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Editorial: California Cannot Live Within its Means Without a Tax Revolt

Speaking to small business leaders in California on Tuesday, Governor Arnold Schwarzenegger summarized what he viewed as the crystal clear message of the electorate that had defeated a $16 billion tax increase a week prior to balance a $23 billion shortfall, “A week ago in a special election the voters sent a very clear message to Sacramento; live within your means. Cut spending, slash the size of government, get rid of the waste and the inefficiency and don't raise taxes.”

The Governor was right—but he was overly optimistic that the message had resonated at all with politicians in Sacramento when he opined, “Let me say I think that we heard, I heard, the message of the people loud and clear and I'm sure that the legislative leaders and the legislators also heard the message loud and clear.” Well, probably not.

Republican Assemblyman Chuck DeVore has a different, likely more accurate view of the situation in Sacramento. Writing for the Policy Report, he states, “I was on NPR with Senate President pro Tem Darrell Steinberg (D- Sacramento) the day after the election as he labored to claim that to claim that the Tuesday vote was all about frustrated voters, worried about their jobs who simply want the legislature to do its job and not pass the buck to them. He rejected my contention that the vote was an anti-tax vote.” And the sad fact is, he never get it.

Not that he needs to. Californians got it. And certainly, the hard lesson is for the politicians about making bigger promises than the people can deliver in the form of taxes. Governor Schwarzenegger notes in his speech, “I can tell you, if we don't make those cuts, I think that we will face catastrophic consequences because the state will simply run out of money and get insolvent, which we can't afford to do. Remember, we are not Washington. We cannot print our own money or we cannot run up trillions of dollars of deficit. We can't do that. In our state we can only spend what we have.” Which, of course, is the problem.

Not that the Governor is perfect. He has not had a perfect record on taxes or borrowing or a host of other budget-related issues to say the least. But he is right. Unfortunately, as Governor he can only set the agenda. The heavy lifting is up to the legislators—and as expected, they will try to shift the burden, or shirk it altogether. But this time has to be different.

The Governor must go further than he has. He has to draw lines in the sand. For instance, a state spending cap must override the state's outrageous spending requirements and untenable mandates Mr. Schwarzenegger outlined in his speech: “[W]e have federal judges telling us how to run our prison health care system and how much we must spend. And we have federal laws telling us how and where we can make spending cuts, or else we risk losing billions of dollars in federal funding and in matching funds...”

California should fight back against the federal mandates in the same way it recently did when Barack Obama, at the behest of the SEIU, threatened the state with losing $6.3 billion in supplemental Medicaid funds if $74 million in pay cuts to home healthcare workers were not rescinded. Instead, California stood strong, and it was Barack Obama, through his new Health & Human Services Secretary Kathleen Sebelius who rescinded his threat.

Mr. Schwarzenegger, unfortunately, weakened his own position by criticizing the two-thirds requirement for the budget to be passed in the legislature. Others have criticized that Republicans in California have “veto” power over the budget. As if removing Republicans completely from the table of discussion and solidifying one-party rule in the state would result in anything other than the Democrat-dominated legislature guaranteeing insolvency—from here to eternity. That, clearly, is not the answer.

Still, he was adamant about the constraints that spending mandates put on balancing the budget, “We have an endless list of propositions that we have to take under consideration, whether it is Proposition 13, 98, 42, 49, 63, Proposition 10, Proposition 1A and the list goes on and on and on. All of those propositions tell us how we must spend our money… We have no choice over those kind of things. They all dictate exactly how we're going to spend the money and it's therefore it makes it very difficult for us to balance our budget or to make the necessary cuts very quickly. Until we fix our system, nothing will ever change. This is no way, of course, to run a state…” Again, he is right.

The solution for California's budgetary woes is a spending cap that overrides and repeals any and all spending requirements currently enacted under state law, and requires across-the-board cuts whenever budgets are delivered by the legislature in deficit. Currently, the state is currently 17.35 percent over-budget. Under mandatory spending cuts, every line would be slashed 17.35 percent without any action required legislatively. And while that may seem drastic on paper, in subsequent years it would force legislators to deliver budgets more on target with revenue projections.

If the simple ability to balance budgets exceeds the skill set of the California state legislators, then perhaps it is time for the people of California to engage in yet another tax revolt and enact a proposition that takes that power away from the legislature all together. As Mr. Schwarzenegger said, “A week ago… the voters sent a very clear message to Sacramento…” Now, it's time to see if the politicians' hearing is as badly impaired as their sense of integrity and self-discipline.


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