Local Services Set to Be Victims of Hasty Car-Tax Maneuver

In this Yuletide season of easy credit, anyone can stroll into a store like Best Buy, spend lavishly and defer the day of financial reckoning for 12 months or even 24.

That doesn’t apply to the state budget, where the harvest of Gov. Arnold Schwarzenegger’s profligate fiscal policy is already upon us. In the last two days, news has arrived from Sacramento of the state’s threat to deny local governments billions of dollars in funds that they require to keep police officers and firefighters on duty, libraries and parks open and streets paved. Meanwhile, Schwarzenegger is contemplating ways to reduce planned spending on K-12 education -- a category he had, categorically, deemed sacrosanct during his campaign.

Such are the consequences of his hastily rolling back the car tax upon his inauguration, thus depriving the state budget, already in deficit, of a further $4 billion a year. Because revenue from the car tax is dedicated to local government services, Schwarzenegger had pledged to restore the lost revenue from elsewhere in the state budget. So far this hasn’t happened, in part because his proposals for specific program cuts would cover scarcely half the difference.

Not that these $2 billion in reductions wouldn’t bring their fair share of pain. In fact, they would strike at the most defenseless portion of the population.

The California Budget Project estimated Wednesday that the cuts proposed so far by the governor would cause about a quarter of a million state residents to lose access to various health and social service programs over the next two years.

“In budgetary terms, cutting these programs may save some dollars today,” said Jean Ross, executive director of the research group. “In human terms, the setback for the individuals who need the help may be incalculable.”

If Schwarzenegger’s policies reflected a “tough love” approach to shocking the Legislature and the voting public into making hard fiscal choices, there might be a point to them. But they seem to be expressions more of the lack of any consistent fiscal policy whatsoever.

Moody’s Investors Service recognized this when it lowered the state’s credit rating another notch closer to junk bond status this week. The rating service’s judgments aren’t always fair, but in this case they poked the finger of blame exactly where it belongs: into Schwarzenegger’s sternum. The service, in its diplomatic way, called “not encouraging” the governor’s move on the car tax, among other failings in Sacramento. At this rate, California’s securities will soon sell so cheaply that the state could be vulnerable to takeover by a corporate raider.

It appears as of this writing that perhaps as early as today we will get a plan to mortgage $15 billion of the state’s existing debt over a period of several decades, along with the imposition of an annual budget cap to help create a “rainy day” fund. But when all is said and done, the question remains: Which public programs should the state spend money on? The answer, of course, is essential when as much as $8 billion may have to be pared from the general fund to meet the soon-to-be-enacted cap.

Many people saw these problems lurking within Schwarzenegger’s mutually contradictory election promises. Pledges to cut taxes and pledges to safeguard the educational programs that consume nearly half the state budget are not reconcilable, at least not in the mathematical system handed down to us from the ancient Egyptians.

It’s true that during the campaign Schwarzenegger promised to commission an audit to determine the true condition of state finances, but he could hardly have expected the audit to show that things were sunnier than they looked. Certainly, there was never any doubt that the state’s fiscal position was so precarious that a $4-billion reduction in tax revenue could only hurt. But now, ludicrously, the governor and his people are throwing up their hands at the seriousness of the trouble as though to say, “Who knew?”

They’re also given to blaming the Legislature. “The governor has indicated the Legislature caused this problem with mispriorities, and he urges them to correct it,” a Schwarzenegger flack was quoted as saying on Tuesday, referring to the absence of funds for local services. But the fault really lies with a political philosophy that raises distaste for taxes to the level of a fetish.

The preferred technique for feeding the voters’ aversion to taxation is to pretend that all or most of the money raised goes down a rat hole, yielding benefits to no one other than bureaucrats, unionized state employees and swindlers on welfare and Medi-Cal. The subtext of Schwarzenegger’s plan to audit the state’s books, indeed, was that he would track down that always-elusive wastefraudandabuse in the system, fell it with a single shot and hang it on his wall like the head of the African bongo.

This charade is about to come to an end. Those squeals you hear are city and county administrators confronting the need to cut 7% to 33% of their budgets by laying off police and fire personnel and suspending local services. That will be followed by the sound of local residents clamoring for the restoration of those same services. The underlying purpose of the car tax, whose vilification was encouraged by unscrupulous politicians looking only as far as their next election, is about to hit home. As a means of public education on the subject of “where your tax dollars go,” this process beats anything on PBS.

Local officials, to their credit, saw this rip-off coming a mile away. A couple of months ago, groups including the League of California Cities proposed a ballot measure requiring voter approval anytime the state government lays claim to revenue intended for local jurisdictions. This column customarily opposes budget-making at the ballot box, but this measure hints at how much the localities fear they will continue to be robbed so the state government looks solvent.

Sacramento’s inability to balance program needs responsibly, and openly charge taxpayers for their costs, is sure to inspire more such end runs. Recently, the California Medical Assn. proposed quintupling a state telephone tax to pay for emergency room services. (They want to place their plan on the November ballot, where it would rub shoulders with the local government measure if both attract enough signatures.)

The potential to conjure up more such nuisance surcharges is endless. But do Californians really gain anything by reducing the state tax system to a dim sum lunch of tiny nibblings? Eventually it will become plain that there are limits to this strategy. When the tobacco tax raises the price of a pack of cigarettes to $42 or so, the opportunity to squeeze another few bucks from smokers will have been pretty much exhausted.

Even if the politicians craft a stop-gap budget measure this week, in time for a vote on the next ballot, their avoidance of the fundamental issues looks likely to continue. Schwarzenegger ran for office as the right man to bring business and industry back into the state, so he should consider what will really keep company executives from establishing themselves in California. Is it the creation of a rational, responsible system of raising money and spending it? Or is it reducing local services to the point where parks are closed, libraries are padlocked and police and firefighters are absent from their posts?

Extra point: This column incorrectly reported last week that the San Diego Chargers haven’t played in a winning season since their Super Bowl appearance in 1994. In fact, the team eked out a 9-7 record the following year, before its final transformation into the comedy act now playing Sundays at Qualcomm Stadium.

Golden State appears every Monday and Thursday. Michael Hiltzik can be reached at [email protected].