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Why Are These Men Smiling? Gov. Arnold Schwarzenegger during happier times, surrounded by Democratic lawmakers including Assembly Budget Chairman John Laird (second from right).

Sacramento Is Burning

Think the budget battle is just a numbers game? This summer's blazes reveal the real cost of the state's money problems

By Eric Johnson

GOV. Arnold Schwarzenegger captured nationwide media attention last weekend when he hinted that he might consider a position as environment czar in the Barack Obama administration. The idea of the nation's greenest Republican going to work for the Democratic presidential hopeful was stunning enough—and plausible enough—to lead national newscasts for a couple of days.

Curiously, the governor reappeared a few minutes later on those same news programs, this time flanked by yellow-uniformed National Guard troops standing in front of redwoods exploding in flame.

In each case, Schwarzenegger calmly explained, in that weirdly articulate, preternaturally confident, Austria-via-Hollywood accent, exactly how he would get a handle on things.

And meanwhile, just outside the governor's Sacramento office, a man-made disaster erupted, as the annual financial crisis that paralyzes the state every budget season reeled out of control.

The same, entirely predictable "emergency" returns year after year, as the costs of running the world's fourth-largest economy spiral upward (with everything else) while revenues remain frozen (by politics). But this year, the situation is more dire than ever.

As usual, state lawmakers have blown the constitutional deadline mandating that a budget be passed three weeks ago. The Democrats who overwhelmingly control the state house have put forward a series of proposals, all of which have been stymied by a stubborn Republican minority chanting the "no new taxes" mantra.

As always, it's a battle between cuts and taxes. The truculent few on the Right side of the aisle, empowered by a Prop.-13-era law that requires a two-thirds supermajority in order to pass any tax, has declined to budge—even refusing to put forward any plan of its own.

And the governor?

He's been traveling to every forest fire and brush fire in the state.

Serious Denial

It's John Laird's job to perform the feat of cat-herding required to pass the state budget. The assemblymember, who represents parts of Santa Clara, Santa Cruz and Monterey counties and chairs the Budget committee, says the governor has "disengaged himself" from the money wrangling.

"He's just not into it," Laird says. "At this point he'd probably take anything we could get him, even if it included new revenues. But he isn't getting involved; he isn't here."

It's difficult to blame Schwarzenegger for indulging in some denial and hiding inside the shroud of smoke. He's been frustrated by this partisan stalemate for a long time—it's practically the very thing that drove him to seek office. And now this smoldering issue has erupted like the state's blazes.

"The problem is bigger this year," Laird concedes. "I'm talking about the sheer scale of it. There are two reasons: First of all, people have continued to jam more and more [expenses] into the budget while the Republicans continue to deny that we need revenues."

The numbers are too big for a normal Californian to fully comprehend, but a glance at the biggest figures is daunting. We've got $6 billion worth of "structural deficit" that is practically built into the state's financing system; $3 billion in debt bonds to pay for previous years' imbalances; and at least another $6 billion in unfunded programs (including $500 million just for the after-school program Schwarzenegger got passed by voter initiative in 2002 before he was elected).

The Legislature managed to fix an $8 billion deficit earlier in the year, but now the state is still $15 billion south of zero.

Although he's been playing this game for a while now, Laird still seems almost incredulous when he adds it up: "That's a $24 billion shortfall in a $100 billion budget."

Laird is about as fiscally hard-nosed as a Democrat can be, but he is unapologetically partisan in his prescription for repairing this huge hole in the state's checkbook. California lawmakers, he believes, must be realistic about how much money their many programs demand, and find the money to pay for them.

He uses this summer's wildfires as an example of the state's penchant for ignoring hard fiscal truths. Last year, the Legislature allocated $70 million to fight fires. Already this summer, we've spent $380 million. Although it's been a hot summer, the same thing happens every year—drawing down the general fund. And the same thing happens all over the budget, not just in emergency services.

This week, Laird and his colleagues managed to get the state's wildfire budget doubled. But while Republicans in Sacramento were willing to cough up 100 million or so to keep the state from being incinerated, Laird is not hopeful that they are going to be willing to increase taxes to keep state programs funded.

Laird explains the realpolitik of the situation by telling a joke he learned from the Speaker of the Assembly's press secretary: Republicans in Sacramento are relevant only twice a year—during the budget vote and at the Legislature's annual softball game.

This is when the Republicans make their deals, holding the government hostage until they get what they want. And this year the Democrats are playing hardball.

"Our goal has been to never give up long-term policy just to win the budget vote," Laird admits. And he knows the game has got to come to an end soon.

"The public is getting to the point where they just want it fixed," he says. "The public is saying: 'You're making us crazy. Just do your jobs.' I get it.

"The question is do we have the votes. The answer is, no, we don't."

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