Thread: Will Arnold be recalled as well

Matthew Yi, Chronicle Sacramento Bureau


(05-12) 04:00 PDT Sacramento -- With the state's fiscal crisis worsening,
there will likely be no good news when Gov. Arnold Schwarzenegger unveils
a revised version of his budget proposal on Wednesday.
Schwarzenegger warned last month that California's looming budget deficit
could be as high as $20 billion, a staggering figure that represents about
one-fifth of the state's annual general-fund spending.
Efforts to close the gap are expected to result in cutting popular
programs as well as generating more revenues by increasing taxes or fees.
And with budget negotiations likely to drag on through the summer, this
story probably won't have a happy ending for the actor-turned-governor or
the 38 million Californians, experts say.
"If this was a Schwarzenegger movie, there would be some secret weapon or
escape hatch, but unfortunately this is Schwarzenegger reality, not a
movie," said John Pitney Jr., a political science professor at Claremont
McKenna College. "He's going to lose political capital no matter what he
does."
The governor already has been on a losing streak. He trumpeted 2007 as the
year of health care reform, but a plan that he brokered with Assembly
Speaker Fabian Núñez, D-Los Angeles, failed to gain approval by a Senate
committee.
Schwarzenegger declared 2008 would be the year of education, but with
state's revenues tanking, the governor has proposed cutting nearly $5
billion in K-12 and higher education for the new fiscal year that begins
July 1.
More recently, the governor has been criticized on many fronts after his
budget proposal in January included across-the-board cuts that would
result in suspending the state's education funding obligations, closing
state parks and releasing early tens of thousands prisoners. Drastic
measures
Schwarzenegger, who says he doesn't want to raise taxes, said such drastic
measures would be necessary to close what he estimated in January would be
a $14.5 billion budget deficit by July 1. By February, nonpartisan
Legislative Analyst Elizabeth Hill said the gap would grow to $16 billion,
blaming the continuing fallout from the housing market meltdown.
The governor and the Democratic-controlled Legislature took emergency
measures - more borrowing, postponing debt payments, withholding unspent
education funds and cutting Medi-Cal reimbursement rates - to slash the
deficit by about half.
But about two weeks ago, Schwarzenegger warned that California's finances
are deteriorating further, warning that the Golden State could be staring
at a deficit as large as $20 billion.
"When you don't have a crisis over your head, you can make compromises and
get over it. But when you're looking at a $20 billion deficit, it's not a
minor problem, but a major headache," said Larry Gerston, a political
science professor at San Jose State University.
And the governor won't be able to count on the economy turning around any
time soon to help remove that headache, said Esmael Adibi, director of
Anderson Center for Economic Research at Chapman University.
"I believe the economy has already entered recession both nationally and
at the state level," he said. "And this will last through 2009. In fact,
the best we can expect right now is that the economy will bottom out by
early 2009."
That puts Schwarzenegger in a real bind, pundits say.
While proposing more cuts in spending will cause even more criticism of
the governor by groups that are impacted by them, raising taxes would also
result in disdain from Schwarzenegger's political base of fiscal
conservatives such as business groups. Governor softens
But the governor has softened his stance on taxes since the beginning of
the year, even hinting at the notion of broadening the sales tax to
include such things as legal and auto-repair services.
"As he has said, everything is on the table for discussion," said Aaron
McLear, a spokesman for Schwarzenegger. "But the governor has been adamant
that he does not support raising taxes."
However, the reality of cutting one-fifth of the state's general fund
spending is unrealistic, Democratic lawmakers say.
"If the (deficit) goes over $10 billion, we need to do something to keep
the state government from going over the cliff," said Assemblyman John
Laird, D-Santa Cruz, chairman of the Assembly Budget committee. "We'll
have to make some cuts as well, but I just think a balanced approach (that
includes taxes and/or fees) will be the way to solving this difficult
problem."
The responsibility of solving the state budget deficit doesn't land on
just Schwarzenegger's shoulders. The state Legislature must first pass the
spending plan with a two-thirds majority vote, which is no easy task with
Republicans and Democrats often at odds with each other.
In fact, that could be the biggest source of frustration for the governor,
Gerston said.
"He is by title the engine of the train, but right now he is riding as a
caboose," he said.
But lawmakers and the governor face extra pressure to broker a budget
quickly, because without a new spending plan, the state could run out of
cash before the end of August, said State Controller John Chiang, a
Democrat. State might borrow
The state has the option of borrowing money to ease the cash crunch, but
loans with high interest rates could negatively impact the state's credit
rating. The state last resorted to such borrowing in 2003, Chiang said,
and "we had to pay tens of millions of dollars in just underwriting fees,
which would be a total waste of taxpayers dollars."
Perhaps the most ironic thing for Schwarzenegger about the state's budget
woes is that a similar fiscal crisis during Gray Davis' governorship
contributed to his recall and resulted in Schwarzenegger's election,
Gerston said.
"If anyone is having a quiet last laugh, it would be Gray Davis," Gerston
said. Budget Webcast
Gov. Arnold Schwarzenegger (above) will release his revised budget on
Wednesday at 1 p.m. View a Webcast of announcement at www.gov .ca.gov.

E-mail Matthew Yi at myi@sfchronicle.com.

http://www.sfgate.com/cgi-bin/article.c ... 10J97G.DTL

Didn't Arnold become Governator after Gray Davis was recalled due to the energy crisis in CA? Wasn't that long ago.