Smoke and money

Now that Assembly Democrats have managed to exemplify political pettiness for the ages by passing a law to dismantle Gov. Arnold Schwarzenegger’s Capitol smoking tent, perhaps they can get back to work on the state budget.

Somewhere between the governor’s proposal and Democratic lawmakers’ alternative to it lies a budget that would be really good for California. Is compromise possible? Not if both sides keep on blowing smoke in each other’s faces.

By every reckoning, the governor has come up with a budget proposal that is pretty good. It would fund education at the highest levels ever, begin repairing the state’s crumbling transportation system and increases allotments to local governments. But it also posits a $4 billion shortfall—the very amount, interestingly, cut from the budget by his rescission of the vehicle-license-fee uptick—to be covered by carryover borrowed funds.

The Democrats’ response has been to propose spending $3.1 billion more on education and slapping a tax on high-income earners. However, their budget would also include a $4 billion shortfall.

The education establishment is right that Schwarzenegger has reneged on his 2002 promise to restore school funding to its full Prop. 98 level. But that level, because of one-time windfall revenues this year from a tax amnesty, is out of whack, demonstrating once again the inflexibility of such autopilot measures. Schwarzenegger wisely chose to use the windfall for one-time road construction projects.

Our elected officials now have an opportunity to pass a deficit-free budget and stop adding to the $40 billion in debt accumulated during a decade of deficit spending. A temporary tax hike to that end would be appropriate, especially if it is coupled with an ongoing state spending limit. True fiscal prudence is within reach.

We’re not optimistic, however. Whatever bipartisan cooperation voters thought they would obtain when they elected Schwarzenegger is out the window—along with the smoke.