“Although Not Without Pain, We Closed a Budget Gap of 60 Billion Dollars”

 Governor Arnold Schwarzenegger began his address by revealing personal details of life within his family household.   The Schwarzenegger household is something of a menagerie he stated and began with a true story from which he was able to parallel a worthwhile lesson.

”An Austrian bodybuilder, a TV journalist, four children, a dog, the normal goldfish and hamsters and so forth -- and in recent years we added a miniature pony and a pot-bellied pig,” the Governor described the family household and then continued. “It's not unusual for me to look up from working on the budget or something to find a pig and a pony standing there staring at me.”

Gov. Schwarzenegger went on to explain that his pig and pony have figured out how to work together as a team to open the dog’s canister of food and devour the contents.

“Together, as a team -- as fractious, tentative and uncertain as it might have been -- together, we got California through the front end of the worst financial crisis since the Great Depression. Although not without pain, we closed a budget gap of 60 billion dollars!”

He said these decisions were very hard for both sides of the aisle. “On the Republican side, we had leaders who sacrificed their careers or put them at risk. On the Democratic side, we had legislators who were threatened by their own interest groups. To those on both sides of the aisle who took these risks for the good of the state, you have my deepest admiration,” commented the Governor. “We did what we had to do.”

The Governor then stated that painful spending cuts were made and temporary tax increases were passed. COLAs for most state programs were also permanently eliminated.

A light at the end of the tunnel was the announcement of legislation that passed and empowered parents to have the means to get rid of incompetent principals and take other necessary steps to improve their children's education. To increase accountability, teacher performance can now be linked to student performance.

Another major accomplishment was the most comprehensive water package in nearly half a century and now the work will begin to pass the 11 billion dollars in water bonds that will be on the ballot in November.

“If I had to summarize in one word our focus for the coming year, it would be the word ‘priorities’” he continued. “The first priority for the coming year is the economy and jobs.
I will come to the main thing we can do to help the economy in a moment, but there are four proposals to spur job growth that I will introduce.”

Gov. Schwarzenegger then began to list the proposals, “First, you will receive a $500 million jobs package that we estimate could train up to 140,000 workers and help create 100,000 jobs. Second, you will receive a measure to streamline the permitting of construction projects that already have a completed environmental report.  Third, to stimulate other construction jobs, you will receive a proposal for homebuyer tax credits of up to $10,000 for the purchase of new or existing homes. And fourth, since we want California to be the dynamo of green technology, I ask you to pass our proposal exempting the purchase of green tech manufacturing equipment from the sales tax.”

Speaking optimistically the governor went on to say that while we still have a long way to go, the worst is over for California's economy.

”So let me tell you the main thing that we here in this chamber can do to help the economy and jobs. We can be a better partner to the economy. To strengthen the economy, which is the foundation of all jobs, we here in this chamber must reform California's budget and tax system. That would be a huge stimulus. The basic problem is that our tax system does not reflect our economy.”

In 2009, California's economic growth declined 2.8%...but our tax revenues were down more than 8 times that much. He sited that 38 million Californians have to rely on 144,000 people for their schools, their fire protection, their health care, their public safety and many other services. The problem is that we need to accept: our economy is 21st Century, but our tax system is 20th Century.

“The Tax Reform Commission did its work and came up with a plan for reform that was praised by both Willie Brown and the Wall Street Journal. We must begin work on these tax reforms because we simply cannot wait for the rich to bounce back.  State revenues are not expected to return to where they were until 2013 to 2014.”

Calling the budget crisis the Katrina in California, the governor said the budget reform is equally important. He recommended that in addition to taking action on the Commission's plan, action also be taken on the Best Practices Budget Accountability Act, which has been drafted by the reform group, California Forward.

”The leaders of this body have said that the legislature should be given a chance to enact reforms before reforms go directly to the people. Here is that chance. I urge you to take it.
And as we struggle to overcome our differences, what I ask you to remember is that the current tax and budget system is cruel. It is cruel because it is forcing us to make a Sophie's choice among our obligations. Which child do we cut? The poor one? The sick one? The uneducated one? The one with special needs?  That is cruel.”

Not missing a beat, Gov. Schwarzenegger continued, “I will address our immediate budget situation more fully in a few days, but let me give you an overview. We face a $19.9 billion deficit -- $6.6 billion for the rest of this budget year and $13.3 billion for the upcoming budget year. First, as bitter as the words are in my mouth, we face additional cuts. What can we say at this point except the truth? That we have no choice. But I am drawing this line. Because our future economic well-being is so dependent upon education, I will protect education funding in this budget.”

Thirty years ago 10 percent of the general fund went to higher education and 3 percent went to prisons. Today almost 11 percent goes to prisons and only 7½ percent goes to higher education. He has vowed to I submit a constitutional amendment so that never again is more a greater percentage of money spent on prisons than on higher education.
He stated that “it simply is not healthy.”

What is he recommending regarding the prison expenses?

“The way we get this done is to find more cost-effective ways to run our prison system and allows private prisons to compete with public prisons. Competition and choice are always good. California spends $50,000 per prisoner. By comparison, the ten largest states spend $32,000. They spend less, and yet you do not see federal judges taking over their prison health care. If California's prisons were privately run, it would save us billions of dollars a year,” the Governor stated adamantly.

The bottom line is that this shift would mean billions of dollars that could go back to higher education where it belongs and where it better serves our future.

He next pointed the finger at the federal government, stating, “Another major item is this: federal funds have to be part of our budget solution because the federal government is part of our budget problem. When President Clinton was in office, California got back 94 cents on the dollar from the federal government. Today we get only 78 cents back. Texas gets 94 cents. Pennsylvania gets $1.07. Alaska, with all its oil, gets back $1.84 for every dollar. New Mexico gets $2.03. This should be more fair and equitable. We are not looking for a federal bailout, just federal fairness.”

Another federal situation is due to the location of California. Although it is a border state the federal government is not even funding a 50-50 split of the costs of undocumented immigrants. We are currently owed billions of dollars by the federal government for various programs.

”While I enthusiastically support health care reform, it is not reform to push more costs onto states that are already struggling while other states get sweetheart deals,” says Gov. Schwarzenegger. “Health care reform, which started as noble and needed legislation, has become a trough of bribes, deals and loopholes. You've heard of the bridge to nowhere. This is health care to nowhere. California's congressional delegation should either vote against this bill that is a disaster for California or get in there and fight for the same sweetheart deal Senator Nelson of Nebraska got for the Cornhusker State.”

Every year, in spite of whatever challenges are facing the state the Governor seeks the positive, “I stand up here and tell you how much I believe in California's future. California has more returning veterans than any other state, so our state, as well as the federal government, has a special responsibility. We have a fundamental obligation to anyone who has shed or risked blood for this country. That is a priority.”

Closing his speech on an optimistic tone Gov. Schwarzenegger stated, “No matter how big the problems are that this state faces, no matter how harsh things may seem to us in the months ahead those Californians in uniform will tell you that this is still the greatest place to come home to, the greatest place to pursue a better life.”