Arnold Schwarzenegger may be flexing his muscles in California's gubernatorial recall election, but when the dust settles, the budget morass that will greet the victor in Sacramento may bring to mind the words of another strongman, Mr. T: Pity the fool.
The same freewheeling initiative process that could bring about the ouster of Gov. Gray Davis (D) has made the governor's job virtually impossible in tough economic times, many California budget experts say. Decades of successive and often contradictory voter initiatives have mandated spending on schools, the homeless, roads, prisons and the elderly, while severely limiting the government's ability to raise taxes to fund it. The boom years of the late 1990s only masked a structural deficit that could defy any change of leadership.
"In California, the initiative process is unchecked and unbalanced," said Mathew McCubbins, a political scientist at the University of California at San Diego.
Undeterred, Californians will get a chance when they go to the polls in October to tighten the chain that shackles the governor's hands. Along with voting on whether to recall Davis, they can approve Proposition 53, mandating the transfer of hundreds of millions of dollars in general tax revenue to a new fund for state and local infrastructure projects.
"I don't think there's any question it's democracy run amok," said Leon E. Panetta, a former White House budget director and California congressman. "Our whole system of government is based on the theory that you elect leaders who then have to exercise good judgment to direct the state or direct the country. Now what you have is the worst fears of our forefathers. Instead of allowing our elective leaders make these decisions, the people have taken matters into their own hands -- and not to good effect."
The relative ease of the initiative process has given those citizens and their lawmakers ample opportunity to legislate through "direct democracy," in the form of citizen initiatives or initiatives placed on the ballot by the state legislature. Over several decades, the initiative process has left Sacramento laboring under circumstances unseen in any other state.
Way back in the 1930s, California voters decided to require a two-thirds "supermajority" in the legislature to pass a budget. Only Arkansas and Rhode Island have similar requirements.
California's 1978 taxpayer revolt resulted in the passage of Proposition 13, which lowered property taxes by 60 percent and strictly limited property tax increases. That, in turn, left the state dependent on volatile taxes -- particularly income taxes -- levied by Sacramento instead of local governments. But Proposition 13 also mandated that any tax increase be approved by a supermajority.
Since then, the people have kept that legislature spending. In 1988, Proposition 98 hamstrung any efforts to cut education spending by mandating that funding for education from kindergarten through community college at least equal the previous year's level, plus increases for inflation and population growth.
In 1994, the voters overwhelmingly approved Proposition 184, one of the toughest three-strikes-and-you're-out laws in the country, which mandated long prison terms for repeat offenders even if the final strike was a relatively minor offense. That locked in a prison boom that the nonpartisan Rand Corp. estimated at the time could cost the state $4.5 billion to $6.5 billion a year.
Then, in March 2002, Californians approved Proposition 42, earmarking the state sales tax on gasoline for transportation, taking away the legislature's discretion over $1.4 billion a year by 2008.
Last November, as the state's budget problems pushed the deficit over $15 billion, voters reelected Davis and approved four measures creating a trust fund for emergency homeless shelters, low-income seniors and the mentally ill; funding a comprehensive overhaul of education facilities; financing a new wave of "clean water" bonds; and increasing spending on after-school programs.
The after-school measure, Proposition 49, was backed and financed by Schwarzenegger in his maiden voyage in state politics, resulting in a cost to California taxpayers of $550 million a year, with no additional resources to fund it, according to Jean Ross, executive director of the California Budget Project, a liberal think tank.
In one day Californians had locked in additional financial obligations totaling $40 billion, according to Brian P. Janiskee, a political scientist at California State University at San Bernardino.
"Californians are unparalleled when it comes to financial self-delusion," Janiskee huffed in a San Diego Union-Tribune editorial after the election.
Voter-mandated initiatives, along with the federal partnerships funding Medicaid and welfare, now swallow 60 to 80 percent of the state budget, said John Ellwood, a public policy professor at the University of California at Berkeley. Meanwhile, a recent economic study concluded that the supermajority requirement to pass tax increases has left states like California with 8 percent less tax revenue than they would have if a simple majority could raise taxes.
"Whoever is elected governor is essentially running up against the same wall, a budget that is increasingly paralyzed by initiatives," Panetta said.
Schwarzenegger has not described how he'd address the state's fiscal woes except to say that he'd work to attract business to California. His campaign announced yesterday that billionaire investor Warren Buffett had signed on as the actor's senior economic adviser. [Story, Page A6.]
Through a combination of modest spending cuts, an automatic increase in the state car tax, new borrowing and federal assistance, Davis and the legislature passed a 2003-2004 budget this month that is supposed to close a deficit that has swelled to $38 billion. But whoever is governor next year will face a new gap of $10 billion to $15 billion, with the easiest solutions already used, Ellwood said. The gap will jump by $4 billion if a lawsuit to block Davis's unpopular car tax hike succeeds.
To be sure, Davis and the legislature bear their share of the blame, budget analysts say. The technology boom became a money machine for Sacramento in the late 1990s, as dot-com employees grew rich on stock and real estate. In 1999 Davis used the fiscal windfall for one-time expenditures on infrastructure improvements, said Fred Silva, a senior analyst at the Public Policy Institute of California. But over the next two years state lawmakers went to town, cutting taxes, raising spending and watching the state's $100 billion budget grow by 44 percent over 1998 levels, according to the institute.
For decades, governors of both parties have been quick to say the initiatives have tied their hands, but lawmakers have proven themselves ingenious at getting around those initiatives, McCubbins said.
When voters imposed term limits on legislators in the 1990s, they also mandated a reduction in legislative staff. Lawmakers responded by moving their legislative analysts to the state library system, effectively cutting their staff without trimming their budget by a cent. They transferred their education aides to the state Department of Education, thus helping themselves meet the mandates of two initiatives: They "decreased" their personal staff and "increased" education spending to meet the Proposition 98 mandate.
"Legislators routinely flout these initiatives," McCubbins said. But, he added, their struggles to appear in compliance create "enormous inefficiencies" and make governance opaque to Californians.
That, in turn, only spurs on angry voters to take matters into their own hands with still more initiatives -- and now a landmark gubernatorial recall, Ellwood said.
Panetta suggested the next governor should harness the initiative system to thwart it. Draft an entirely new budget for the state, ignoring the electoral mandates, Panetta said, then submit it to the voters as an initiative.
