Governor Fail

Seven Years After Recall, Arnold Leaves State Worse Off Than He Found It

When Governor Arnold Schwarzenegger swept into office in 2003, promising swift and bold action to reform California’s finances, the state’s deficit stood at $16 billion.

As he rolled out his final budget last week, with considerably less braggadocio, Schwarzenegger found himself proposing a fiscal plan to deal with a $19-billion deficit.

How’s that whole recall thing working out for you, Arnold?

Capitol Letters

Seven years after he roared into Sacramento, having ousted and humiliated incumbent Governor Gray Davis in an unprecedented recall election, the action-hero politician is limping through the final months of a lame-duck term, surrounded by the wreckage of failed promises and squandered political opportunities to repair the Capitol’s dysfunction.

Handed a once-in-a-lifetime chance to lead California into an era of sweeping reform, the governor instead followed a path of policy blunders and misguided judgments, frittering away his political capital in favor of seeking to sustain his personal popularity. By choosing a seemingly easy way out of the budget tangle at the beginning of his term, he was left at its end with nothing but impossibly hard choices — and a popularity rating matching that of the disgraced governor he replaced.

“The politicians have made a mess of the California budget,” Schwarzenegger said in the first, heady days following his 2003 election. “Now it’s time to clean it up.”

But his utter failure to “end crazy deficit spending,” as he had promised in the recall campaign, may be traced to several key policy and political miscalculations he made in the early years of his tenure. While he is certainly not to blame for the recession that has eroded state revenues in recent years, he is responsible for at least three crucial decisions that helped lock in the state’s structural deficit:

• VEHICLE LICENSE FEE: One of the key issues that Schwarzenegger used to hammer Davis was his promise to roll back a relatively small increase in the fee Californians pay to register their cars, which the then-incumbent had imposed to help ease the budget mess. Most of the money from the fee increase — about $5 billion a year — passed through Sacramento to help pay for local government programs; when Schwarzenegger took the politically popular position of repealing the increase, he tried to have it both ways by also promising to keep paying locals the money they would have otherwise lost, knocking a permanent $5-billion hole in the state budget.

• SHORT-TERM BORROWING: In his first year in office, Schwarzenegger convinced the Legislature and voters to support a $15-billion bond issue to borrow money to bridge a budget gap created by debt and operational expenses (partly due to the loss of vehicle license fee money). The borrowing not only set a pattern for the kind of budget gimmickry that would follow in coming years but also burdened the state with more than $1 billion in annual interest payments; overall, bond interest now represents the fastest-growing item in the budget.

• POLITICAL OVERREACHING: In 2005, Schwarzenegger put before voters Proposition 76, a ballot initiative that called for a hard cap on state spending, the most important and substantive budget reform he had proposed. But for reasons that remain politically inexplicable, he put it on the ballot with three other measures that had nothing to do with state finances — weakening teacher tenure, restricting political contributions by public-employee unions, and changing the system of legislative redistricting — a strategy that offered an easy target for the powerful California Teachers Association and its allies; all four of his initiatives went down in flames, as Schwarzenegger was dealt a crushing political defeat.

Despite his reelection in 2006, the governor was permanently weakened in the Capitol. He revamped his administration by bringing in a liberal Democratic chief of staff and moving toward the political center. But the strategic recalibration earned him the lasting enmity of Republicans and not much but contempt from Democrats. His last bid for budget reform went before voters in a special election last year, as one of a confusing quartet of ballot measures, but was overwhelmingly voted down when it was paired in one initiative with a raft of proposed tax increases.

“Ever since I was elected governor, I have been trying to get budget reform,” Schwarzenegger said on a recent appearance on one of the Sunday political talk shows. “We haven’t done it yet. But I will continue pushing for that and fighting for that.”

Sorry, Arnold, it’s a little late for that.


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