Follow Us:

Aug 2009
Uncertain fiscal crisis awaits next governor

The next governor of California will face a financial crisis of undetermined magnitude, but most of the candidates for the job have offered scant clues as to what they would do about it.

Candidates have a lot to say about boosting state tax revenues by creating jobs or saving money by streamlining government, but not much about how they would wrestle with what seems certain to be another multibillion-dollar deficit when the next governor takes office in January 2011.

"Most of them have avoided budget talk like it was the plague. It's kind of disappointing," said Larry Gerston, a political science professor at San Jose State University. "I'm not sure any of them right now has passed the test of leadership."

Gov. Arnold Schwarzenegger and the Legislature last month closed a $26 billion budget deficit with a combination of cuts and accounting maneuvers. It was out of balance the minute it was signed.

State Finance Director Mike Genest has projected a deficit of between $7 billion and $8 billion for the next budget cycle. Plus, federal stimulus money, $5 billion of which was used to backfill education cuts this year, may not be available. And about the time the next governor takes office, $16 billion in temporary tax increases that were included in a February budget deal will expire.

Two of the three Republican candidates for governor say they would have vetoed the budget last month.

In a recent interview, state Insurance Commissioner Steve Poizner, founder of several technology companies, said the budget deal was an improvement over the one in February that raised taxes. But he said it was not good enough and more cuts should have been made. Majority Democrats balked at further cuts.

"On one hand, I note the progress that was made. On the other hand, it's half done and I would have sent it back for more work," Poizner said. "Half of the solutions are gimmicks and smoke and mirrors. They will be back at the table in a few months because of the gimmicks, and the forecasts on revenue will be wrong."

Former eBay CEO Meg Whitman said after a speech in El Cajon last week that she too would have vetoed the budget and proposed saving money by eliminating far more than the 5,000 of the 235,000 state workers laid off by Schwarzenegger.

"The first thing is we are going to be forced to reduce the work force of state government much more dramatically than it has been reduced," Whitman said. "My view is that's going to have to be closer to 30,000 or 40,000 state workers because we have a government we cannot afford."

Former Rep. Tom Campbell, also a former state finance director, said that while he finds much to criticize in the budget deal, he would have signed it because prolonging the stalemate would have imperiled the state's falling credit rating.

Analysts question Whitman's call for massive layoffs.

"You could fire every state employee and it would simply cut the $26 billion deficit in half," Gerston said. There's also a practical consideration, said Jack Pitney, a professor of American politics at Claremont McKenna College.

"It sounds good until you start identifying who the employees are and what they do, because a lot of them do things that people like, like putting out fires and catching crooks," Pitney said.

Poizner maintains that much money can be saved by restructuring government.

"We do need to do what I did at the Department of Insurance and that is do a complete, top-down review, modernization overhaul of the entire state government," he said.

Campbell, who is hampered by scarce resources in a race against two wealthy technology entrepreneurs, is the only candidate in either party that has put forward a detailed plan for righting the state's financial ship.

He proposes a system to be phased in over 10 years in which an entire year's tax receipts would be placed in an interest-bearing account that would become the budget for the following year.

In the short term, he would freeze state expenditures, impose a hiring freeze on non-emergency state positions and add a furlough day for state workers, most of whom now have three a month.

More controversial is his proposal for a one-year, 10 percent increase in the gasoline tax, which he estimates would generate $6 billion.

"The one candidate who has given the kind of answers one would expect from a civics textbook is Tom Campbell," Pitney said. "And of all the major candidates, he probably has the least chance of winning."

Of the two likely contenders for the Democratic nomination for governor, San Francisco Mayor Gavin Newsom has been vague about what he would do about the state's chronic financial crisis and Attorney General Jerry Brown openly has not been forthcoming.

At a town hall meeting in San Diego last month, Newsom ticked off things he would and wouldn't do. He would impose a tax on oil produced in California and raise tobacco taxes. He also proposed eliminating the two-thirds requirement for the Legislature to pass a budget.

Newsom also said he wouldn't take money from local governments or cut welfare for the working poor or children's health services.

"Unless and until Air Force One comes in with even more money in a second or third stimulus, the reality at the end of the day, subject to a dramatic shift in resources, is we're going to be needing to do things dramatically differently as we fight for more dollars," he said.

What that means, Newsom said, is he is "committed to comprehensive budget reform" and that "all options must be on the table."

Brown, who has not announced his candidacy but is widely expected to run, has generally declined to weigh in on state finances on the grounds that he is not a candidate.

At a San Diego Lincoln Club luncheon in May, the former governor, former mayor of Oakland and three-time presidential candidate was asked what taxes he would raise and what programs he would cut to balance the budget.

"First of all," Brown replied, "you certainly don't a year and a half before you get going tell everybody what the hell you would do because that's a formula for failure."



Related News