Rainy Day Fund

At the Sacramento Bee, Dan Weintraub examined the changes in the rainy day fund that were part of the budget agreement. He was skeptical but also suggested they could, in time, prove to be a victory for Gov. Schwarzenegger. I'd bet against that, for reasons both political and budgetary.

First, the political. The rainy day fund changes are not official yet--they need to be approved by voters. And there is so much anger about the budget agreement among the state's powerful labor unions, particularly those representing public employees, that it seems likely the rainy day fund may face an aggressive "no" campaign in a special election next year. Such a campaign will be difficult for Schwarzenegger to win.

Second, the budgetary. The rainy day fund's supporters see it as having only modest effects. It wouldn't end the state's budget dysfunction. It might make the budget spikes -- and thus the budget down years -- less severe. Such a half-measure is unlikely to inspire much passion among voters, while an angry labor campaign against a budget agreement that all sides acknowledge is problematic would be an easy sell.

In a news conference, a frustrated and angry Gov. Arnold Schwarzenegger blasted legislators of both parties for failing to reach a budget compromise ("shameful") and offered another budget proposal. This is unusual. California governors typically release two budget proposals -- one in January, and one in May. But the governor has put forward a compromise plan that includes a temporary sales tax increase -- violating his promise not to raise taxes -- in exchange for budget reforms. He said he was taking a risk: "I'm stepping over the line here," he said.

There was a take-it-or-leave-it feel to the session, which was cut short after four questions. He said it was time for budget "dialogue" to stop. "This is not part of the kabuki or anything like that," said the governor, all but demanding his proposal be passed.

Other highlights:

-Schwarzenegger admitted openly that his first attempt to fix the state's budget problem--the ballot measures Propositions 57 and 58, which were approved by voters in 2004--had been a failure. "This year is coming out clearly that our budget reform that we attempted in 2004 with Props 57 and 58 does not work," he said. 

In California, Thomas Elias may be the most important voice you've never heard of. Elias, an independent journalist whose column in appears mostly in smaller papers over the state, was arguably the first person to circulate the notion of a recall of then Gov. Gray Davis just after his re-election in 2002. (Other folks took it and ran from there).

Elias reports and thinks deeply, and gets into the guts of the issue. Now, almost alone, he offers a column not about the politics of Gov. Schwarzeneggger and his reform efforts (the preoccupation of Sacramento) but about the substance of the governor's proposals. Today, Elias looks at budget reform, and he raises important points. His main problem is that Schwarzenegger's budget plans, which have only been loosely outlined, would give far too much power to the governor's office. Governors could make mid-year cuts, set aside money for reserves and in some cases, suspend laws all by themselves. Elias sees this as dictatorship. Having sat through legislative budget hearings, your blogger wonders if a little bit of dictatorship in making budget adjustments might not be such a bad idea. Whatever the case, Elias deserves credit for trying to spark a debate on the nuts and bolts of this. California voters, after all, may have vote on a "reform" plan of some kind this November--six months away.