Posted 10:04 AM by Robert

Dropping More Than Balloons

The Democratic faithful now wait in Boston for the big balloon drop and a skit by some John Kennedy impersonator - but in Sacramento Arnold Schwarzenegger is preparing to drop something rather more substantial on the California legislature. His apparent strategic vision in these matters is a revelation. 

By the end of the week California will have a $105.3-billion budget, with the Assembly already accepting the negotiated deal, which incorporates some of Gov. Arnold Schwarzenegger's spending proposals. But the budget constitutes very little real progress:

The proposed budget has so much borrowing and so few long-term spending cuts that the state will be facing yet another fiscal crunch next year. Economists say it would take an upswing in the economy of dot-com boom proportions to avoid it.

"I just don't see the economy bailing us out under any foreseeable circumstances," said Michael Bazdarich, senior economist with the UCLA Anderson Forecast. ... "The steps we are taking to solve it are pretty tiny for this late in the game."

The budget plan does rein in some spending. ... Overall spending will go up by less than 1%. In a typical year it goes up several times that.

But the temporary cuts to schools and local governments will help the state keep spending down. They have been given assurances that two years from now the state will return to giving them more money. ... [A] shortfall of as much as $10 billion that is projected to emerge in 2007.

So this year's budget punts the big problems into the future, and next year's budget is the first part of that future. What happens then? If California faces another of its typical budget impasses next year, an impasse avoided by this year's negotiated budget, both the Legislature and the Governor can expect their poll ratings and popularity with voters to fall dramatically. That happens with every budget impasse, and the fall can be very painful: After the last such impasse and fall, Grey Davis was ejected from office in the recall election that brought Mr. Schwarzenegger to Sacramento.

One might ask what the last impasse and that recall have to do with next year's budget. And that's where Mr. Schwarzenegger's thinking gets really interesting. The poll and popularity falls following a California budget impasse are not permanent. They do take a while to dissipate, but that dissipation happens before the next election scheduled after the face-off. The Legislature counts on the timing of that dissipation in handling the impasse.

What if there were no substantial time? What if a special election were scheduled just a few weeks after the budget was supposed to have been enacted? What would happen then? Well, the legislators would face an angry electorate. A very large portion of them would share the fate of Mr. Davis.

A special election of the Legislature can't be scheduled that way. But Mr. Swarzenegger may call a special election next year asking voters to, among other things, convert the Legislature to part-time status, strip legislators of their power to draw their own districts and restrict campaign contributions, his spokesman said Tuesday.

If such an election were scheduled to be held soon after next year's budget is supposed to be enacted, the dynamics of the annual Governor/Legislature impasse would change dramatically - and not entirely predictably. The Governor would not face any form of re-election threat. The legislators would become very nervous about creating or maintaining the impasse as they watched their polls plunge. In the past the Legislature has received approval ratings below 20% during such periods. During such a period the Legislature would obviously not welcome a special election asking voters to convert the Legislature to part-time status, strip legislators of their power to draw their own districts and restrict campaign contributions. There would probably be lots of unintended and unexpected side-effects, of course, from such a dramatic proposal. For one thing, the electorate might come to see the Governor's move as an undesirable power grab and rebel against him. But one thing is sure: the stakes would be a lot higher than they are in a typical year, and the Governor could win very big.

Of course, it is not easy to schedule a special election in California. One must first acquire sufficient voter signatures: hundreds of thousands of them. In practice that means one must hire and pay professional signature-gathering companies. The Grey Davis recall signature effort, for example, did not take off until it was financed by Darrell Issa, an Orange County millionaire Republican Congressman. Such people are not easy to find.

And that brings us to another of Mr. Schwarzenegger's features that the Legislature must find truly terrifying: his wealth. Mr. Schwarzenegger could easily write a single check to finance the signature-gathering effort for his proposed Constitutional amendment. Indeed, he used exactly this tactic to force the Legislature to enact a reform of California's workers' compensation law that was almost identical to one that he had already formulated as a ballot initiative:

"Why have we waited this long to do these reforms?" asked Assemblyman Russ Bogh, R-Beaumont. "It's no accident, let's be honest. We are here today because of one thing: because over 1 million people answered Gov. Schwarzenegger's call for signed petitions to reform workers' compensation."

Could this Governor spin the dross of the legislators' unbounded craving for office into the gold of a budget that really fixed California's finances by personally financing the signatures for his constitutional amendment "reforming" the Legislature?  An old joke comes to mind: Do I believe in infant baptism? Why, I've seen it done!

The score so far: This year's budget is OK, but not great. But it looks like Arnold Schwarzenegger is planning to be back.