There is perverse pleasure to be had in seeing other states wrestle with budget problems worse than Maine’s. But there is also something instructive about following the battle that played out in California in recent weeks between that state’s moderate Republican governor, Arnold Schwarzenegger, the Democratically controlled state Legislature, and the Republican lawmakers needed for the required two-thirds budget approval.
It took months, but the resolution included some big and perhaps embarrassing concessions from the governor, a truce of sorts between unions and anti-tax groups, and a bet that voters are ready to suffer some pain now to avoid a worse future.
Last year, the Golden State faced a revenue shortfall of $42 billion. As in Maine, California’s slower economy meant fewer taxes and fees were being paid. On top of that, California was hit hard by housing foreclosures. In the end, a compromise was struck that included $14.9 billion in spending cuts and $12 billion in new taxes.
In 2003, as Gov. Schwarzenegger ran for the state’s highest office, the Terminator pledged he would not raise taxes.
The new taxes include a quarter-percent hike in the personal income tax rate, a 1 percent sales tax increase, and a near doubling of the vehicle license fee. When running for office, Gov. Schwarzenegger pledged to end the vehicle fee altogether.
Hard times make for hard choices.
Six Republican lawmakers defected to vote for the budget. Though Gov. Schwarzenegger called the six “great heroes,” Republican Party officials are threatening to punish them by withholding funds for their mailings to voters.
California took a long time to deal with its budget crisis. The longer the governor and legislative Democrats and Republicans wrangled, the lower their approval ratings sank.
Part of the fix asks voters to approve a referendum that would enact a state spending cap while simultaneously extending the tax hikes for two years. Unions and anti-tax groups are, so far, not mounting opposition to the referendum.
California’s governor deserves praise for being flexible in trying times. As he told ABC News, “When you’re in the center, you get attacked from the left and you get attacked from the right. And this is a good sign, actually, because that means that you’re in the right place. Because remember one thing: What is good for the people is not always good for politics.”
In addition, the fiscal conservative earned some victories in the struggle. From the ABC show: “We never had a rainy day fund; we didn’t have a cap; we didn’t have midyear cutting authority or any of those things. For the first time in 60 years, we got all of this now as part of the budget negotiations. This is a huge coup.”
Who would have thought that a man who gained fame by pumping iron and blowing up buildings could be such a peacemaker?