In California, Virginia looks awfully good

VENICE, Calif. -- In some respects, life’s the same the world over, especially when is comes to budget politics.

Let’s take a look at California and our dear old Virginia. We’ll see that the Golden State’s ongoing political – that is, budget – debate is not terribly dissimilar from the one that characterized Virginia’s recently completed legislative session, though it’s taking place in an environment wholly different from our own.

Currently, California Gov. Arnold Schwarzenegger, who was elected only eight months ago, is locked in a budget battle with not only the legislature’s majority party Democrats, but with a good number of fellow Republicans, too. At issue are the details of the state’s new $103 billion spending plan, which should’ve gone into effect on July 1 but hasn’t even been passed yet.

The primary sticking points between Schwarzenegger and powerful Democratic lawmakers have been funding levels for higher education, social services, and local governments – sound familiar? – where, generally, the governor wants less and the legislators want more. The governor’s problem with fellow Republicans is less practical than political, where many GOP lawmakers feel Schwarzenegger has made too many budget concessions to the ruling Dems.

Deals seemingly have been reached on higher ed and social services spending, so now getting a budget deal boils down to an agreement over state aid to localities. And local officials are feeling none too easy over being the last card to be dealt.

Local governments had previously struck a deal with Schwarzenegger and agreed to a $2.6 billion cut in state funding – all eager to do their part to end the state’s long-running deficits – in return for certain budget protections down the road. Now, that deal seems to be less certain after word leaked that the governor had agreed separately with Democrats to a budget provision allowing the state to raid local governments’ coffers in times of fiscal emergencies. Well, given that California is forever in a fiscal emergency, what, pray tell, was there to protect municipal governments’ funding?

This apparent reneging prompted the Beverley Hills chief administrator to recently call state leaders “some of the greatest mental midgets of our times,” though he didn’t say precisely who the biggest diminutives were on his list. Many other local officials were equally critical, though less colorful.

As the July 4th holiday approached, lawmakers abandoned both Sacramento and their budget duties and returned to their districts. Republicans and Democrats alike agreed that a break in their budget impasse simply wasn’t at hand.

If you’re a Virginian sitting beneath the palms of Southern California watching all of this unfold, you’ve got to chuckle a bit, especially when comparing it to the Old Dominion’s recent budget battles.

We’re fortunate that Virginia isn’t where California now is – in a new fiscal year without a new budget. Virginia lawmakers had the good sense not to risk their state’s renowned reputation for fiscal sanity and struck a 2004 budget deal in time (albeit seven weeks late) to avert a real budget – and constitutional – crisis. For the fourth year in a row, California has failed to adopt a budget for a new fiscal year before ending the old one.

Worse, the budget deal currently on the table guarantees California will face multibillion-dollar deficits in years to come. Why? Because it is laden with debt and is chockfull of one-time budget fixes and accounting tricks. A few months ago, Schwarzenegger successfully persuaded voters to approve $15 billion in new bonds in order to avoid unpopular cuts or tax hikes. These weren’t bonds for capital infrastructure investments, mind you, but largely for general operating expenses – a cardinal fiscal sin, if there ever was one.

In short, Schwarzenegger has engaged in many of the same less-than-honest budget tricks that sparked a rebellion against his Democratic predecessor, Gov. Gray Davis, who ran up a $40 billion deficit and was ousted by voter recall barely a year after winning a second term. And, to be sure, California’s lawmakers continue to be complicit in the budget gimmickry. Many analysts say that the state’s future debt now exceeds what it would’ve been under Davis’s proposals.

Virginia, to be sure, had engaged in some of this foolishness, too. For several years running, our budgets were built on short-term fixes, including some untimely tax cuts, delays in spending obligations, and raids on dedicated accounts, all in an effort to make things seem what they weren’t.

But we woke up, finally. We found the wherewithal to fix some failed tax policies, enact limited reforms to an outdated tax code, and resist urges to rely on grossly more debt.

Virginia remains a beacon of fiscal soundness, as reflected by the recent reaffirmation of our AAA bond rating, a status that’s been continuously conferred by Wall Street since 1938. California, on the other hand, has among the nation’s lowest bond ratings and pays about the highest rates possible for the billions it’s borrowed to make ends meet.

The Golden State has lots of nice things – great weather, hundreds of miles of beaches, grand mountains and desserts, and a somewhat appealing let-live lifestyle. But so much of what the state has to offer is undercut by a fiscally unsound government whose actions (or inactions) will exact economic tolls for years to come.

Virginia may not be known for actors – or actors as governors – but we do have policymakers who are willing to act. And that’s worth a lot.