In a state of receivership

After passing on an opportunity to reduce the deficit, legislators launch into more spending that could send us to fiscal ruin

Illustration By B.Z.

Not long ago, the Assembly Appropriations Committee, faced with California’s $38.2 billion fiscal deficit and no easy fix, shelved one proposed spending bill after another—spending being a pointless topic. I watched as Committee Chairman Darrell Steinberg quietly noted the only good news was that President George W. Bush was sending California $2.4 billion in relief.

That and other money, part of $20 billion set aside under Bush’s tax bill, is on its way to deficit-ridden states. Yet, upon hearing news of the inbound $2.4 billion, a member of the Assembly Appropriations Committee declared, “Well, maybe now we’ll be able to fund some of these programs we are talking about!”

I’ll admit, I snorted reflexively. Then, I perched forward in my seat to see who had uttered such a thing. But my view was blocked as a curious contingent of citizens in front craned their necks at the same time.

A flurry of chattering spread as we in the peanut gallery glanced in amazement at one another. These politicos, elected to represent us, have driven the state to the brink of financial collapse with their gross overspending, and some assemblywoman with a microphone glued to her lips still doesn’t get it?

Could this be right? Gray Davis and the majority Democrats are asking taxpayers to cough up $8 billion in new taxes—including $4 billion in tripled car-registration fees, making ours by far the highest in the nation—and Sacramento isn’t going to use the $2.4 billion relief to pay down the deficit?

A man shook his head and remarked how painless it is for fat cats to burn up the public’s money. But, to my consternation, many onlookers in the hearing room were nodding, agreeing that the $2.4 billion from Washington should be spent quickly on programs.

These two dueling reactions to the relief check arriving from Washington speak volumes about the crisis that threatens California’s credit rating, its attractiveness to investors and to its middle class, and its very economy as the Legislature stumbles toward a June 15 deadline to approve a 2003-2004 budget.

Although you’d be hard-pressed to glean it from newspaper coverage of the Legislature, which is staggeringly slanted, the majority Democrats have clung to huge spending programs and made only the barest in real cuts so far—$3 billion or so—from a budget of about $78 billion. Up nearly $20 billion from four years ago, California spends almost twice per capita what Arizona spends to deliver state services.

In months of hand-wringing histrionics, Democrats have persuaded the flatline media to focus on the anti-tax obsession of the Republicans. But it is difficult to overstate the broad failure of the majority party to lead, to be adults, to belt-tighten and to try to head off fiscal ruin.

As a Democrat often disgusted by my party, perhaps I am too tough on Democrats. So, I contacted a couple of moderates, one from each side of the aisle, who are respected as careful thinkers: Al Checchi and Tony Quinn. I got an earful about the foolishness of the Democrats and their enablers, the media.

First was Checchi, the Democrat multimillionaire who lost to Davis for governor five years ago. In my column in January, Checchi made dark predictions that now sound real, warning that California might even default on its loans.

“To blame this on the GOP’s opposition to taxes is absurd,” Checchi said. “The California Legislature is very, very far left, and they are oblivious to what creates jobs, and they are destroying the economic base of California. The California media are so consistently myopic—consistently!—that you have to look to national publications to see how bad Sacramento is doing in comparison to other states and how much trouble California is in relative to other states.”

Such comparisons show, Checchi said, that “these folks have set the state back so far with indiscriminate spending, it will take 20 years to straighten out what they have done. But they are oblivious, so naturally their reaction is to spend the $2.4 billion coming from Washington.”

Some legislators are indeed oblivious. On the far left, fiscal flakes abound in Sacramento, like the truly likable Santa Monica Democrat, Senator Sheila Kuehl.

Kuehl just pushed through the Senate, by a 23-14 vote, a troubling “universal health care” bill to give the state of California—whose Medi-Cal program is arguably the most fraud-riddled in the United States—the power to abolish all private health insurance and control the health care of every Californian. The media largely ignored the story.

Kuehl wants to spend the $2.4 billion—not just blow it paying off a silly deficit. She insisted to one newspaper she only wants to “spend money on frail seniors and children’s health care,” but, like the rest of the Legislature, she has made no attempt to get money by identifying and cutting bloated state bureaucracies.

Socially caring people like Kuehl, who create fiscal messes because they find economics boring, don’t tell the whole story in Sacramento.

There are more reasoned attitudes, like that of Steinberg, the Sacramento Democrat and chairman of the appropriations committee who says the $2.4 billion has not been snatched—yet. “No, no, no,” said Steinberg, “$1 billion is earmarked for medical, and this may be one-time money we can’t rely on. We have to use it wisely to close the budget gap,” he said, although he is not sure how.

But Republican Ray Haynes of Murrieta said that the moment the federal money was announced, Democrats stuck $1.9 billion in spending back into the 2003-2004 budget. “They spent it on ‘stuff’ and didn’t use any of it to reduce the current debt—incredible,” said Haynes. Quipped Senate Republican Caucus fiscal expert H.D. Palmer, “I think they’ve got Direct Deposit.”

Already, construction unions have been told $500 million will go to transportation projects. In Southern California, tens of millions of dollars may flow to transit projects that citizens are not clamoring for.

Quinn, co-editor of the California Target Book, a non-partisan publication that tracks legislative races, describes Sacramento as a bizarre burg where politicians rarely hear what genuine citizens want.

“Many legislators feel comfortable saying they are going to spend that $2.4 billion because, first and foremost, they have ‘safe’ districts at home where they cannot be unseated by the other party,” said Quinn. “The media in California rarely explain to the public that’s what is actually going on.”

Moreover, he said, “The people legislators talk to in Sacramento at cocktail hour are not the regular citizens but the spenders. The legislators all hang around with spenders in their after-hours! That’s why nobody tells the state retirees they cannot have their big pension increase, and nobody tells the prison guards they cannot have their big pay increase.”

You can watch a creepy scenario playing out as the “spending groups“ surge powerfully up and down Capitol corridors wearing color-matched T-shirts emblazoned with union insignias. Whenever a Senate or Assembly committee discusses budget cuts, two or three T-shirt groups sit in intimidating color blocks up front.

“Not even 5 percent!” one platoon of shirts opposed to cuts read recently.

Legislators wave and grin—after all, it’s all just democracy—but in truth, many legislators fear them. In the next primary election, the groups effortlessly can shift campaign funds and foot soldiers to a rival from the same party and unseat the “safe”—but actually quaking—incumbent.

On June 25, 2002, outgoing Senator Steve Peace, who is now Gray Davis’ budget czar, gave a rousing speech praising legislators for being on the verge of confronting their fiscal disaster.

“I know you’re not going to let me down as a private citizen next year,” Peace told the Senate. “You’re going to deal with that structural issue, and you’re going to deal with righting the ship.”

Peace was dead wrong. The majority Democrats are mired in gross overspending habits and stuck with a volatile tax system they must restructure. Yet this year, they have taken a gutless pass, as I predicted in January.

According to Quinn, with the media rarely explaining all this, the Democrats will not raise public ire until tax increases hit.

(Among other proposals, Davis and the Democrats want to triple the car tax using a rule they say does not require a two-thirds vote of the Legislature, to get around Republicans’ opposition.)

“It will be interesting to watch about six races in swing areas because the Democrats could end up losing them,” said Quinn. “There could very easily be a price to be paid for the Democrats’ regressive new taxes and failure to reduce spending. Watch places in Southern California like Long Beach, Manhattan Beach, Torrance.”

Oddly, the Democrats’ salvation from voter wrath may be in Republican hands.

As this column went to press, Republicans had suggested a novel way to re-jigger the sales tax, avoid new taxes and make only $2 billion in extra cuts to the 2003-2004 budget. Aside from Assembly Speaker Herb Wesson, who is still refusing to come down to planet Earth, Democrat leaders were listening.

But Checchi noted that four years of stupidity have created incredible, long-term problems. “I am not so sure California wouldn’t be better off if a trustee took it over and ran it instead of this governor and this Legislature,” he said.

Imagine what a historic downfall that would be. After all, California is a state that loves to be first.