California's budget mess

Posted: Jan 18, 2004 12:00 AM

SACRAMENTO -- The plan is for the good ship California to float to safety over jagged economic reefs -- mostly reefs of its own making -- on a tide of testosterone. But the second-most crucial member of the ship's new crew is named Donna.

Being director of California's department of finance is not for the fainthearted. ``Breathtaking'' and ``staggering'' were among Donna Arduin's initial descriptions of the state budget, which is triple the size of Florida's, although California's population is only double Florida's. She guesses that 75 percent of California's budget is controlled by constitutional or other state and federal mandates. None of the other states where she has done budget diagnostics matched California's entanglement in union contracts that limit competitive bidding by private-sector providers of services.

An aide says someone should design an Arduin ``tour jacket'' like those that rock bands have, listing on the back the cities the bands visit. So far, Arduin's jacket would list Lansing, Albany, Tallahassee and Sacramento. Before coming here from Florida, where she was helping Gov. Jeb Bush, she assisted New York Gov. George Pataki and former Michigan Gov. John Engler.

California's good news is the severity of the bad news. Change becomes easier, an Arduin aide says, ``when you have one foot in the fiscal grave.'' The state's credit rating -- worst among the states; one cut above junk bonds -- will presumably be improved if, on March 2, voters authorize $15 billion in borrowing to tidy up past debts. The alternatives are default in June, followed by tax increases.

Then must come measures to decrease the cost of doing business in California. Concerning which, consider Buck Knives.

Favored by sportsmen around the world, they have been made in San Diego since Hoyt Buck arrived there in 1947. By next year they will be made in Idaho, where the firm's immediate savings will include $500,000 in workers' compensation costs and a 60 percent decrease in utility bills.

The owner of five Hungry Howie's Pizza franchises near Fresno scrapped plans to add five more, with up to 70 new jobs, when energy costs tripled and workers' compensation quadrupled. Multiply the businesses that do not come to, stay or expand in California and you have ... Argentina, which in 1900 had a per capita income as high as Canada's. Or sub-Saharan Africa, which In 1950 had per capita income as high as Southeast Asia's. Government -- especially bad government -- matters. In the late 1990s it helped drive roughly 200,000 Californians from the state each year.

Arduin's mastery of budget mechanics, which was known, in the service of Arnold Schwarzenegger's political subtlety, which is surprising, is already producing successes. Her task is to clarify the future costs of past decisions. His task is to revise some of those decisions.

Here testosterone enters the equation. Six months ago the question was: Could an intergalactically famous Hollywood hero heal California's self-inflicted wounds? Today the question is: Can only such a person do the job? On a Schwarzeneggerean scale, fame -- ``the fever of renown,'' Samuel Johnson called it -- might today be a political asset necessary for governing a state this big and broken.

Fame can help him strike separate deals with large interest groups, so he will not confront a vast unified opposition. The California Teachers Association has agreed to only modest cuts in education spending. But Dan Walters of the Sacramento Bee notes that this will help the governor isolate unions representing non-teaching school employees. Those unions oppose revisions of a law that impedes outsourcing non-teaching services to private contractors.

Schwarzenegger's fame can generate public support sufficient to pressure state legislators. Because of gerrymandering by both parties to protect incumbents, most legislators have seats so safe they rarely feel threatened. And with the coin of fame Schwarzenegger can buy public mobilization to enact through referenda those reforms that the Legislature spurns.

It is irrational but actual: A movie action hero as governor may be immune to charges of being soft on criminals. Therefore he can contemplate reducing the prison population through alternative handling of parole violators. Prison guards, a powerful interest group, can contemplate revising their lucrative contracts or losing jobs.

The state began expanding in-home care for the elderly in the 1950s, when the polio vaccine threatened unemployment for caregivers for polio victims. Now the $1.4 billion program is six times larger than a decade ago. Schwarzenegger proposes to stop paying family members to care for their own relatives.

Every cost-cutting idea is met with a chorus of abuse, and the opposition's idee fixe -- taxing ``the rich.'' What is unfolding is a drama worthy of Schwarzenegger's talents, which were wasted on make-believe dramas.