"Here's my plan," an earnest Arnold Schwarzenegger said in one of his most detailed TV ads during the 2003 recall campaign. "Audit everything. Open the books. And then we end the crazy deficit spending."
But it wasn't so simple. And now, as one of the most iconic governors in American history bids his farewell, polls suggest that very few Californians think he's fixed the state's dysfunctional budget system.
My detailed look back at the governor's record on the state budget aired on this morning's edition of The California Report. And again, it's far more complicated than the sales pitch the Republican movie star made in the weeks leading up to the recall election of October 7, 2003.
It's important to remember that governors don't, by themselves, write state budgets... a fact that Schwarzenegger found out the hard way more than once. Budgets are the ultimate political compromise, shaped as much by public perception (and blown constitutional deadlines) as they are politics or, occasionally, sensible policy. Accordingly, the budgets that he signed into law didn't always reflect his preferred path forward.
Yet even when budgets seemed to include many items that Schwarzenegger disliked, he proclaimed them to be "fantastic" examples of good governance. And while a governor is only one actor, he does set the budget agenda and wields the ultimate power play: the veto.
Perhaps the best way to examine the Schwarzenegger budget legacy is to start with the macro picture.
For today's story, we used the annual fiscal outlook of the nonpartisan Legislative Analyst's Office, along with some additional LAO number crunching help, to find that the average annual growth rate in general fund spending since Governor Schwarzenegger took office has been 3.3%. That's substantially lower growth than under some of his predecessors, but also a rate ratcheted downward by the global recession as much as his own demands.
(Sidenote #1: While Schwarzenegger's office hasn't offered details to back up the governor's recent statement that average spending growth was only 1.3%, former budget director Mike Genest wrote a recent op-ed that says the average is 2.4% -- a number that appears to be based on the size of the 2003-04 budget after being recrafted by Schwarzenegger and not the budget as it stood on the final day of the previous administration, a perhaps more fair way to understand what existed before the new Guv's tinkering began.)
You can see a chart based on the LAO data here (PDF), a chart with modest growth in most major general fund categories but major growth in two areas in particular: prisons and borrowing. The dilemma in corrections certainly preceded Schwarzenegger, but it was one he was unable to resolve, with a lot of spending in recent years driven by a federal court-controlled prison health care system.
Borrowing, though, is a story unto itself. Keep in mind that the 12.7% increase in the LAO fiscal data actually is limited to infrastructure debt -- some that was pre-Schwarzenegger plus the first costs of the massive bond package the governor convinced voters to ratify in 2006. That figure does not include some of the most hotly debated borrowing: the 2004 Proposition 57 "deficit bonds" that Schwarzenegger cast as "economic recovery bonds," which totaled $15 billion. That debt payment, now ensconced in one of those only-in-Sacramento budget maneuvers (the "triple flip"), reflects a very early decision by Schwarzenegger to embrace and enlarge a deficit borrowing plan from his predecessor, rather than cut spending or raise taxes to the needed levels when he took the oath of office.
The governor's characterization of the borrowing was also unique. "It's not new borrowing, it's refinancing," he said in a February 2004 appearance on a radio talk show in San Diego. But it was, in the end, new borrowing -- so much so that the final $3 billion in "deficit bonds" weren't sold until 2008, long after Schwarzenegger inherited debt. The $15 billion obligation, once expected to be paid before he left office, is now scheduled to be on the books until 2017.
(Sidenote #2: The mechanics of how to account for the Prop 57 bonds in the early budgets may also explain the discrepancy between the LAO and the Guv's ex-budget guru Genest on average spending growth these last seven years.)
It also wasn't the last time the governor would push creative proposals... or explanations. The 2008 pitch to borrow future lottery revenues certainly falls into this category. And while the governor called that proposal a "gift from the future," other times he criticized politicians who he said wanted to delay the day of budget reckoning by always pushing to "kick that can down the alley."
No budget action under Arnold Schwarzenegger was as controversial -- then or now -- as his lowering of the state's vehicle license fee, the infamous "car tax" raised and reviled during the previous administration (which had implemented a cut in the fee that, under yet another administration, was considered temporary). The fee was wildly unpopular, no doubt, but the new governor's action was one for which there was no money.
"At the time he repealed the vehicle license fee increase, there was a $10 billion deficit in the state budget," says Democrat John Laird, former chair of the Assembly Budget Committee. "And that added $4 billion."
The extra burden on state revenues didn't seem to matter by 2006, when an unexpected windfall suddenly evaporated all of the partisan fights and cleared the way for the only on-time budget of his tenure. "I have always said that a budget is much more than just about numbers," said a beaming Schwarzenegger on June 30, 2006. "It is about our values."
But neither Democrats nor Republicans in the state Capitol seemed to fully trust the governor when it came to the budget. Democrats excoriated the governor's annual attempt to reduce spending on health and human services; Republicans lamented that he didn't cut enough, especially in boom years like 2006 and 2007 (the latter being the year in which the governor proclaimed a "zero deficit."')
"We should have controlled spending better than we did," says Republican Roger Niello, a former vice-chair of the Assembly Budget Committee.
And again, the budget was the most significant ongoing fight between the governor and legislators. From labeling them in 2004 as "girlie men" to in 2008 saying the Legislature was a "kindergarten" as a budget crisis was debated, Schwarzenegger never found firm footing with the 120 men and women who comprise a co-equal branch of government. Perhaps it's worth noting that the 2006 on-time budget mentioned above was also one crafted largely by the legislative leaders and not in meetings with Schwarzenegger.
A retrospective look at the Schwarzenegger legacy on the state budget also should include the governor's long-running attempt to impose some new constitutional control on state spending. A 2004 effort turned into a more meager balanced budget amendment ("So watered down that it became meaningless," says GOP ex-legislator Niello) and a "rainy day" fund that even the governor no longer supports; a 2005 attempt became the centerpiece of his special election that ended with his worst political defeat ever; a 2008-09 proposal was rejected by the voters, either because they hated it or hated its conjoined tax increase. This past summer, he convinced legislators to put a spending limit proposal in front of the voters again in 2010.
But reliance on automatic control mechanisms never seemed to square with Schwarzenegger's frequent lamentations on other automatic budget formulas, each approved by the voters (including the one he cut his political teeth on in 2002).
"Don't misunderstand me, I have nothing against formulas," he explained when I asked him about the apparent contradiction in January 2005. " But we should have formulas that make us fiscally responsible."
In that same answer, Schwarzenegger said he was simply "narrowing" the options for elected officials. Earlier this month -- almost six years later -- he lauded other budget restrictions through the years as measures that had "tightened the noose."
Of course, at that same event, the departing governor compared the state budget's woes to "fault lines." Fault lines, as Californians well know, are evidence of destructive natural events that can't possibly be avoided. And the use of that metaphor seems to reveal a lot about the state's most obvious governance problem, one a newcomer thought he could easily arm wrestle into submission in those heady days of late 2003.