Contributor

George Passantino

George Passantino is Director of Government Affairs for the Reason Foundation and coauthor of "Roadmap to Reform" and "The Citizens' Budget"

A Clear Agenda
But can the Governor change Sacramento's spending lust?
[George Passantino] 1/13/04

In his first State of the State address, Governor Schwarzenegger offered a clear and ambitious agenda that will set the stage for a real confrontation over California's future.

He praised the legislature's passage of the $15 billion recovery bond and balanced budget amendment, comparing it to a family that consolidates their debt and tears up the credit cards.

Now California faces the really tough step that those families must also tackle—changing the behavior that resulted in the run-up credit card bills in the first place. Debt does not accumulate alone, after all.

Moreover, Governor Schwarzenegger must ensure that all the credit cards have actually been cut up. With a history of employing accounting gimmicks and phantom savings to balance the state budget on paper, a new balanced budget requirement, such as the one approved by the legislature, is not enough protection for California taxpayers. The Governor will need to be that protector until a constitutional spending and revenue limit can be adopted.

Governor Schwarzenegger argued that the state suffers, not a tax revenue crisis, but a crisis of spending. No solution to the state's fiscal challenges exists without this recognition. It was refreshing to see direct references to specific reforms that will confront this spending mismatch, many of which were consistent with the "Citizens' Budget" produced by Reason Foundation and Performance Institute last spring.

• The Governor's proposal for a Performance Review Commission to systematically audit state programs to ensure that they are worthwhile investments will be an important step moving California toward a system that bases budget decisions on performance rather than preference and politics.
• Governor Schwarzenegger made it clear he was going to take on the fiefdom-driven politics of California state government to consolidate duplicate and overlapping state programs. Not content to just "move the boxes around" he intends to "blow them up."
• The Governor, without hesitation, touched the third-rail of politics—school funding. Governor Schwarzenegger should be applauded for confronting this challenge and offering school districts more flexibility in how they spend categorical funds for education. We should recall that in his January budget last year, Davis proposed a similar consolidation plan for these highly restricted pots of money, which Sacramento doles out to schools. It will be intriguing to see if the Governor sticks to his guns.
• Similarly, Governor called for the repeal of the bill, SB 1419, which severely restricted local schools' ability to competitively contract for non-instructional support services. In doing so, the Governor will give schools more purchasing power by allowing them to shop around for the best services. This will help them confront the painful budget realities.
• Schwarzenegger also wielded very publicly what may become his policy weapon of choice—taking his agenda straight to the public in the form of ballot measures. The legislature must know that he possesses the wherewithal to do this—perhaps surpassing the ability of any modern governor, given his tremendous personal fortune and Olympian public appeal. And it seems unlikely that the legislature would want a contentious worker's comp. fight on the ballot in November—particularly one marketed as a response to their own inability to act. Will the legislature follow his lead and enact significant reforms? The battle will be exciting to watch but my guess is that yes, they will.

In summary, Governor Schwarzenegger's first State of the State address set the stage for a real clash of ideas about California's future. While hostilities will emerge as a result of the pressure for change, the tone and direction being set by Governor Schwarzenegger are both refreshing and long overdue. And for political junkies, it will be a great spectacle to watch unfold.

copyright 2004 Reason Foundation

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