Palace intrigue

Think of India, so famous for the power of its bureaucrats, who carry on like members of a royal court, complete with sophisticated power struggles and tiny individual fiefdoms. Perhaps more than any other force, their aversion to economic progress has helped keep India in the past. Today, their power wanes.

Not so for Sacramento. With Governor Arnold Schwarzenegger releasing a much-anticipated final budget proposal May 13 that includes major cuts and seeks no tax increases, palace intrigue has spiked. Every faction and phalanx sprang into action to influence what got stuck in the budget document.

Do you know Maria? Give her a call immediately and beg for her to speak to her husband. Do you know somebody who knows somebody who meets with Education Secretary Richard Riordan, Environmental Protection Agency (EPA) Secretary Terry Tamminen or Corrections Department czar Jeanne Woodford? Quick, see if you can get them to set the governor straight before his discomfiting new ideas are permanently entered on the gubernatorial hard drive.

Schwarzenegger has helped fuel all this side-balcony intrigue, of course, by publicly changing his mind on big cuts he planned to make in troubled programs for the disabled. Although the programs serve a worthy cause, they blow money and resist reform.

Schwarzenegger announced his reversal on cutting the funding after appeals from Maria Shriver and other advocates for the disabled among the Shriver set. Some Democrats and Republicans perceived his change of heart as weakness and began going to the media with demands that Schwarzenegger withdraw other cost-cutting from his budget.

Speaker Fabian Núñez, a sharpie and adept strategist, even flew to Washington, D.C., a few days ago to publicly beseech Republicans and Democrats representing California in Congress to pressure Schwarzenegger not to cut the state’s massive social and health-care welfare systems.

Not to be out-shouted, back on the West Coast, the bipartisan government efficiency agency known as the Little Hoover Commission fired off an early-May report revealing the state’s neo-Great Society programs to be in complete disarray. The commission said California’s expenditure of a staggering $60 billion per year in state and federal funds has proved so inefficient at resolving poor people’s problems that the programs are imploding under their own weight.

Why was everybody so hepped up to influence the governor’s budget document? After all, last year at this precise time, most of the very same players regarded Gray Davis’ final budget proposal with a huge, collective yawn.

Davis was, to be kind, a non-leader. His budget was viewed as little more than a passing irritant even by the Democrat-controlled Legislature that supposedly was on his side. A year ago, the Democrats, led by Senate President Pro Tem John Burton and former Speaker Herb Wesson, ignored Davis’ pleas to massively cut spending, thus hastening his political doom and worsening the fiscal crisis.

But Schwarzenegger, who just earned kudos from radically different observers—the socially liberal New York Times editorial board and the fiscally conservative Economist magazine—is emerging as the most powerful California governor in years. That means his budget will be a powerful tool—a blueprint, if you will—for everything that happens in state politics and government in 2004.

Some of the biggest braggarts who insisted they influenced the governor’s budget were lobbyists for cities and counties as well as the health-care industry. Even among Schwarzenegger’s cabinet, powerful new players like the EPA’s Tamminen were putting out word that they had access that might be used to change his mind.

One longtime Republican staffer said, “The lobbyists are circling and saying, ‘Yeah, I have influence via [Schwarzenegger confidant and aide] Bonnie Weiss, and I know Maria, too. And I was like, ‘If you do, why are you having lunch with me?’”

Schwarzenegger’s friend Riordan, though declining to give details, said his office has been pelted with calls from people seeking to influence the process. “Yep, every single day. I guess some of it can be healthy, like a give and take—or not!”

Shriver appeared to be wearying, however graciously, of all the vague acquaintances who boasted they’d pressed her to influence the governor. She did acknowledge on Larry King Live on May 6, while promoting her book about her father’s struggle with Alzheimer’s, What’s Happening to Grandpa?, that her in-depth policy discussions with Schwarzenegger go far beyond anything so outmoded as “pillow talk.”

But she hastened to add, as if cognizant of the mounting demands for her ear, “He’s running the show. He’s the one who was elected.”

In fact, Schwarzenegger’s budget is coming down to math, not connections.

Although more than $2 billion in unanticipated extra taxes poured into the California treasury by the April 15 tax deadline because of the improving economy, the new money served largely to ease new fiscal crises that cropped up. Schwarzenegger, meeting for hours on May 7 with his budget team, led by Department of Finance Director Donna Arduin and her top numbers-cruncher H.D. Palmer, faced an estimated deficit of $14 billion to $17 billion.

The budget that took shape was based on some borrowing, some one-time cuts and some sizable spending reductions that could alter radically the way California conducts government business. Indeed, Schwarzenegger’s budget is a precursor to his dramatic upcoming plan—long overdue in California—to remake Sacramento’s unappealing and ineffective bureaucracy from top to bottom.

In recent days, word spread quickly through the Capitol that a Performance Review Team of hotshot state workers, selected for their interest in cost savings and reform, has proposed to Schwarzenegger huge structural changes that would wipe out some bureaucracies and disband scores of silly paid state commissions. The plan would fold several departments into super-divisions to eliminate stunning levels of duplication and widespread languor typified by the “we’ve always done it this way” mentality.

Schwarzenegger’s no-new-taxes budget, when paired with the Performance Review Team’s ideas, which will become public in late June, represent the most profound threat to Sacramento’s royal court in my lifetime.

These special interests, led by the public-employee unions, soon will take the gloves off to fight whatever disrupts their comfort. For the first time since his swearing-in, our neophyte and cheery governor is going to be peering directly into the dark partisan soul of the Capitol.

So, how will he comport himself once his infectious enthusiasm and work ethic—Shriver said he “often works until 2 a.m. or 3 a.m.”—are no longer enough to keep the partisan barbarians, both Republican and Democrat, at the gate?

Scrappy Speaker Núñez, for instance, announced at a press conference a few days back, “Make no mistake; we are going to fight very hard for the things that we believe in”—mostly social welfare and health programs that lack any cost controls or any caseload controls. The metastasizing programs—one big health program has skyrocketed in cost more than 700 percent in five years—would require substantial new taxes to continue underwriting them at current levels.

Sounding mildly threatening, Núñez said, “The governor can tell us how he plans to see that the revenues are there to fund those programs.”

The short answer is that he won’t. Major belt-tightening and more-intelligent spending of scarce dollars will be Schwarzenegger’s big push. For example, the hundreds of thousands of non-poor Californians who get virtually free state health care and other taxpayer help will be required, under Schwarzenegger policies, to make small co-payments or participate on a sliding scale.

Palmer says the only major new money available—that is, without levying new taxes—is sitting in Washington, which screws California when it hands out dough to the 50 states. Of each $1 we send to Washington, state officials say, we get back a pathetic 75 cents or so.

Palmer said the governor isn’t trying to secure “a bailout, but to help California get a more-fair share of federal resources.” Washington may not “write a check,” but instead may remove strings by which it dictates how California spends federal money.

Last year, then-Speaker Wesson and others embarrassed themselves by blaming Washington’s fiscal shutout on powerful Southern congressmen who long have controlled several bigger committees, using them to funnel money to Southern states.

That’s pure victimology, so typical of the Sacramento legislative mindset. The truth is that members of California’s congressional delegation—the 53 elected U.S. representatives plus Senators Dianne Feinstein and Barbara Boxer—consistently have focused on partisan tiffs with one another instead of winning back money for the state.

Schwarzenegger needed only a few days last winter to notice the bickering afflicting our 20 Republican and 35 Democratic members of Congress. He met with the feuders at a posh hotel, cajoling them to stop warring. No word yet on whether they listened.

So, let’s say Schwarzenegger succeeds in peddling to a widening audience his less-is-more philosophy of directing public money more wisely. I’ll still be stunned if a big partisan conflagration doesn’t burn in Sacramento for much of the summer.

The governor has done what many said was impossible, toning down the rhetoric and getting Republicans and Democrats to work on crucial projects, including the $15 billion deficit bond refinancing that voters approved in March. Joel Fox, an anti-tax advocate and Schwarzenegger campaign adviser, called it “beautiful to see.”

It is. But let’s not forget that we are observing the studied manners of the elected and appointed royal court, each member angling to protect this fiefdom or that. Still hidden in the flaps of their robes, the long knives await at the ready.