Get ready for several days of intense reporting on Governor Schwarzenegger’s 2005-2006 budget proposal, a budget that will apparently offer up both more of the same and a call for change.

While the budget won’t be officially unveiled until Monday afternoon, a few details are trickling out. Later today on The California Report (4:30pm and 6:30pm on KQED, other times on other stations), we’ll take a look at one issue embedded in all of this: the recent popularity of budget borrowing.

Meantime, some topics to keep an eye on when the budget finally hits the shelves (actually, it won’t hit the shelves, as discussed here recently):

* The governor’s advisers say the size of the General Fund budget will increase by 4.2% from 2004-2005. Depending on whose numbers you use, that would mean an overall budget in the range of $ 82 billion.

* Schwarzenegger will propose borrowing money to help close the estimated $8.1 billion gap. Included in that will be more money of as much as $3 billion from the Prop 57 deficit bonds, as well as transfers of money originally earmarked for education and transportation.

* Also being proposed are modifications to both of the accounts being borrowed from: Prop 98 and Prop 42. Any new Prop 42 borrowing would effectively be banned two years hence, in a way similar to the deal made last year with local governments.

* Even more intriguing is the governor’s anticipated call for modifying Proposition 98 by eliminating the so-called “Test 3″ funding amount, an idea sure to be hotly debated by policy wonks. “Test 3″ is an alternate (and cheaper) way of determining the level of education funding. While it was ostensibly put in place to keep K-14 education from gobbling up too much of the General Fund in bad economic times, “Test 3″ also requires the (further confusing) “maintenance factor”, which requires that funding go back to the proper levels in the future.

Is the governor’s idea a good one? Depends on who you ask.

Fred Silva, a budget analyst with the Public Policy Institute of California, calls “Test 3″ a “release valve” when times get tough. He says getting rid of it could make things very difficult for future lawmakers, who would then have fewer budget tools at their disposal.

All of this and more will be in play beginning Monday. And when you add in all of the other government reforms Schwarzenegger laid out on Wednesday night, 2005 is shaping up to be a very busy year.

At first blush, the press release this afternoon from Governor Schwarzenegger seemed simple enough: he was making two appointments to two separate state boards. But wait, what are those asterisks beside each person’s name?



The governor appointed Dr. Laurie Gregg and Robert Sachs to the Physician Assistant Committee of the Medical Board of California… and Kenny Cherng and Dr. Steven Tan to the state’s Acupuncture Board.

Trouble is, Schwarzenegger also submitted a list of some 100 boards and commissions he wants to eliminate as soon as July 1st. And both of the organizations mentioned above are on that list.

So why appoint these folks? The official press release simply says, “the governor may continue making appointments to these boards and commissions until that time to ensure continued operation of core governmental functions until their reform or elimination.”

So congratulations to the appointees… and, while we’re at it, our condolences.

Tonight’s State of the State by Governor Arnold Schwarzenegger was a challenge to the Legislature for reform on both a small and large scale. But the speech wasn’t the only thing worth noting.

A full roundup of the speech, including news that the governor wants extra money earmarked for K-14 education to be spent elsewhere, can be heard this morning on The California Report.

In the meantime, a few anecdotes from inside– and outside– the Assembly chambers:

* For the second year in a row, Lt. Governor Cruz Bustamante used his brief moment in the spotlight not for the traditional introduction, but rather to deliver some not-so-thinly veiled jibes at the policies of the man who would speak next. For example, Bustamante suggested that Schwarzenegger work to close more tax loopholes for corporations, instead of proposing budget cuts. Schwarzenegger drew a good laugh from the audience as he thanked Bustamante for the “nice introduction and wonderful speech.”

* Excluding applause for First Lady Maria Shriver, an unofficial count suggests that the governor was interrupted for applause 28 times. But most times, the hands making noise were almost exclusively Republican.

* Schwarzenegger’s aides say this was the first time the State of the State speech was offered as a live webcast on the governor’s official website.

* The speech was largely the work of former Reagan speechwriter Landon Parvin, who has been the wordsmith behind many of Schwarzenegger’s high-profile appearances.

* Three former governors sat in the cheap seats this time to watch someone else in the spotlight: Republican Pete Wilson, and Democrats Jerry Brown and Gray Davis.

* When the speech was over, many of the VIPs made their way to a private reception hosted by the California Protocol Foundation, which is headed up by Charlotte Mailliard Shultz (wife of Reagan cabinet member George Shultz). A full bar and appetizers awaited the guests, who mingled both in a large tent on the West Steps of the Capitol, and inside the Capitol rotunda. And contrary to yesterday’s posting, there was indeed food for the media inside their tent on the North Steps… though the muffins on a tray paled in comparison to the food on the other side of the building.

Whether it’s due to the new glamour brought to town by Arnold Schwarzenegger, the continuing demands of the 24-hour news cycle… or both… the State of the State speech is now much more than an exercise in political oratory.

So as work crews erect a large white tent on the north side of the state Capitol to accommodate the overflow of news media, it seems appropriate to offer a glimpse at what seems like the pregame show of the Super Bowl:

* Democrats appear anxious to level the playing field, working hard even before the speech to spin the focus back towards issues they think lean their way. At a news conference this morning, Senate President Pro Tem Don Perata was asked what reaction he’d have if the governor calls a special session to deal with legislative redistricting. “Let’s have a special session on education”, countered Perata. “If we’re going to have special sessions, let’s do them on the issues of priority.” Perata outlined other issues that Democrats see as part of that priority– including health care, transportation and housing, government reform, the environment, and getting more money from the federal government.

* There was also the slight hint of the campaign-to-come as Treasurer Phil Angelides held a Wednesday morning event calling on Schwarzenegger to end what he calls the “budget deception” of last year. And that, by the way, was what Angelides said at his “official” (non-campaign) event. 20 minutes later, Angelides put on his “campaign” hat, next door at the same Sacramento location, to unveil a TV spot being paid for by his political “issues” committee… a likely precursor to an Angelides campaign for governor in 2006.

* As for the frenzy behind the scenes: about 200 credentialed media will be in attendance, down slightly from last year. Included in that group are international media members, including a radio reporter from Austria who traveled with Schwarzenegger extensively during the 2003 recall.

* And back to that large tent just outside the Capitol: it’s again being sponsored by the California Broadcasters Association, which estimates their total cost for the tent and satellite coverage of the speech to be just under $10,000. One aide to the governor dubbed it the “spin tent”, where politicians and interest groups can give a quick reaction tomorrow night. One TV videographer asked staffers, “will the tent have catering?” The answer, sadly, was no.

* Our special hour-long edition of The California Report begins at 5:00pm Wednesday, hosted by Scott Shafer. As always, we hope you’ll join us.

No time to wish you a Happy New Year, because the wheels of politics are already back in motion… as evidenced by the above quote from state Senator Liz Figueroa this morning, a challenge to Governor Schwarzenegger.

Figueroa (D-Fremont) and Senate President Pro Tem Don Perata announced the creation of a new Senate committee which will take its own stab at reorganizing state government, a subject that’s shaping up to be one of the big issues of 2005.

Figueroa, who will chair the committee, promised a series of hearings across the state ( and took a jab at the governor’s similar hearings this past summer for his California Performance Review, where she said the “public was treated as an afterthought”).

But in her responses to questions from reporters, Figueroa didn’t fully explain whether the new committee will put forward its own separate plan, or whether it will primarily be vetting– or modifying– the administration’s massive list of recommendations.

And the Senator fired a couple of hot shots across the bow, too.

First, she criticized any notion that the governor might submit a massive plan that only could be voted “up” or “down”. Second, she challenged Schwarzenegger to give a full accounting of any fiscal implications of his suggestions, reminding reporters of the administrations’s decision to scale back the Vehicle License Fee last year, without a lot of explanation of how the state would fill in the resulting $4 billion hole.

More on this subject in my report tomorrow morning on The California Report. Also, be sure to catch our live broadcast of Wednesday’s State of the State address by the governor, beginning at 5:00pm on our network of stations across California.