by Assemblyman Mark Leno
Tuesday, January 25, 2005

In delivering his 2005-06 budget, Gov. Arnold Schwarzenegger has been quite clear in his assessment of our ongoing budget crisis: The state is suffering from a spending problem, not a revenue problem. If that is the case, the solution should be rather simple -- cut spending.

But what would it take to close a $9.1 billion gap through spending cuts alone? If we were to fire every state employee, we would save approximately $8 billion in salary expenditures. If we were to completely dismantle the University of California and California State University systems, the annual savings would be about $5.4 billion. Eliminate our Youth and Adult Corrections Agency, thereby closing every state prison? Savings: $7 billion. Clearly, if we were to balance our budget through cuts alone, we would do serious damage to our state's infrastructure.

Just as clearly, the governor knows that cuts alone cannot be the solution. That is why borrowing, which comprised 40 percent of his solution to the shortfall in the current fiscal year's budget ($8 billion out of the $20 billion shortfall), is growing to 66 percent in his proposal for the coming year ($6 billion out of $9 billion shortfall). This is in spite of his famous recall campaign pledge to Fox TV's Bill O'Reilly, "I promise you as governor, I will not spend more money than the state takes in," or during the Proposition 57 and 58 campaigns, when he declared to numerous groups, "We will ... cut up the credit cards and throw them away."

So if the governor cannot resolve our "spending problem" through cuts alone, is it possible that his premise is faulty? Might we have a revenue problem? Without considering any new taxes, but merely returning to the tax- revenue sources the state had in place in the 1990s, the budget deficit would evaporate.

If the vehicle license fee had not been suspended by the Legislature in 1998 and rescinded by Gov. Schwarzenegger on his first day in office, the state would have benefited by approximately $4 billion each of those years, totaling nearly $30 billion to date. The cut in the VLF saved the average car owner about $200 annually, an amount she/he paid every year since 1948.

If the top 2 percent of California's taxpayers were paying at the same rate in state income tax that Gov. Pete Wilson established in the early 1990s, the state would be receiving an additional $3 billion each year. If the governor were to direct his energies toward closing corporate-tax loopholes and ensuring better collection of existing tax revenues owed the state, we would have another billion dollars or more to close the gap.

Rep. Zoe Lofgren, D-San Jose, has identified tens of billions of federal dollars owed to California. Our taxpayers, for instance, send Washington $1 and get 77 cents back; Texan taxpayers receive closer to 92 cents on their dollar. If Gov. Schwarzenegger were to collect just 10 percent of federal funds due Californians, we would have $5 billion of new revenue. Unfortunately, there is virtually no new federal money in the governor's new budget.

Rather than admit the state has a revenue problem, the governor proposes that we increase our debt load and put it on our children's credit card. Rather than do what is necessary to collect new revenue, the governor proposes taxing the elderly, disabled and poor by limiting their access to life- sustaining services and continuing to starve our underfunded and failing public school system. He also sees no problem with taxing middle-class families by continuing to raise the cost of higher education.

Could it be that by reasonably balancing the 2005-06 budget with a combination of cuts and new revenue without borrowing, the governor would have no substantive arguments for a special election this year? Is it possible that without exacerbating our fiscal crisis the governor would have a more difficult time scapegoating teachers and our public employees as the cause of our problems? There must be some explanation as to why the governor would break his promises, go back on his word and not recognize that there are more sensible and politically feasible ways to return our Golden State to sound fiscal health.

Assemblyman Mark Leno represents the eastern half of San Francisco in the California Legislature.