Schwarzenegger legacy entwined with fiscal crisis

SACRAMENTO, Calif. - California voters gave Arnold Schwarzenegger a single, blockbuster-sized mission when they sent him to Sacramento six years ago in an unprecedented election: Fix California's chaotic budget system, once and for all.

Today, California is unable to pay its bills, and Schwarzenegger finds himself mired in the worst financial crisis in decades and in a race against the clock to deliver on his promise to "end the crazy deficit spending."

In less than six months, the Republican governor will enter his final year in office and become a political lame duck, as attention begins to focus on his potential successors. That gives him little time to dig California out of its deep financial hole and enact the lasting budget reforms that he had hoped would shape his legacy.

The nation's most populous state, responsible for 12 percent of the nation's gross domestic product, is saddled with a $26.3 billion deficit, has started issuing IOUs for the first time in two decades, is burdened with the lowest credit rating of any state and is seeing unprecedented joblessness and a decline in personal income.

To Cynthia Sterling, president of the Fresno city council, the fault for California's financial mess lies squarely with the governor. A moderate Democrat, the type of centrist Schwarzenegger has been courting for years, Sterling shared the stage with the Republican governor in the past to show bipartisan support for his initiatives.

Today, she believes Schwarzenegger has talked a good game but failed to follow up the rhetoric with decisive action.

"He made poor decisions and did not include those of us who were in the know," she said. "We're in real financial crisis because of this governor."

That October night in 2003, when Schwarzenegger rode his global celebrity to victory and he and his wife, Maria Shriver, waved to thousands of admirers amid a blizzard of confetti, seems like an eternity ago.

Schwarzenegger still draws autograph-seekers, to be sure, but only a third of voters approve of his job performance, according to polls taken this spring, before the state's fiscal crisis had deepened to the point of issuing IOUs.

He seemed surprised last month by the hostility of an audience in Fresno, typically a conservative bastion that has been welcoming to Schwarzenegger throughout his tenure. This week, he was met with boos from state workers protesting his proposed budget cuts as he left a press conference at the state Capitol.

Even his famous gags have fallen flat as the state sinks deeper into financial chaos. He sent the Democratic leader of the state Senate a metal sculpture of bull testicles as a lighthearted way to convey fortitude during the budget negotiations. The lawmaker promptly returned the gift with a terse note saying the cuts Schwarzenegger planned to make to the poor, frail and low-income college students were no joke to him.

"It's not like Arnold came into this situation looking for a $25 billion deficit to cut. Nobody does," Shriver told The Associated Press recently. "People come in because they want to do good, and they want to grow a state and transform a state and help it grow."

That Schwarzenegger finds himself stuck in a financial crisis even worse than the one he inherited is not entirely his fault. He reminds crowds during budget addresses around the state that the worst recession in decades has incinerated wealth everywhere and has hit California especially hard.

Economists agree that the depth of California's financial crisis is due in large part to the sinking overall economy. Schwarzenegger cannot be blamed, for example, for Californians' first drop in personal income since the Great Depression, which is one reason personal income tax dropped 34 percent during the first five months of the year.

His communications director, Matt David, said Schwarzenegger has been fighting since his first day in office for financial and long-term budget reforms that would have given California a buffer during the current economic downturn. But David said the governor has been thwarted by politics or voters.

Schwarzenegger also fought to establish a rainy day fund in 2004, although its watered-down language allowed lawmakers to tap it virtually at will. He now wants a stronger rainy day fund and would like to cap state spending and streamline government programs.

Voters defeated the latest proposals during last May's special election, when they turned down all five budget-related measures on a ballot that was plagued by confusing and deceptive language.

The Legislature also shares a large part of the blame for spending beyond the state's means. The governor, Democratic lawmakers and even voters have approved new or expanded programs over the years without a dedicated way to pay for them, adding to the burden on the state's general fund.

While Schwarzenegger cannot be saddled with the full responsibility for the state's ailing fiscal health, he has taken several steps that have worsened it.

He started by repealing a car tax that brought roughly $5 billion a year to state government but did not identify how he would make up the difference. He persuaded voters to borrow $15 billion to cover the deficit he inherited, then championed another $37 billion in borrowing for infrastructure programs.

Before he was governor, Schwarzenegger persuaded voters to pass the very kind of program that he now criticizes - an initiative for a $500,000-a-year after-school program that is untouchable because it was approved at the ballot box.

Daniel J.B. Mitchell, a professor at the University of California, Los Angeles Anderson School of Management, said Schwarzenegger's failure to commit to a clear agenda is one reason he has failed to enact meaningful, long-term fiscal reforms.

"He was elected largely because of a budget crisis under (former Gov.) Gray Davis. So one would think that working on that - priority 1, 2, 3, 4 and 5 for him would've been dealing with the state budget," Mitchell said.

Instead, from his inauguration through May's special election, Schwarzenegger has turned his attention to an array of policy ideas, many unrelated to the budget, Mitchell said.

Complaints about the governor's revolving policy priorities reached a crescendo last week as negotiations collapsed over California's then-$24 billion budget shortfall.

Every day the state slides deeper into financial freefall increases the likelihood that Schwarzenegger will spend his final year in office overseeing a state in decline, with children losing health coverage, crowded classrooms and shuttered state parks.

Senate President Pro Tem Darrell Steinberg, D-Sacramento, said solving the budget crisis should be good enough for Schwarzenegger right now, but it doesn't seem to be.

"We want him to have (a) positive legacy, and that means California begins to turn itself around," Steinberg said. "But you know, you build a legacy over years, not over two weeks or a few days."