It’s Arnold Versus ‘Armageddon’ in Calif. Tuesday

Posted February 25, 2004 at 4:06pm

SACRAMENTO, Calif.

The sword that Arnold Schwarzenegger wielded in “Conan the Barbarian” sits on a box on display in the anteroom of his office here. I lifted it. It’s heavy.

Last week, the governor of California took it out during a visit from the governor of the Mexican state of Baja California and gave it a big swing. [IMGCAP(1)]

“This is vat I am going to do to the budget,” he said, according to aides. And it looks as though he has a good chance to slay opposition to his two ballot propositions on state finance Tuesday.

He’d better. If Propositions 57 and 58 don’t pass — and they both have to be approved by voters for either to take effect — it would be a blow to his deserved reputation for vigorous, bipartisan leadership.

And, as Schwarzenegger says, the fiscal consequences would amount to “Armageddon.”

Prop. 57 authorizes the state to borrow $15 billion to refinance back debt of $22 billion — $14 billion of which comes due in June.

Prop. 58, which Schwarzenegger likens to “tearing up the credit card,” imposes a constitutional requirement for a balanced budget and creates a “rainy day” fund for future hard times.

A new Field Poll shows support for Prop. 57 at a bare 50 percent, but that’s up 17 points since January. And Schwarzenegger has a weekend blitz planned to push his measures over the top.

In an interview, I tried to get Schwarzenegger’s state finance director, Donna Arduin, to describe what “Armageddon” would look like and see if the threat was being used to scare voters into supporting Tuesday’s votes.

She wouldn’t spell out the spending-cut priorities the governor has in mind so as not to upset the carefully balanced set of interest groups he’s put together to pass the ballot measures.

But she said that, in the worst case, the state might lose control of its own financing to banks in return for high-interest, short-term loans and would have to cut spending by $22.5 billion, representing 28 percent of the state’s general revenue fund of $79 billion.

Combining his own charisma with a sense of crisis, Schwarzenegger has managed to convince interest groups and Democratic legislative leaders to consider a new budget for next year that includes previously unthinkable items.

Included are one-time reductions in the rate of increase for K-12 education outlays, a cap on state university enrollments, a 10 percent hike in university fees, and caps on Medicaid and welfare outlays. The total reduces spending by $11.5 billion.

If Props. 57 and 58 don’t pass, Arduin said, Plan B would be to rely on an $8.6 billion borrowing plan approved under former Gov. Gray Davis (D) to cut into old debt — which is actually worth only $5 billion owing to interest-rate costs.

However, that bond issue was never voted upon in a referendum and is now up for judicial review. It may not be validated.

By way of explaining what happens if that occurs and the propositions fail, Arduin pointed to cuts that haven’t been made in spending so far, implying they are in play in the future.

The fiscal 2003-04 budget does not involve actual reductions in per-pupil education outlays, university enrollment reductions, tuition hikes, throwing people off welfare, or depriving Medicaid recipients of so-called “optional benefits” such as prescription drugs and nursing home care.

“We’ve got to the edge,” she said. “We haven’t gone over. We have not gone to early releases from prisons, for example.”

Strangely, although perhaps because it’s complicated business, the campaign to pass Props. 57 and 58 has not resorted to scare tactics to get them approved beyond the governor’s general warning of “Armageddon.”

Dan Weintraub, political columnist for The Sacramento Bee, said, “They’re leaving it to people’s imagination. Those who fear tax increases think failure will mean tax increases. Those who worry about deeper spending cuts think that’s what will happen.”

So far, ads urging passage rely on a sense of bipartisanship — with Schwarzenegger appearing in one ad along with Democratic state Controller Steve Westly and Sen. Dianne Feinstein (D) appearing in another — and fiscal persuasion.

Another ad features the governor, by himself, saying that the two measures on the ballot “are critical to resolve the state’s fiscal crisis” and explains that from 1998 to 2003, state revenues went up 25 percent while spending rose 43 percent.

Schwarzenegger has managed to raise about $10 million to finance the referendum campaign, and the Field Poll shows that the ads are having an effect.

An earlier poll by the Public Policy Institute of California released last Friday, just as the ads were going on the air, showed Prop. 57, the borrowing measure, with only 38 percent support.

Field showed that a more popular balanced budget amendment was favored by 49 percent of likely voters in January and by 55 percent this month.

Even though opponents of 57 and 58 have raised $685,000, they’ve yet to go on the air with ads. Nearly half the money was loaned by Democratic state Treasurer Phil Angelides, who’s considering a run against Schwarzenegger in 2006.

At the moment, it looks like Angelides has pitted himself against Conan and is going to get whacked Tuesday. And that’s a good thing. It certainly beats “Armageddon.”