In the spirit of détente

Schwarzenegger could make nice with Democrats by slashing waste while protecting those truly in need and by putting Corrections in its place

Illustration By B.Z.

By now, the governor will have given his State of the State address, and soon after, he will release his budget for 2003-2004 that takes chunks out of Medi-Cal, seeks a pause in the fast growth in education spending, curtails prison budgets and generally upsets every imaginable faction in Sacramento.

I have a guiding principle and a plan to offer the guv, who, as a Republican, must work with the majority Democrats if anything remotely resembling his budget is to be passed.

First, the guiding principle: It ain’t gonna fly if you continually bash the Democrats, as the Republicans have done during the fiscal crisis of the past two years.

Yes, I accept that my own Democratic Party was in charge as California went nearly belly up. But even the conservative Cato Institute points out that nearly every state legislature that was suddenly flush with huge revenues from the stock market run-up lost its head. California was just the worst state example in an epidemic of governmental shortsightedness.

Arnold Schwarzenegger must show real leadership—even as the Dems assail him with predictably nasty press conferences and other Sacramento sideshows—by launching Democratic Détente.

Here’s my definition of Democratic Détente: Help the Democrats find ways to save money while saving face. Ease the tensions and show them the way.

First, Schwarzenegger’s January 9 budget must fulfill his unmet promise to root out waste and fraud, a sticking point with Democrats who believe it was an empty attack on their ability to govern. He owes the Democrats an answer on this important issue.

Second, on looming battles about costly social programs such as Medi-Cal and Healthy Families, and over unaffordable goodies given to government-employee unions, Schwarzenegger must emphasize a search for reform. Democrats need to be able to tell voters: “Things will be tougher on people but fair, with less overhead and bureaucratic spending.”

But first, let’s settle this question of waste and fraud. Is California blowing a couple of billion dollars annually that can be saved?

Oh, yeah.

Each year, California pays a king’s ransom in avoidable fines due to chronic poor management by state-government supervisors who make $100,000-plus per year but can’t get their acts together. To wit:

• California pays $200 million in fines per year to the federal government because it failed to create an automated system to collect child-support payments from parents, as required by federal law.

California is one of only two states being fined annually because it blew past a 1997 deadline. More than a year ago, Curt Child, director of the Department of Child Support Services under Gray Davis, said automation was “on track” to launch in 2005-2006.

Good grief.

Possible savings: If Schwarzenegger reforms this department by copying a more competent state, we could save $200 million in avoided fines.

• California has the worst-run food-stamp program in the nation. In 2002, it was so screwed up that $172 million in food stamps were granted to unqualified people, while qualified people were shorted $79 million.

California was fined $116 million by the feds for its endless mistakes. Yet, the following year, the state reduced its “error rate” only slightly, from 17.4 percent to about 15 percent—still the nation’s worst. So, in 2003, the feds fined California another $62.5 million.

A Davis crony with no previous background in running a huge department, Social Services director Rita Saenz, blamed workers in Los Angeles who didn’t understand their computer system and stopped using it to track cases. Saenz has had years to fix that.

Savings: If Schwarzenegger brings in an expert to lower California’s error rate to the national average, it could save $100 million per year.

Con artists who see California’s poorly policed assistance programs as a personal bank account also are siphoning off a vast fortune. This is especially true of programs that allow recipients to apply online or that don’t require rigorous proof of identity or of true need.

• According to the California Taxpayers’ Association, 10 percent of California’s $29 billion Medi-Cal program goes to con-artist doctors, pharmacists and other slimy professionals who fraudulently bill for services they did not render and supplies they did not provide.

Some $2.9 billion is stolen per year. Schwarzenegger should copy the states with the lowest such fraud. While he’s at it, steal those states’ fraud experts away. California’s Medi-Cal fraud division is pathetic.

Savings: $1 billion or more per year is attainable.

• An amazing $280 million per year is being paid by the state’s unemployment-insurance fund to cheaters who are not unemployed.

According to The Sacramento Bee, the state Employment Development Department is so poorly run that it hands out benefits to con artists using Social Security numbers that belong to dead people (who are, come to think of it, utterly unemployed).

One ring was broken up after a Fresno County sheriff’s deputy noted during a traffic stop that a motorist had keys to hundreds of post-office boxes. The ring had used fake names to collect $16 million from California.

Savings: If half of this can be cut with reform, that saves $140 million per year.

Beyond outright fraud, there’s also pure waste. It tends to be fueled by a “we’ve always done it this way” attitude. Schwarzenegger’s administration is getting an earful from government workers who are sick of watching their $100,000-per-year state supervisors blow money.

H.D. Palmer, a spokesman for the Department of Finance, said the governor’s January 9 budget includes “proposals for program reforms in a number of areas that will show payoffs now and down the road.”

Typical of a mess needing fixing is the state’s disability-insurance fund. As the San Francisco Chronicle reported in 2003, the fund, which covers pregnant women and workers who were not injured on the job, wastes tens of millions of dollars through a Byzantine system that invites abuse.

From 1999 to 2001, workers overpaid between $124 million and $200 million to people who may not have deserved the money, and this continues. Nobody knows the full picture.

That’s my list of waste and fraud, gleaned from the news. Palmer said Schwarzenegger’s budget has its own target list, which Palmer called “inefficiencies, lack of accountability, and in some cases outright fraud.”

If Schwarzenegger stops a lot of this waste and fraud and ensures that the truly deserving get their benefits, he could save upwards of $2 billion annually. He’d create a reservoir of good will among Democrats.

Just look at what happens if Schwarzenegger gets the automated child-support system moving before its far-off date of 2005-2006: The biggest cause of poverty among California children is the failure of deadbeat parents to pay child support. Hurrying this effort along would drag untold numbers of children above the poverty line earlier than expected.

That’s a very big deal.

Palmer confirmed to me that “we are indeed proposing change in handling of the automated child-support system, and it will involve the feds.”

Cutting waste and fraud are the easiest areas in which Democrats and Schwarzenegger can find agreement. But when it comes to cutting social services and education, Schwarzenegger will face something akin to war.

Last year, Democrats virtually ignored their own governor when he begged them to cut California’s burgeoning social programs. But Davis was universally disliked and was a terrible negotiator. Schwarzenegger may be able to move Democrats on these issues by finding accord with them on cuts Democrats are dying to make.

For example, Democrats want to cut the bloated prison budget and release nonviolent, mostly minority drug offenders to drug-treatment programs. California voters also prefer this approach. So, apparently, does Schwarzenegger.

Over several years, this plan could save billions. The Republicans will fight it, but eventually they must bend on this issue.

Schwarzenegger also should enlist Democratic support for his fiscal plan by highlighting the Democratic examples of fiscal responsibility breaking out all over California.

Sacramento is an incredibly isolating place. Many Sacramento Democrats are barely cognizant of the fact that deep budget cutting under way across California is largely being undertaken by Democrats. Democrats, after all, tend to run California’s bigger cities, school boards and the most powerful governmental bodies.

In heavily Democratic Oakland, a months-long battle wore on between city leaders and a union after the city asked workers to pay more money into their pension plans temporarily. During the standoff, the city ordered workers to stay home one day per month to save money, and Oakland shut down all sorts of city services on that day.

Workers recently agreed to a compromise on the increased pension payments, and citizens weathered the closures of city services. Oakland pulled through.

That’s the sort of outside-the-box Democratic thinking that Sacramento Democrats—who, until now, have shown bald fear toward state public-employee unions—need to believe is within their own reach.

Schwarzenegger can use the help of fiscally sharp Democrats like Oakland Mayor Jerry Brown to get out this message. The governor’s theme should be: “In tough times, California Democrats know how to belt-tighten while being fair, and I know you are capable of the same.”

If Schwarzenegger can find accord with Democrats by slashing waste while protecting those truly in need, by releasing nonviolent prisoners and by illustrating how Democrats across California are instituting fiscal restraint, he will find an easier path through the potentially ugly battles to come.