Budget Presents Balancing Act for Schwarzenegger
By HOWARD FINE
The Sacramento Showdown is fast approaching.
That’s the annual exercise in June when the governor and legislative leaders in the Senate and Assembly get together to hammer out a state budget.
This year, with the deficit projected to run at least $16 billion, all eyes will be on Gov. Arnold Schwarzenegger. The challenge: working out a compromise that can appease both sides of the aisle.
Last year, former Gov. Gray Davis had stirred so much acrimony during the process that it helped fuel the movement to recall him from office.
But judging from Schwarzenegger’s recent negotiations on workers’ compensation reform, the atmosphere is likely to feature more accommodation than confrontation.
“This governor has shown himself to be far more active in the negotiation process than Gray Davis ever was,” said Fred Silva, senior adviser on governmental relations at the Public Policy Institute of California in San Francisco. “He seems to be a guy who wants to get stuff done and is willing to compromise with the Legislature to make it happen.”
Silva compared Schwarzenegger’s style with that of former Gov. Pete Wilson, who routinely joined the so-called Big Five meetings with legislative leaders to negotiate major deals.
(The strategy didn’t always result in a timely agreement.)
Davis, by contrast, put out his budget and then let legislative leaders hammer out a deal among themselves for weeks before finally coming back into the process.
Whatever the approach, this year’s negotiations won’t be easy.
With a deficit likely to rise another $2 billion to $3 billion when the May revise comes out,and with all the easy options exhausted,Schwarzenegger will face his toughest challenge to date.
The governor has acknowledged the difficulty, suggesting last month he might be willing to consider a tax increase. Such talk may be anathema to conservative Republican legislators who held out in past years against tax increases.
But for Schwarzenegger, the imperative to close a deal may prove more important.
“He’s no Tom McClintock, who would fall on his own sword to avoid a tax increase,” said John Ellwood, professor of public policy at the University of California, Berkeley, referring to the conservative Republican state senator who ran for governor in the recall election. “He has a keen political instinct and is quite willing to change course if he senses the need.”
Under the state constitution, the Legislature must pass a budget by June 15 to be signed into law by July 1. In past years, those deadlines seldom have been met due to stalemates on the key issue of tax increases.
But this year, Assembly Budget Chair Darrell Steinberg, D-Sacramento, said he thinks a deal could be reached on time.
“I’m much more optimistic that the deadline will be met this year than in past years,” he said. “In my experience with him over the past six months, Arnold has brought a good mindset and focus toward solving problems.”
Steinberg also pointed to another change this year: the role of Republican legislators.
“Under Gray Davis, the Republicans could just play the role of saying, ‘No, no, no,'” Steinberg said. “Now they have a governor. And it’s incumbent upon them to be less ideological and focus more on solving the problems.”
But if negotiations over workers’ compensation are any indication, Schwarzenegger’s tendency to yield on key points to reach a compromise could prove a problem in his relations with fellow Republicans.
Several Republicans voiced concerns that the deal he worked out with legislators doesn’t go far enough in reducing employer costs.
But unlike workers’ compensation, a two-thirds vote is needed to pass a budget. That will require substantial bipartisan support.
“Under Davis, the Democratic strategy was to peel off a handful of Republican votes for the Democratic proposal,” Silva said. “But Schwarzenegger needs support at the outset from both parties if he wants to achieve a deal.”
Schwarzenegger, of course, brings one other weapon to the table that none of his recent predecessors has had,his celebrity.
“Schwarzenegger can apply pressure from the outside to move things forward,” said Leo McCarthy, president of the California Taxpayers Association. “He can call out all the folks in the media and shine a really bright spotlight on the inaction or irresponsible action of the Legislature.”
Fine is a staff writer with the Los Angeles Business Journal.
