Did You Know?

In this edition of "Did you know?" we take a look at Prop. 1C. Sure, the ballot statement, the legislative analyst's report, and every public utterance about Prop. 1C to date asserts that it would allow the state to borrow $5 billion dollars against future lottery revenues. But did you know that, according to Darrell Steinberg, it would actually allow the state to borrow twice that?

Trailing badly in the polls, Proposition 1C would infuse the state budget with cash by borrowing against future California Lottery revenues. The February budget assumed that it would provide $5 billion for the 2009-10 budget. But Steinberg said he now believes the state could borrow $10 billion from the Lottery and use it all in 2009-10.

Consider it something of a "Hail Mary" argument for Proposition 1C.

"In my view we can triage our way through an $8 billion problem," Steinberg said. "That doesn't mean that there won't be some difficult choices. But, you know, we have a $2 billion reserve. There may be other opportunities with federal economic stimulus ... If 1C passes, you know, it's actually a $10 billion one-time securitization. It was just contemplated as being spread across two fiscal years. You could bring the second $5 billion into the budget year."

What fun things you learn when your proposition trails in the polls!

Let's go to the summary of Prop. 1C, shall we?

Impact on 2009–10 State Budget: Allows $5 billion of borrowing from future lottery profits to help balance the 2009–10 state budget.

Hm, no mention of future state budgets there. But yes, the Senate President Pro Tem is correct. In the analysis by the Legislative Analyst, he mentions that "the state also could borrow more from lottery profits in future years." In fact, the $5 billion dollar figure appears nowhere in the text of Prop. 1C. Here's the relevant portion of the text:

(2) Notwithstanding any other provision of law or this Constitution to the contrary, the Legislature is hereby authorized to obtain moneys for the purposes of the California State Lottery through the sale of future revenues of the California State Lottery and rights to receive those revenues to an entity authorized by the Legislature to issue debt obligations for the purpose of funding that purchase.

Well, that would be interesting to know before voting, wouldn't it? That this proposition basically opens up a new state credit card for the potential purpose of endless borrowing? Borrowing that would have to be paid back, with interest, for the next several decades?

California's reliance on borrowing to cover the budget deficit has been part of the landscape for 30 years. Debt service currently costs the state $5 billion a year. If you think this is a good idea, I invite you to enable it by voting to allow basically limitless borrowing against the lottery. Surely that won't be abused.

...by the way, the depiction by Steinberg of $8 billion dollars as a niggling problem not to be trifled with, but $14 billion as simply insurmountable, is another new one. Considering that Steinberg and the Senate passed a majority-vote fee increase of around $9 billion last year, more than the $6 billion allegedly at stake in the special election, and his description of how to fill the budget gap did not include this, forgive me for saying that his beliefs don't hold up to scrutiny.

Securitizing The Future

Building off Brian Leubitz' post at Calitics, George Skelton's discussion of Prop. 1C gets things about right - the choice is between a terrible public policy and deeper debt. Supporters of the special election will only show you one side of that argument, the expanding budget deficit that would result from failure, wrapping that into a fearmongering message of urgency. Opposers of the special election prefer to look at the actual policy, which Skelton describes accurately.

Prop. 1C -- the "Lottery Modernization Act" -- is one of six budget-related measures proposed by the Legislature and Gov. Arnold Schwarzenegger. It is by far the measure with the biggest immediate money impact.

It would authorize significant tweaking and expansion of the state lottery, creating more winners. And it also would allow the state to borrow $5 billion immediately against future lottery revenue.

Those should be separate questions: 1) Should the state expand its gambling operation? 2) Should Sacramento take out a loan for, say, 30 years just to help pay one year's worth of daily expenses? [...]

You could also call it a payday loan. That's how far Sacramento has fallen.

This is probably the easiest $5 billion the state can pocket, even if it would have to pay back double, including interest.

Put aside the fact that lottery revenues have dropped consistently over the past several years (per capita participation is among the lowest in the nation), and that, even if this scheme of more advertising and bigger payouts worked, you would be balancing the budget on the backs of a lottery-buying constituency composed mainly of the poor. But borrowing policies like this, as a result of putting off tough decisions and mortgaging the future for 30 years, are why our deficit bursts at the seams relative to other states. In the long term we will pay far more for this borrowing that could ever be brought in. The solution from the legislature and the Administration, literally, is to not call it borrowing. David Crane (Arnold's economic advisor) initially makes a decent point, then hides behind the word "securitization" to mask the reality.

Crane maintains that both tax increases and government spending cuts slow economic recovery. Government programs are "a way of keeping more people employed," he says. "In a recession, you want government to be counter-cyclical -- the teeter-totter" to a falling private sector.

"The overriding principle is that, at a minimum, you want government to be retaining the same level of expenditures, if not expanding."

Crane points to President Obama's economic stimulus package, which is heavy on new spending.

Of course, the feds can run up huge deficits and print money. States can't. And many California conservatives would rather see state government go belly-up than pay higher taxes.

Part of the distasteful remedy may be the lottery borrowing. Only don't call it "borrowing" in front of Crane. It's "securitization," he insists. Future lottery revenue would "securitize" the state's repayment of $5 billion in bonds.

This is a semantics game with political consequences. When the "borrow" word is used to describe the lottery proposal, I'm told, voter support for it drops by 25 percentage points.

Of course, it is borrowing - when you issue bonds and promise to pay them back later, you're borrowing. But the "securitization" model also masks the fact that California officials will have to go out into the market and find investors to buy debt based on future lottery revenues. Despite the success of recent state forays into the bond markets, that's not such an easy sell:

The ballot measure simply gives the state the legal authority to go out into the financial markets and find investors willing to purchase debt backed by a revenue source that has declined since 2005-06.

Before counting on quick cash from the sale of lottery bonds, it is worth reviewing borrowing-related assumptions made in recent budget agreements, such as the $1 billion in proceeds from the sale of EdFund booked as part of the 2007-08 budget agreement, a sale that was never consummated, or the $1 to $2 billion in proceeds assumed in various budgets from proposed, but never sold, pension obligation bonds. Or the $1 billion in proposed, but never issued, bonds for transportation programs that were to be repaid out of tribal gaming receipts. The careful reader may note a pattern here — a pattern that began long before the global meltdown in financial markets that has made obtaining loans more difficult for even the most creditworthy borrowers.

This isn't a serious funding measure, it's an accounting trick - a way to take $5 billion off the books quickly and easily with a minimum of pain. It's symptomatic of the failed solutions taken by this legislature and this Governor for years, which constantly try to push off solutions and never deal with the consequences (of course, the needy in this state always do). That anyone would sink money into protecting this status quo speaks to a failure of imagination, and a willingness to delay fundamental reforms that must happen before it's too late.

May 19 Special Gets Field Polled

A Field Poll released today shows support for 6 items on the May 19 statewide ballot (they neglected to poll the new and improved Prop. 13, which deals with prohibiting seismically retrofitted buildings from being classified as "new construction" for property value purposes, and will also be on the ballot). These are baseline numbers, as the awareness of the election is low and the turnout model is unclear. But I think we can conclude that this initial support is in no way firm, and at least two items are in peril. Here are the raw numbers:

Proposition 1A (Spending cap/tax extension)
Registered voters
Yes: 54 percent, No: 24

Likely voters in May special election
Yes: 57, No: 21

Proposition 1B (Education funding)
Registered voters
Yes: 59, No: 27

Likely voters
Yes: 53, No: 30

Proposition 1C (Lottery)
Registered voters
Yes: 48, No: 37

Likely voters
Yes: 47, No: 39

Proposition 1D (Early childhood services funding (Prop. 10))
Registered voters
Yes: 62, No: 20

Likely voters
Yes: 54, No: 24

Proposition 1E (Mental health funding(Prop. 63))
Registered voters
Yes: 61, No: 23

Likely voters
Yes: 57, No: 23

Proposition 1F (No raises for officials in deficit years)
Registered voters
Yes: 74, No: 17

Likely voters
Yes: 77, No: 13

The softest support is for Prop. 1C, the measure to sell the lottery, cashing in now to fill a budget hole in exchange for a long-term revenue loss. That's under 50% and could easily be tipped over if a No campaign explained that this will hurt long-term future revenues. A loss on this measure would put a $5 billion dollar hole in the signed budget that would have to be dealt with by June 15.

Most interesting is the case of Prop. 1A, the spending cap. The ballot language is going to be crucial here.

when told that the "rainy-day" measure, Proposition 1A, triggers as much as $16 billion in higher taxes through 2013, four out of 10 initial supporters said they were less inclined to vote for the measure, particularly Republicans and fiscal conservatives.

"I'd vote 'no' on that," said William Tate, 49, a South Lake Tahoe voter who said he'd support Proposition 1A before learning of the taxes. "They should just save some money and put it in a 'rainy-day fund' without taxing people. We've got too much bureaucracy in this state."

This of course is an expression of magic pixie-fairy Santa Claus conservatism at its worst, but there's no doubt that a sliver of the electorate will view things this way. And unlike other potential ballot measures around taxes, this is very tangible (your taxes will go up X) and there's no counter-argument of what voters are getting in return. In fact, they're getting an unpalatable spending cap that would ratchet down state services and tie the baseline to a budget put together during the worst economic crisis since the Depression. There's something for pretty much everyone to hate in Prop.1A, and the construction of it was a pure play to keep interest groups on the sidelines, and just to make sure no mere voter knows about it, they hid the truth from the ballot language.

When the Legislature places a measure on the ballot, however, it often bypasses the attorney general by specifying the ballot title and even indirectly designating those who write ballot pamphlet arguments. In other words, the Legislature, in league with the governor, tries to fix the election by fixing how measures are portrayed.

Cases in point are the six measures that the Legislature and Gov. Arnold Schwarzenegger are asking voters to approve in a hurry-up May 19 special election to implement much of their state budget deal.

The most important of the measures, Proposition 1A, would create a state spending limit and direct excess revenue into a "rainy day" account to be used when the economy and state revenue dip. But a very important provision of the package is that billions of dollars in new taxes would be short-circuited if Proposition 1A is rejected.

That "poison pill" is designed to discourage unions and other left-of-center groups – which despise state spending limits – from campaigning actively against the measure. But it indirectly gives conservative anti-tax groups, which despise the new levies, a potential weapon.

Voters won't be told any of that in the official title written by the Legislature, which reads this way: "RAINY DAY BUDGET STABILIZATION FUND. Reforms the budget process. Limits future deficits and overspending by increasing the size of the state 'rainy day' fund and requiring above-average revenues to be deposited into it, for use during economic downturns."

That's misleading on a whole host of fronts, not just on taxes but on the role of the spending cap. Our friend Anthony Wright at Health Access is teaming with the Howard Jarvis Association to file a lawsuit to overturn the ballot title and summary. The question is whether the larger groups will jump into the fray. That the legislature allowed this subterfuge can only empower the argument that they are trying to stealth tax everyone and will hurt future efforts at reform. It may well cause someone like a Meg Whitman with designs on the Governor's mansion to spend some of her fortune to beat it, and given that support drops from 57% to 34% at the mere mention of the tax issue (and particularly how its hidden from view), it wouldn't take that much. With progressives like Loni Hancock committed to killing the spending cap, this could be a strange bedfellows election.

Who Will Fight The Spending Cap?

Anthony Wright of Health Access has a good piece musing about whether or not we'll still need additional spending cuts or revenue increases before the next fiscal year budget in June 2010. It basically hinges on two things: the May 19 special election, where close to $6 billion in budget money is on the line, and the federal stimulus, which if it provides enough money to the state could trigger some reductions in cuts and taxes. First, the trigger:

Although the budget contains a number of spending cuts, it also contains a mechanism to restore some of those cuts using federal funds authorized by the American Recovery and Reinvestment Act of 2009 (ARRA) signed by President Obama on February 17, 2009. The mechanism requires that in order to restore cuts, the state must receive at least $10 billion in federal funds to offset General Fund costs. In other words, $10 billion of federal funds are needed to “trigger off” some of the cuts.

The precise amount of federal stimulus funds for California is still being determined, however, the Director of Finance and the Treasurer must determine by April 1, 2009 whether federal funds meet the $10 billion threshold to trigger off the spending cuts. Specifically with respect to health care cuts discussed above, if there is sufficient federal funding, Medi-Cal benefits would not be eliminated and public hospital payments would not be reduced. If there is insufficient federal funding, those cuts and others--including steep cuts in SSI/SSP, IHSS, and CalWORKS would be implemented July 1, 2009.

Hopefully, these funds will make it to California's shores to stave off the worst cuts. Ultimately the federal government should seek a goal of stopping all cuts in public services and layoffs of staff, and should fill the gap in revenue in the short term. The states are being punished through little fault of their own, and counter-cyclical cuts threaten the success of recovery.

The next element is the May 19th special election. We'll be covering that in the weeks to come, but Wright lays out the most important initiatives that relate to the budget.

* Proposition 1D would amend Proposition 10, which was passed in 1998 and increased the tobacco tax to be used exclusive for services for children up to five years old. This budget, subject to voter approval, would redirect Proposition 10 funds of up to $340 million in the first year and $268 annually for the following five years to be appropriated by the Legislature. As a result, local First Five Commissions would have to cut the programs they fund, such as county “Healthy Kids” coverage initiatives.

* Proposition 1E would amend Proposition 63, which in 2004 raised the income tax for the upper-tax bracket to earmark funding specifically for mental health services. This budget, subject to voter approval, would redirect Proposition 63 funds of up to $226.7 million in the first year and $234 annually for the following year from Proposition 63 mental health services to backfill the existing Early and Periodic Screening, Diagnosis, and Treatment (EPSDT) program.

* Proposition 1A would pass a Constitutional amendment to institute a spending cap, to limit the amount of revenue that can be appropriated for the General Fund. It also would extend the temporary taxes to last from two to five years. Under the spending cap, any revenues above a forecasted amount must be put in a “Budget Stabilization Fund,” and can only be accessed under certain circumstances. In other words, the spending cap locks up money making the state less able to fund education, health care, and other core state services.

Wright doesn't mention Prop. 1C, which would sell the state lottery to fill a $5 billion dollar hole in the short term, but cost the state money in the aggregate in the long-term from the loss in consistent revenue. I've always thought it was a stupid and shortsighted idea and would be unlikely to support it in May.

But clearly, Prop. 1A is the most dangerous measure in the long-term, locking the state into deep cuts into the distant future, which would ratchet down services regardless of demand or growth. This is the long-sought effort by the far right to drown government in the bathtub. And yet to this point, no opposition has been found to this measure.

The last time Gov. Arnold Schwarzenegger asked California's voters to permanently cap state spending, organized labor dumped millions of dollars into a successful campaign to defeat his proposals.

Four years later, Schwarzenegger and other proponents are hoping the unions will sit out the May 19 special election in which the governor is again asking voters to enact a spending cap. That measure was placed on the ballot by the Legislature as part of last week's deal to resolve the state's cash crisis.

The official ballot arguments have been submitted, and in what administration officials hope is an encouraging sign, the best-funded labor groups opted not to weigh in against the measure. At least not yet.

In addition, the state's major antitax groups have split over the measure, with at least two supporting it even though it would prolong the tax increase that the Legislature passed last week. The California Taxpayers' Assn. signed the ballot measure backing the spending cap, and Lew Uhler of the National Tax-Limitation Committee said he also favors the measure, called Proposition 1A.

The above-mentioned provision that extends the taxes passed by the Legislature makes for approximately the easiest demagoguery in the history of California initiatives. Jon Coupal at the Howard Jarvis Taxpayers Association says his group will try to defeat the measure. The fact that the ballot arguments had to come in so quickly may be driving this perceived silence on the part of slower-moving unions, but they need to make themselves clear. Do they support a spending cap that will unquestionably take the state backwards in the future, or will they oppose it - and back up that talk with action? We shall see.

Budget Ugliness Continues To Reveal Itself

The California Budget Project has done a preliminary report on the "solution" (and I'm glad they put it in quotes) reached yesterday and expected to be signed by the Governor today. They demystify the fact that this is, once again, a short-term fix that will actually worsen our budget situation in the future. The $42 billion dollar hole from this year is a direct result of constant short-term fixes over the past several decades, pushing off the problem until the current legislators are out of office. Even in this budget, it is balanced through $6 billion in borrowing, which might as well be magic since we have the worst bond rating in the country.

The worst part of this is the spending cap, which could cripple future budget and severely ratchet down state services well beyond demand or even the rate of inflation and population increases. We have seen from other states how this is a hammer on the heads of the least of society and it must be fought in the May 19 special election. But the CBP is just as perturbed about the massive tax cuts, at a time of a $42 billion dollar deficit, to large multinational corporations:

Give multi-state corporations the option to choose between two different formulas for determining how much of their income would be subject to tax in California. This provision would be in effect in tax years beginning on or after January 1, 2011 and would cost $650 million in the first full year of implementation, eventually increasing to $1.5 billion annually. This provision provides no benefit to small businesses that only operate in California.

The tax breaks for movie companies and new construction home buyers and for hiring new workers (which history has shown doesn't end up increasing employment but increasing employer chicanery with their payrolls) are all temporary, as are the tax increases. The only PERMANENT tax in the entire plan is this giveaway to giant corporations like Exxon. This is why Richard Holober claims that big business is the "only winner" in this budget.

The worst of the business tax cuts is a permanent change in the formula for calculating the income tax for multi-state and multinational corporations. This produces an initial big business tax cut of about $700 million a year. The State Senate analysis estimates the recalculation will eventually yield a corporate tax reduction - and state revenue loss - of $1.5 billion a year. This is not tax fairness. Combined with the tax hikes on everyday Californians, it is redistribution of income away from workers and consumers and into the pockets of our state’s biggest businesses. And it provides no tax savings for the mom and pop businesses that we usually count on to provide the camouflage for these corporate welfare schemes.

Another major sin in this budget are the agreements secured by Republicans to essentially increase greenhouse gas emissions by relaxing environmental regulations for large diesel vehicles. This is another example of Arnold Schwarzenegger being a complete hypocrite, running around the country painting himself as the "green governor" while ramming through a provision directly contrary to that.

Like the budget itself, AB 8 XX was not the subject of any public hearings. The measure’s scaling back of emission controls was one of many concessions sought by Republicans in order for three of them in the Assembly and three in the Senate to vote for the budget.

Since there were no public hearings on the measure, it was easy for the GOP to side with the construction industry and ignore the majority of its members who want California to reduce greenhouse gas emissions and improve air quality.

A 2006 statewide by the Public Policy Institute of California found that 62 percent of Republicans strongly support state action to ratchet down greenhouse gas emissions. So do 73 percent of Democrats and 70 percent of independent voters.

That same poll found that two-thirds of likely voters for rolling greenhouse gas emissions back to 1990 levels by 2020. That is the legislation that became AB 32.

Finally, there is $5.8 billion that will be on the ballot for voters to agree upon, including a privatization of the lottery (which assumes a $5 billion sale... who is lining up to buy the California Lottery?) that would be a net loss of revenue for the state in the long-term, and $800 billion in raids from various voter-approved funds for things like mental health treatment. Considering how unpopular the legislature is these days, there is no guarantee that any of these will pass, which will leave another hole to fill by June.

These are just some of the details that reinforce the object lesson that major fundamental reforms, in particular repealing the 2/3 rule, are desperately needed. None of the above measures help the state. They were put in to placate a fanatical minority who is emboldened by a conservative veto. Sign the pledge to repeal 2/3.

Eric Garcetti Stomps On Budget Deal, Lights It On Fire

Before last night's blogger conference call with LA City Council President Eric Garcetti, my opinions of the budget deal from Sacramento weren't very well-formed. I think I have become so inured to craptastic solutions from Sacramento that this one looked no worse than others. Of course, I don't have a responsibility to constituents and a need to implement the outlines of the plan, so Garcetti's very forceful words against the package kind of snapped me out of my slumber. Here's a paraphrase.

"I think it's a reflection of a broken system. It's like shooting a little morphine into a sick patient. I think depending on federal dollars to balance the budget is irresponsible, and will blunt the impact of the stimulus. It means that the county and school districts will see a lot of projects rolled back. The health care cuts are going to be devastating. You're going to see a lot more homeless people this year, a lot more people who need critical care and can't get it. So there is no joy in this resolution other than that it is a resolution."

Very strong stuff. And he's not wrong. It's not the reliance on federal stimulus dollars to balance the budget, which is necessary and will save jobs throughout the system, that gets me, but the continued reliance on borrowing and the raid of voter-approved funds for mental health and early childhood programs, which is illegal and will require the unlikelihood of passing new initiatives. We all new there were going to be extremely painful cuts, including an elimination of all local public transit agencies at a time when transit activity is up, and cuts to education below levels of Prop. 98's mandate (which will also require a vote by the people to override the passed law). But some of the ideas are just completely bizarre - they can't cut prison medical care, it's in a receivership and not their hands, unless they figure that releasing 55,000 inmates will alleviate them of the burden of providing Constitutional rights for those who remain.

There are long-overdue revenue increases but they are both temporary and either flat or regressive. For 30 years the affluent in society have avoided their share of the tax burden, and now the least of society will have to pay for it for a few years. And of course, it's sweetened with an enormous corporate tax cut.

Careful listeners could glean that the “framework” includes a new limit on state spending and no permanent tax increases. In response to a question as to what taxes would be increased, Steinberg answered that the reporters who had written about the issue in the Los Angeles Times and the Sacramento Bee were “good reporters.” These stories suggest that the deal would include a 1 cent increase in the state’s sales tax rate, a 12 cent per gallon increase in the gasoline tax, a doubling of the Vehicle License Fee rate - although the new rate would remain lower than the pre-late 1990s tax rate - and a 0.25 percentage point personal income tax surcharge. The duration of the tax increase would depend on whether voters approve the proposed limit on spending. If voters approve the limit, the new taxes would stay in effect five years. If voters turn down the cap, the new taxes would sunset in approximately two years.

There isn't any margin for error if, say, one of the five measures that will now be on the ballot fail, or if nobody wants to buy our debt or buy the state lottery, which is losing revenue. It's another seat of our pants craptastic budget which makes no long-term solutions and essentially keeps intact a broken structure. Garcetti is right that the problem is systemic, and so that's the goal for progressives in the state for this point forward - systemic change.

Wednesday Is Deal Day

In addition to a deal on the federal stimulus, it looks like - and I stress looks like - the Big Five have reached an agreement on a state budget deal.

Legislative leaders and Gov. Arnold Schwarzenegger have reached a tentative deal to close the state's projected $40 billion budget gap, according to sources close to the negotiations.

Staff members are working out some drafting issues, one source said, but a vote is scheduled for Friday.

Details of the pact are still emerging, but the plan involves tax increases, cuts and borrowing. The state also stands to receive billions in federal stimulus money as the package approaches closure in Washington.

Sources said Tuesday the plan would raise sales taxes by one cent on the dollar, increase income taxes across the board and hike the vehicle license fee from the current .65 percent of the vehicle's value to 1.15 percent. The taxes would last a minimum of two years.

These are generally flat increases (though the VLF is progressive based on the value of the car). They are not permanent, which means the structural revenue gap remains a long-term issue. They will be combined with up to $20 billion dollars in painful spending cuts (depends on what we get from the federal stimulus). And there are (at least) two big cappers that Republicans are getting in exchange for these revenue hikes.

As a tradeoff for new taxes, Republicans demanded that the deal include a limit on future state spending. Under the tentative agreement, the restriction would require the state to place money into a rainy-day fund after reaching a limit determined by state revenues over a 10-year period.

Voters would have to approve the spending limit, likely in a special election later this year, and it is particularly controversial among education groups who constantly seek more state money for schools. Concerned that the state's powerful teachers' union would try to kill the spending restriction at the ballot, budget negotiators included a provision that would extend the new taxes to five years if the spending cap passes [...]

Republicans and Schwarzenegger also asked for business-friendly changes in environmental and labor laws, emphasizing that looser regulations would help the economy rebound in California. While sources said unions have been successful in fighting labor changes, the deal exempts some major state highway projects from environmental review to hasten construction.

Let's take these one at a time. The spending cap (here called "brilliant" by high Broderist hack Dan Weintraub) is a pretty terrible idea, and it has failed virtually everywhere it has been tried. However, it is moderately popular in the state among voters, and Arnold will no doubt characterize it as a "reform," so I wouldn't say it's entirely sure to be rejected. However, combining it with an extension of the tax increases is a dumb strategy on the part of spending cap advocates. First of all, it seems unconstitutional, on the grounds of one initiative dealing with multiple issues. Second, you set up a situation where anti-cap advocates can offer a simple message - vote No to lower your taxes - which is the message that has won countless statewide elections in the past 30 years.

Then there are the environmental and labor reviews. It looks to me like liberals got most of what they wanted on this front. The exemptions are unfortunate, but increasing the gas tax and raising emissions standards will hopefully decrease the worst environmental effects.

There are a couple other elements, however. First, the state lottery sale, passed last year, will have to be on the ballot, and this budget counts on that for a short-term $5 billion dollar infusion of cash. It's just unlikely to me that anyone's going to buy it at that price, and it could fail at the ballot. And then there's the real capper for the Yacht Party - another corporate tax giveaway:

They would get a major break in state taxation from such a shift while their rivals from other states, such as Microsoft, could be hit with higher California taxes, but whether the shift would mean a net increase or decrease in state revenues is a highly contentious aspect.

The Franchise Tax Board has contended it would be a loss, but advocates say it would be a gain because California would become more attractive to job-producing investment.

Two years ago, a version of the "single sales factor" bill was attached to the final deal on the state budget, but, under fire from liberal groups, was rejected in the state Senate. And now it's part of this year's crisis-tinged negotiations, possibly as a sweetener for Republicans to vote for higher consumer and personal taxes.

Always wanting something for their "base," those Republicans. And by the way, I think we may be a little premature in calling this a done deal. Dave Cogdill says it's the best the GOP could get, but won't even commit to voting for it HIMSELF:

"My deal, one more time, has always been that I would try my best to get it to a position where I felt it was as good as I could get and I was willing to release my members," Cogdill said in a brief interview in the hallway outside his office. "That's where I am. So I'm not guaranteeing any votes; it's up to them (his members) to make that decision."

"But I've negotiated it to the point where I think it doesn't get any better," Cogdill said.

Asked if he specifically would support the package, Cogdill hedged, "We're waiting to see all the language and all of that so I'm not ready to commit who the votes will be at this point."

Not a guarantee at all. This still could be torpedoed when the votes come in.

Democats Ceding Ground On The Budget

L.A. teachers walked out of their classrooms for one hour yesterday to protest proposed education cuts in the budget. In West LA they stopped traffic. Speaker Bass, at LA Trade Technical College for a ceremonial swearing-in event, offered support to the teachers.

State Assembly Speaker Karen Bass (D-Los Angeles) said the demonstrators -- who included teachers in red T-shirts, parents with young children and students -- were heard by the governor and state lawmakers wrestling with a $17-billion budget shortfall. She said Democrats in the Assembly and Senate will not accept any budget that is balanced through cuts only.

"I absolutely support the action taken by the teachers, and if it wasn't for the swearing-in activities, I would have walked on the picket line right along with them," said Bass at her ceremonial inauguration as Assembly speaker at Los Angeles Trade Technical College. "What the teachers did today was they sounded the alarm for the people of Los Angeles to understand how serious this crisis is."

Of course, it would be nicer if this show of support translated into a revenue solution more robust than picking up the Governor's ridiculous lottery borrowing idea and running with it.

Democratic lawmakers made an opening pitch Thursday for closing the state's $15.2 billion deficit, using lottery borrowing as well as unspecified proposals to close tax loopholes [...]

Assembly Democrats have supported the governor's plan to borrow from the lottery but rejected his proposal to put the money into a so-called "rainy day" account. Instead, they would like to use the money to pay down debt.

Democratic leaders in both houses proposed giving schools more than the governor recommended. They include cost-of-living increases for teachers.

I think the move here for Bass is to get the necessary short-term revenue by whatever means necessary to balance the budget this year, and then put her taxation task force in motion thereafter and make the real fight through the next two years of her leadership. But that's unfortunately a shortsighted proposal. Borrowing from the lottery means greater deficits in the future, and Californians understand this and have rejected the idea. Every year that we fail to address the revenue side is a year where we have to borrow more and more to get the budget balanced, meaning that we'll need more revenue when we finally get around to structural change. And Bass doesn't seem particularly wedded to any tax loophole closures because she didn't specify any.

You could see this coming when Fabian Nuñez gave his blessing to the lottery proposal in an editorial a couple weeks ago. Democrats should be headed into this debate strongly, with the backing of the people of the state and the spectre of a 2/3 majority cutting Republicans completely out of the equation. But they've already gone more than halfway before the negotiation has even started.

The California Report

Here are a few tidbits on this GOTV weekend!

• Obviously everyone is going to be working hard for their causes and candidates, so it may be a little quiet around here. I'll be out walking all day tomorrow. Oh, and don't vote for the racist guy, Bill Johnson, as a Judge of the Superior Court (Office number 125) in LA County.

• Yesterday was the deadline for bills to get passed out of their chamber of origin, and the Assembly passed major subprime mortgage legislation, without help from Republicans (6 of them abstained despite being seated right in the chamber). This bill has some good homeowner assistance elements that will allow people to restructure their financing before foreclosure. A mortgage bill has also passed the State Senate, so some form of legislation will hopefully get to the governor post haste.

• One of the biggest problems with the housing crisis is that, as home sale prices lower, homeowners are reassessing their value and getting their property tax lowered, decreasing state revenue yet more.

• Sticking in the shiv before riding off into the sunset, Fabian Nuñez writes a puzzling op-ed in the Sacramento Bee approving of the Governor's horrible idea to borrow against future lottery revenue. Considering that the only sustainable solution to the permanent crisis mode that we have in our budget is to reorganize the tax structure instead of constantly borrowing, I have no idea why any Democrat would veer so far off message and undermine the new Speaker's ability to move forward. What's more, lotteries are regressive taxes on the poor.

• One spot where there will be a lot of action on Tuesday is in Ventura County, where Democrats now outnumber Republicans and which could have contested elections in the Assembly, Senate and US Congress. However, the LA Times shows its political acumen by writing:

One of the more closely watched contests on Tuesday will be the Democratic primary in the 24th Congressional District. Insurance agent Mary Pallant of Oak Park; Marta Jorgensen, a Solvang educator; and Oxnard businesswoman Jill Martinez are running.

Marta Jorgensen quit the race over a month ago and endorsed Martinez. Way to go, LAT.

• Excellent news out of Los Angeles: there's been a $1 million dollar settlement with Hollywood Presbyterian Medical Center for their dumping homeless patients on Skid Row. They will also be monitored by a US Attorney for five years. This unethical practice has reached a reasonable conclusion. Hollywood Presbyterian deserved punishment.

• Trying to get rid of marijuana grow houses in Arcata is like trying to get rid of the Pacific Ocean on the California coast.

Enjoy!

Shorter Coward Arnold

You guys figure that out budget thing, I've got yacht parties to attend:

Gov. Arnold Schwarzenegger brushed aside criticism of his latest budget plan Thursday and said lawmakers now bear responsibility for resolving the state's $15.2 billion budget deficit.

The Republican governor, speaking with The Bee's editorial board, lamented he had "negotiated with myself" for the last five months because legislative leaders did not meet with him to discuss the budget.

"The reality of it is that the ball is in their court," Schwarzenegger said. "The more they scream, the deeper they bury themselves. Because in the end, they have to meet somewhere in the middle to get this budget done."

Hey, Arnold did all he could, right? He threw out some ideas to massively cut social service programs and raid lottery funds to borrow against the state's future. Isn't that ENOUGH? I mean, the guy hasn't been on the cover of a magazine or at a Laker game in WEEKS! Let him be. These yacht parties don't happen every day.

It is funny that Schwarzenegger is firmly in the middle of a Republican civil war.

"I said, 'Look, if you guys are so worried about it, I'll say it,'" Schwarzenegger said about the need to consider taxing more services. "And of course I'll get beaten up and Republicans will say this is a signal, this is a code word that means you want to raise taxes. What do I care? Let them say that. They're always going to complain anyway that I want to raise taxes."

There were hundreds of students at the Capitol yesterday protesting the education cuts that remain in the May Revise. The Yacht Party is on the wrong side of history. Arnold's also on the wrong side - unwilling to actually fix the budget out of fear, and willing to mortgage the future (and threaten taxes as a way to get his way on mortgaging the future).

Schwarzenegger - The Ultimate Girly-Man

(This is a little technique called "using your opponent's words against them," not an signal that I think "girly-man" is some kind of devastating or even viable slur, for the record)

Key stakeholders are weighing in on the Governor's revised budget. The Education Coalition notes that public education is still shortchanged, primarily through suspending COLA adjustments. Health Access California sees major cuts to health care, through denying certain Medi-Cal benefits to adults, eliminating coverage for some low-income working parents, and forcing others through loads of paperwork in the hopes that they'll trip up and forget to check a box so they can be purged from the rolls. Shane Goldmacher has a pretty comprehensive list of several other reactions.

But my favorite take - probably because it most mirrors my own - is from Dan Weintraub, whose main point is basically what a coward this Governor is.

The governor's revised budget would give more to schools and less to health and welfare than he proposed in January, but the real story is his proposal to use lottery revenues to bridge the stubborn gap between spending and tax collections. Schwarzenegger's press staff is furiously trying to portray the lottery deal as something other than borrowing, but borrowing it is. The state would change the game's rules in ways designed to attract more business, then lean on private investors for $15 billion in up-front payments. That advance on lottery revenues would be repaid over 30 years from the new proceeds generated by the changes. But the up-front money runs out after three years, and guess what happens then: Yup: the budget deficit reappears, unless there's an economic miracle between now and then. Ironically, if there were an economic surge and the governor's revenue-averaging proposal were in place, the state couldn't spend the new money and would still be left with a shortfall to cover. That persistent shortfall, at least according to the governor's numbers, is in the range of about $5 billion to $6 billion a year. Fixing that would be the next governor's problem.

Schwarzenegger started off saying he was going to "blow up the boxes" in Sacramento. He barely tried. He said he would be the "Collectinator" and end the state's donor status with respect to the federal government. Didn't happen. This year he said the time had come for budget reform. He offered the same answer as he has in previous years. He's even trying to shake down the state into accepting his borrow-and-spend proposal with the lottery, by raising the spectre of a regressive across-the-board sales tax if the voters knock it down in November.

He's a coward. He doesn't want to be responsible for fixing the budget permanently, so he wants to pass off the problem to his successor. He doesn't want his legacy besmirched, so he pulled back on the proposal to close parks or suspend Prop. 98. He just wants to tour the world and appear on magazine covers, without having to do any of that nasty business of governing. Nobody could be worse for this state at this time of crisis.

The May Revise Is Here, The May Revise Is Here!

I think we can pretty much conclude that Arnold Schwarzenegger, for all his bluster, is just another cowardly politician. On Monday he dropped his plan to release 22,000 elderly and nonviolent inmates early, because God forbid anyone be seen as insufficiently "toughoncrime". Today his May revise of the budget is out, and he's again retreated to borrowing against our children's future because he can't bring himself to actually do something meaningful about revenue.

• Arnold will float bonds using the state lottery as security. $15 billion over 3 years will be raised but $10 billion goes into "rainy day fund"

• If that fails, 1% sales tax hike to last no more than 3 years

• Prop 98 suspension abandoned; instead COLA will not be paid

• State parks closures abandoned; instead fees to rise $1 to $2

• $6 billion still left to cut or balance out somehow.

Overall thoughts: Here we go again. Arnold Schwarzenegger came to office in the recall of Gray Davis in 2003 promising to solve our state's budget problems once and for all. Instead he immediately blew a $6 billion hole in the budget with the Vehicle License Fee cut and then borrowed to close the rest of the gap - costing the state around $3 billion in annual debt service.

Now that Arnold's solution has predictably failed, he is predictably offering more of the same. Borrowing against the lottery is a problematic concept for many reasons, the main one being it avoids the core issues of our budget. It's yet another one-time fix that does nothing to solve the structural revenue shortfall that has plagued our state for 30 years.

Yep. Not much more to say than that. I would add that citizen activism around education cuts and park closures has seemed to work. We're not out of the woods on education and will have to see the final numbers, and at the least education funding won't grow at the same rate as expected because of the elimination of cost-of-living increases. But people all over the state were furious at the proposed 10% and rallied against it, and Schwarzenegger, girlie-man that he is, backed down.

...Selling anticipated lottery revenue is probably better than privatizing it altogether, but it's still borrowing against the future. At some point those lottery revenues won't be there for the next governor, and we'll be back to the drawing board. It's stupid economics and he keeps doing it over and over.

A Tale Of Two Speakers

Fabian Nunez hosted his final press conference as speaker yesterday, and began his post-speaker life by offering a series of proposals focused on process issues.

The redistricting component features an independent 17-member "hybrid" commission. No legislators will serve on the panel, with the majority picked randomly from a screened pool with no legislative influence and eight others picked by legislative leaders. Unlike the Voters First initiative that may appear on the November ballot, this proposal requires diversity in every step of the process and puts the Voting Rights Act first and foremost among the criteria in selecting districts. There's also a host of transparency and public input provisions.

The term limits provision is similar to Prop 93, but excludes the provisions that protected many incumbents that drew criticism. It reduces the maximum amount of time a person can serve in the Legislature from 14 years to 12 years, allowing a legislator to serve all their time in one house.

There's also a fundraising blackout period prohibiting campaign contributions to legislators and the Governor from May 15th until the budget is enacted.

These would go up on the ballot for passage by voters in November once they get through the Legislature. There is of course already a redistricting measure that appears to be on its way to the ballot, so it's unclear whether or not this is a "confuse and kill" strategy. But Nuñez said that his hope would be for one redistricting proposal on the ballot.

That's the past; here's the future.

Karen Bass has drawn up a short agenda for her two-year reign as Assembly speaker that begins next week.

There are only three items:

* Balance a state budget that Gov. Arnold Schwarzenegger has declared is "$20 billion out of whack."

* Create a ballot initiative that would produce $300 million to $500 million annually for foster care programs.

* Restructure California's tax system to make it conform to the modern world. Actually, she wants to create a blue-ribbon commission of "the best and the brightest" to tackle taxes.

That's all.

Foster care programs are Bass' pet issue, but otherwise she's focused on, I have to say, the ACTUAL problem facing California.

We are out of money. Not out of money in theoretical terms, or on a balance sheet somewhere, but physically out of money by August if no budget is enacted. The cash reserves are empty and the revenues aren't coming in. All that matters between now and August is that we put a budget in place that is SUSTAINABLE and, as Bass notes, in line with the modern world. All of this process stuff about redistricting and term limits is what gets pundits and press people all a-twitter, but it's not the problem in California. What Bass is saying without saying it is that we need to end the 2/3 requirement so we can have a legislature that reflects the will of the people. That's the only way we're going to pass a sustainable budget, that's the only way we'll get a 21st-century revenue system. And I believe she knows that.

The governor wants to sell out our future, sell bonds, sell the lottery, hold a fire sale and mortgage California for generations. We should not have to stand for that. Selling off the state to preserve tax cuts for the wealthy is not a "creative" solution. I have no idea how Karen Bass will fare in her 2 1/2 years as Speaker, but I'm now confident that she's at least focused on the right issues.

...And You Will Know Him By The Trail Of Dead (Bills)

I saw Bill Maher on Friday in an interview with former Mexican President Vicente Fox, lamenting that Bill Clinton and Arnold Schwarzenegger wouldn't be able to face off as Presidential candidates due to Constitutional violations. "Isn't that sad," he said. For all his conceits as a free thinker, Maher represents a kind of baseline Hollywood groupthink when it comes to Arnold, reading the headlines and the magazine covers but never bothering to uncover the whole story. That story can be easily divined from this weekend's veto massacre. In addition to stopping the California DREAM Act, he vetoed needed legislation for the state's migrant farm workers, allowing them to organize through a "card check" system. He even disabled a bill that would have added a sunset clause to the card check system, making it ever harder for them to organize and support themselves and their families. Here's another bill that went down the drain:

On Saturday, another bill was vetoed, AB 377, by Assemblymember Juan Arambula (D-Fresno). It would have required an employer who is a farm labor contractor to disclose in the itemized statement furnished to employees up to five names and addresses of the legal entities that secured the employer's services.

According to the sponsor of the bill, the California Rural Legal Assistance Foundation more than 40,000 California farms grow fruits and vegetables on almost four million acres in this state, so it is not surprising that a 2006 survey of Central Valley farm workers found that 70% could not identify the name of the farm they were working on.

The same survey found that 56% had not been paid the minimum wage when working on a piece rate; 31% had not been paid all the overtime they were owed; and that 42% had unexplained deductions made from their pay. Between 60% and 80% of harvest work is done by labor contractors. Without being able to readily identify the farm who hired the contractor, enforcement actions against the contractor are unlikely to either make the worker whole for wages owed or to have any deterrent effect at all against a grower who shares legal responsibility for the contractor's labor law violations.

So while Governor Schwarzenegger told the hundreds of farm workers who were at the Capitol in September that he was supportive of their goals, in the end, he vetoed these bills and sided with agribusiness.

Indeed, this is part of a persistent pattern by the Governor to make life harder for working families while protecting the corporate interests that helped get him elected. Far from a governor of the people, he is simply a corporatist who has the backs of the elite. Because we don't have a functioning political press, this contempt for the average Californian will probably not make it too far off the blogs and insider political circles. But they have real-world consequences that people will only discover when they are put in the situation that legislation could have covered, and they aren't likely to connect the dots. A sampling of the pro-worker legislation that was vetoed:

• SB 549 (Corbett)-this bill would have protected the job of a worker taking time off to attend to the funeral of a family member.

• SB 727 (Kuehl)-this bill provided that employees covered by family temporary disability insurance (FTDI) could take the leave to care for a grandparent, siblings, grandchildren and parent-in-law.

• AB 537 (Swanson)-this bill expanded the definition of family under the California Family Rights Act (CFRA) to allow eligible workers to take job-protected leave to care for a seriously ill adult child, sibling, grandchild, or parent in law.

• AB 435 (Brownley)-this bill would have addressed harsh limitation periods on bringing certain wage discrimination claims. These claims are frequently brought by working women who have been underpaid relative to their male counterparts, and many of these women are struggling to raise kids in single parent situations.

• AB 1636 (Mendoza)-this bill would have expedited a job retraining voucher to disabled workers unable to return to their former jobs; workers such as these are struggling to adapt to replace the income needed for the family to survive.

• SB 936 (Perata)-this bill would have increased the benefits paid to permanently disabled workers over a 3 year period. Since 2004 these workers have seen their benefits slashed by 50% or more according to studies by University of California researchers. At the same time, insurer profits have exceeded all benefits paid to or on behalf of disabled workers; it’s a concept that is clearly not family-friendly. The families and kids of disabled workers suffer as they struggle to keep pace with the financial devastation of injuries.

AB 435 is the state version of the Lily Ledbetter Pay Act, attempting to remedy a horrible Supreme Court decision from earlier in the year. So Arnold is putting himself squarely in the position of Antonin Scalia, Clarence Thomas, John Roberts and Smuel Alito. This is our post-partisan "leader."

Furthermore, he vetoed meaningful health care reform in AB 8, and put forth flawed legislation of his own that has no chance of coming out of the legislature, partially financed by the stupid, shortsighted practice of leasing the lottery to private interests.

I'd like to say that there's an "on the other hand," a couple bills Arnold allowed through that provide aid or comfort to the working class. But on these issues, he comes down squarely on the side of his corporate buddies. It feels like spitting into the wind to keep noting this. Maybe someday Bill Maher won't have a big-time TV show, he'll be working for his own retirement, and he'll realize that he's been screwed by this Administration. But I wouldn't bet on it.

"These Are Not The Final Numbers"

Remember, the Governor said that he had a plan to fix the state's health care system in October, 2006.  He said he'd tell everyone about it after the election.  ONE YEAR LATER, Schwarzenegger announced at a big press conference yesterday that the bill is almost ready.  It's not a bill being carried to the Legislature by anyone, at least not yet, although I expect the leadership will bring it along just to have something to negotiate against.  But this is a complete waste of time and energy, to wait 12 months to present something that has no earthly hope of passing.  And paying for it, in part, by privatizing the lottery, which is a long-term money-loser for California.

I mean, this is ridiculous:

Every time he was asked about the numbers, he revealed that this proposal is still a ways from being fully cooked, starting with this response to a question about the financing of the bill--where the money comes from: "This is our proposal. We think that's the best way to go. But this is not final because it is still being negotiated. A lot of this stuff is still being negotiated."

Counting on money from the Feds seems tricky to me, given the veto of SCHIP by President Bush. That will leave a gaping hole as far as children's coverage, and paying for it, are concerned.

When asked about affordability and what Californians at different income levels would have to pay out of pocket, he said: "Well first of all, the numbers that I have given you--this is our proposal. So these are not the final numbers. Because like I said, with the numbers, those things are still being discussed--what the numbers should be." Maybe we should be happy that the exact shape and form of affordability, a key part of the bill, are not yet written in stone. With an individual mandate, that seems to me to be an area to really scrutinize.

There's a summary of the plan, which ISN'T THE FINAL PLAN SO DON'T CRITICIZE IT, at the link.  It seems to me that the deal here is to try and avoid all specifics so there can be absolutely no discussion about the biggest domestic issue facing the state and the nation, so Arnold can evade all responsibility for whatever transpires until the moment he signs a bill, at which point it's entirely because of his leadership.

That's post-partisan, baby.

Arnold, The Great Uniter

Arnold Schwarzenegger has finally managed to bring people with differing viewpoints together to agree in a post-partisan fashion. See, nobody likes his revised budget plan, as Bob Salladay reports. Conservatives think that it doesn't go far enough, spends too much, and relies on too many shaky budgeting gimmicks, like privatizing the lottery for a short-term cash infusion. Democratic leaders have rightly called it mean-spirited and cruel for slashing aid to the poor and cutting public transit funding, among other things. The state's pundit class has sneered at the cynical nature of saying that you could balance the budget responsibly to begin with. And the Legislative Analyst's Office, who are supposed to play it right down the middle, criticize the revision as well.

The administration has attempted to address a $2 billion decline in the state’s fiscal outlook. Due to several overly optimistic assumptions, however, the May Revision overstates its reserve by about $1.7 billion—leaving an estimated reserve of $529 million. Even this reserve level would be subject to considerable risks and pressures. As a result, the Legislature will face a significant challenge to develop a 2007-08 budget that realistically reflects revenues and spending while maintaining a prudent reserve. As it sets its own priorities, it should identify solutions that realistically balance the state’s finances on an ongoing basis while also avoiding new ongoing commitments (absent identified funding to pay for them).

The Governor is more about fantasy than reality, anyway, so it shouldn't be suprising that his budget numbers would be a carefully crafted fiction.

A budget is a moral document. Priorities in the budget mirror priorities in the real world, what kind of California you want to see. Arnold Schwarzenegger wants to see a California where investment bankers get rich while the poor and the middle class who struggle to survive are left on their own. And this would have been worse if the state didn't find a little more unexpected revenue at the end of last month. Nobody should be surprised that this Governor automatically thinks "cut the poor" when faced with a budget crunch. That translates directly to who he values in society. This isn't the result of Arnold "reverting back" to his pre-post-partisan self, as Speaker Nunez claimed in his statement. This is who he's always been.

UPDATE: One thing that should be stated is that the Governor is very much an acolyte of Reaganomics. He puts everything on credit and passes the problems off to future executives and future generations.

Schwarzenegger's "Kick-The-Can" Budgeting

The state of California is not generating the revenue that they expected. This is clear and it's been known for some time. The original budget that the Governor proposed, based on those sunny estimates, is obsolete. In order to balance the budget, spending will have to decrease or revenue increased. We know what choice the Republican will make.

Gov. Arnold Schwarzenegger is likely to call for state spending cuts beyond those he proposed in January when he presents a revised budget to the Legislature next week, administration officials said Tuesday [...]

In January, Schwarzenegger outlined a $103 billion general-fund budget for the 2007-08 fiscal year and proposed balancing it by withholding cost-of-living increases for welfare recipients, cutting welfare payments to children whose parents fail to comply with work requirements, and reducing aid to the homeless, among other things.

The cuts to welfare will remain in the budget the Republican governor is slated to unveil on Monday, Palmer said. That could set up a showdown with Democratic lawmakers, who have made it clear they oppose reducing the social safety net for children.

But don't worry, there's a Plan B; privatizing the lottery!

Gov. Arnold Schwarzenegger is poised to call for privatizing the state lottery, a move that would bring California a cash infusion of as much as $37 billion to help solve pressing budget problems but also could sacrifice a major revenue source for decades to come.

....It comes at a time when the state is facing only a modest budget deficit for the coming fiscal year — about $1 billion. But billions more in bond payments will be due soon after.

This is "kick-the-can-down-the-road" budgeting, and it's no different than George Bush trying to run out the clock on Iraq so that the next executive has to clean up the mess. It's irresponsible to put so much of a debt burden on future generations. We're looking at hundreds of billions of dollars in debt for decades and decades, in bond issues and the loss of revenue for short-term gain. Kevin Drum thunders on this, and he's absolutely correct:

Once again, Arnold "We Have To Stop This Crazy Deficit Spending" Schwarzenegger is desperately trying to figure out a way to increase our deficit spending so that he can continue to pretend that he hasn't raised taxes. That's all this is about.

He's already done this once with his deficit bonds, which will have to be repaid out of increased taxes eventually, and now, in order to make sure that "eventually" is sometime after he leaves office, he wants to raid the lottery to tide himself over. The result, of course, will be lower revenue in the future and therefore higher taxes. But not on his watch.

Schwarzenegger may have a sunnier persona than George Bush, but the cynicism on offer here is even worse than Bush's. Arnold knows perfectly well he's raising taxes. He's just hoping the rest of us are greedy enough to allow ourselves to be convinced otherwise.

We're going to have three and a half more years of this nonsense, of this focus on short-term glitz at the expense of long-term security. We are getting played, and I would like to see some of our Democratic leaders in this state make this point forcefully.