Arnold’s executive order laying off 10,000 state employees – and slashing another 200,000 paychecks to the federal minimum wage – is not just insulting because he’s punishing people for the actions of others. It’s that the budget crisis we’re in is largely his fault, and the Governor refuses to take responsibility. Starting with Schwarzenegger’s first day in office when he repealed the Vehicle License Fee, Arnold has played one game of fiscal gymnastics after another – leaving us with today’s budget deficit of $17 billion. With right-wing Republicans in the state legislature still playing their usual game
of obstructionism, Arnold has shown no leadership of reining them in – and now says that state workers have to suffer. When Newt Gingrich did this to federal employees in 1995, he paid a heavy political price for it. Will the press let Arnold off the hook again?
Imagine you’re a nurse in a state hospital, or a lawyer in the Attorney General’s Office – and your boss says you now have to work for $6.55/hour. That’s what Arnold calls a needed stopgap measure for a state budget that is six weeks past due. It’s easy to blame the legislature’s Republican minority – who every year refuse to pass a budget with any tax increase whatsoever, and can hold it hostage because the state requires a 2/3 majority. But we’ve come to expect irresponsible obstructionism from these right-wingers – who still won’t say
how they’ll come up with a solution. Schwarzenegger’s supposed to be a “post-partisan” moderate Republican, and it’s his job to bring them in line.
The Governor admitted last week that laying off temporary workers and cutting everyone else’s salaries down to minimum wage won’t resolve anything. But Arnold has nobody to blame but himself for the fiscal mess we’re in today – because for five years, he has repeatedly played a game of “borrow, borrow, borrow” to put off one budget crisis after another. And inevitably, the chickens have come home to roost.
In 2003, on his first day in office, Arnold Schwarzenegger repealed the Vehicle License Fee. This modest tax had been around since 1935 – where car owners paid 1.5% on the purchase of a new automobile. Governor Earl Warren raised it to 2% in 1948, but the state temporarily lowered it in 1998 because of excess revenues (understanding that it would be restored when the state hit hard times.) In one fell swoop in 2003, the state lost $5 billion in revenue for the first year – with increasing losses each successive years.
We already had an $11 billion deficit when Arnold repealed the so-called “car tax” – but never mind. Schwarzenegger then placed a $15 billion bond measure on the March 2004 ballot, called it the “California Recovery Act” and convinced voters that we needed it to bring our fiscal house in order. The trouble with bonds is that they have to be paid back with interest – and paying off one year’s deficit is now costing the state $1 billion a year.
If it had never been repealed, the Vehicle License Fee would net the state $6.5 billion this year. Add the $1 billion we currently owe for interest on the 2004 Bond, and the Governor is single-handedly responsible for a $7.5 billion hole in this year’s budget alone – or almost half the deficit. So what’s Arnold’s solution for this year’s budget, since he balks at raising taxes? Another bond measure – borrowed against future lottery revenues.
When you’re already in a hole, it’s a good idea to stop digging. “What about next year,” asked a frustrated Assemblyman Mark Leno. “Are we going to bond against future income taxes? Are we going to bond against future property taxes? This is like an addict desperate for the next fix. We need to be honest with the people of California, and admit that the state has a revenue problem. And the way you get out of it is through taxes.”
The Democrats in the legislature have a comromise to plug the state’s $17 billion deficit – which involve a painful set of budget cuts coupled with reasonable tax increases. $5.6 billion could be achieved by asking Californians who make more than $272,000 a year to pay an extra 1% on their state income tax (from 9 to 10%.) This increase was originally placed in the ‘60s by Governor Ronald Reagan, repealed by George Deukmeijan and then restored temporarily by Pete Wilson. So it’s the Reagan-Wilson tax rate for the wealthy.
Another $1.1 billion could be raised by nixing a tax break that businesses use when they have a net operating loss one year. “In a year when we’re asking the blind, disabled and elderly not to take a cost-of-living adjustment,” explained Leno, “it’s fair to also ask businesses not to benefit from an accounting allowance.” Another $1.5 billion could be realized by temporarily lifting a fine that people who owe back taxes must pay – which would actively encourage scofflaws to pay up, bringing the state more revenue.
But Republicans in the legislature – whose votes are needed to get a 2/3 majority to pass the budget – simply refuse to acknowledge we have a revenue problem. All 15 GOP State Senators and 31 of their 32 Assembly members have signed the infamous Grover Norquist
pledge to “oppose and vote against any and all efforts to increase taxes.” Schwarzenegger refuses to bring them in line – and now wants to punish state workers with layoffs and pay cuts.
For years, I’ve assumed that – beyond the 2/3 requirement – the culprit for this gridlock is the state’s ultra-partisan redistricting. After the 2000 U.S. Census, the Democrats and Republicans in the legislature drew the lines in such a way that each district was virtually guaranteed to elect a member of one party or another. The result is that Republicans who go to Sacramento are extremely conservative – and come from districts whose electorate is more likely to punish an incumbent for being “too moderate” than “too extreme.”
But that’s no longer the case. In a recent statewide poll
of registered Republican
, 65% said the state legislature should pass a budget (even if it means more taxes) – whereas only 29% said “no new taxes” (even if it means gridlock.) These G.O.P. legislators are out of touch with their own constituents – and it’s time for them to join the Democrats and support some very modest revenue measures.
Moreover, the media needs to shame Arnold for passing the buck on state employees - as opposed to all the other times they've let him off
the hook. People who work for the state don’t deserve that kind of abuse, and the Governor’s as bad as Newt Gingrich for taking this move.