Eureka Reporter

By CAROL HARRISON, The Eureka Reporter

Published: Jan 8 2008, 10:59 PM · Updated: Jan 9 2008, 12:28 AM

Gov. Arnold Schwarzenegger’s call for across-the-board spending cuts and a constitutional amendment to overhaul state finances brought immediate reaction from Humboldt County’s two state legislative representatives.

“I was surprised that he was going to take another stab at an amendment, but at this point, everything needs to be on the table including that,” Berg said in a phone interview. “There are no easy fixes.”

“We will learn more in the way of specifics in the days and weeks ahead, but I remain opposed to drastic reductions in spending for education, health care and services for the elderly and disabled,” Wiggins said. “Nor will I support further tampering with our Constitution to give this governor more unilateral control over spending.”

Schwarzenegger has previously said he will declare a fiscal emergency to deal with a budget shortfall of $3-4 billion in the current fiscal year.

The gap is expected to reach $14 billion in the next fiscal year, which begins July 1.

Schwarzenegger will release his budget in detail Thursday, but yesterday’s speech made clear his direction and priorities.

In addition to the across-the-board cuts and the constitutional amendment, Schwarzenegger identified priorities in education reform, infrastructure, environment and energy, and veterans access to civil service and education benefits.

The Department of Health and Human Services got no mention, which wasn’t lost on Berg, who is the Assembly chairperson of that committee.

“About 42 percent of the budget is education and 28 percent is human services,” Berg said. “Ten percent across the board is not a creative way to deal with this. I fear for social services.”

Berg said she’s looking for ideas from states such as Washington and Iowa, which she said have dealt with shortfalls more creatively.

“The operative word is opportunity,” Berg said. “California has never had a master plan, has never sat down as a collective and said what kind of state we want California to be for the 21st century. This budget deficit provides the opportunity to move forward.”

In addition to calling for across-the-board cuts, the governor wants to move forward on a Budget Stabilization Act that administration officials said earlier in the day would have prevented the state from developing a structural deficit had it been in place since 1998.

“When revenues jumped 23 percent in 1999-2000, or when they jumped 14 percent in 2005-06 — those were the sugar highs,” Schwarzenegger said.

But in the rush to fund good causes, the state created ongoing obligations.

“We spend it all one year and can’t sustain it the next. We need to budget more evenly.”

The Legislature opposed the governor’s attempts to cap spending in 2004. Voters rejected in 2005 a constitutional amendment to tie spending to the previous year’s level plus the average revenue growth of the prior three years.

Rather than having to declare a fiscal emergency and make mid-year budget adjustments in a special session of the Legislature, the governor’s amendment would mandate automatic reductions in state spending triggered by the governor if the Department of Finance predicts a year-end budget deficit.

The Department of Finance would release the projections in November, January and June. If there is a deficit, then state agencies would reduce spending by 2 or 5 percent, depending on the size of the deficit.

A 1 percent deficit would generate a 2 percent spending reduction; a deficit greater than 1 percent results in a 5 percent reduction.

In year when the state is flush, the governor proposes a substantial rainy-day account that would swell to 15 percent of the state’s budget before being used for one-time only expenses or tax rebates.

His amendment, which must be approved by California voters, requires the Legislature to enact a statute specifying how the state will reduce spending by 2 and 5 percent.

“It used to be that Sacramento plugged deficits by grabbing money everywhere it could — pension funds, local governments, bonds, gas taxes meant for transportation,” he said. “But we tightened the noose by taking away those options. We now have no way out, except to face our budget demons.”

The governor said his budget for 2008-09 would not raise taxes.

“What I find troubling is the erratic ways we treat those who need our help,” he said. “Up one year and down the next. We cannot continue to put people through the binge and purge of our budget process.”

Wiggins said she was disappointed, but not surprised, by the across-the-board cuts.

“This proposal lacks thought, vision and courage,” Wiggins said. “He doesn’t need any additional tools to move the state in a positive direction. He already has the power to blue pencil out spending that he does not support. He’s just failed to do so.”

Berg said she was pleased with some of the speech, particularly the part about making decisions in partnership with Democrats, Republicans and the people.

“What do people in the state of California expect government to do, what do they want government to do and what are they willing to pay for?” Berg said. “It’s going to be a painful year because we are talking about a very big problem with no easy fixes.”

In related news, Schwarzenegger launched his Web site dedicated to his 2008 State of the State Address that can be found at gov.ca.gov/sots/2008/.