Gov. Lays Out Agenda of Concrete, Steel

SACRAMENTO —  Gov. Arnold Schwarzenegger on Thursday launched a super-sized plan to rebuild the very foundations of California -- a $222-billion construction project to fortify freeways, schools, jails, ports and waterways.

Schwarzenegger used his annual State of the State speech to outline a decade-long blueprint for reshaping California to its core. If successful, he would be author of the state’s largest public building program since the 1960s, when former Gov. Edmund “Pat” Brown helped California absorb millions of new residents during a postwar boom.

In the 23-minute address to lawmakers, which was as much about rebuilding his own image as it was about repairing California, Schwarzenegger paid homage to past governors who “built the foundations of California’s prosperity.”

“They built California with steel, concrete, hard work and vision,” he told legislators gathered in the Assembly chamber. “We must do all that and more.”

Schwarzenegger’s plan would provide money for hundreds of miles of new highways, carpool lanes and commuter rail lines, hundreds of new schools, two new prisons and a new crime lab. He would shore up the state’s leaky levees and upgrade other flood-control systems.

The governor’s aides said earlier Thursday that he wants a series of public bond issues, starting with $25 billion this year, placed before voters in five elections through the year 2014. In total, $68 billion in new government debt would be incurred to pay for the building program.

Schwarzenegger is counting on the willingness of the federal government to chip in tens of billions of dollars. His plan also would draw from gasoline taxes, school and county budgets, new tolls and fees on businesses and commuters, and partnerships with private businesses to meet the $222-billion price tag.

Republicans and Democrats alike greeted Schwarzenegger’s speech with tepid applause and, later, guarded comments. In particular, lawmakers appeared stunned at the cost proposed by a governor who has been preaching fiscal responsibility.

“The governor is proposing a lot more spending than we are,” said Senate leader Don Perata (D-Oakland), referring to the Legislature’s own infrastructure ideas. “It’s unclear how he plans to pay for it.”

Republican lawmakers said they were worried about too much government borrowing and about higher taxes disguised as “user fees.” The governor needs Republican votes to get his proposal through the Legislature; two-thirds of lawmakers must approve it to place it on the ballot.

Sen. Tom McClintock (R-Thousand Oaks) lauded the governor for focusing on public works construction but stopped short of endorsing the proposal.

“We’re already borrowing record amounts,” McClintock said, “and our bond rating is the lowest in the country.”

Sen. Dave Cox (R-Fair Oaks) cautioned: “We have to be sure that we are not hurting our children and our children’s children.”

Los Angeles Chamber of Commerce President Rusty Hammer was among those who praised the proposal, particularly the money for ports and traffic improvements. But Hammer also sounded a cautionary note.

“We want to make sure these bonds are not Christmas trees,” Hammer said. “We want the highest-priority projects funded around the state, as opposed to having every legislator putting in their pet projects like ornaments on a Christmas tree.”

The Republican governor offered his ambitious plan with his political reputation badly damaged and with Democrats girding to fight him for reelection. He began his speech with a contrite acknowledgment that he was too confrontational last year, leading to his stinging defeat in the November special election.

“I have absorbed my defeat and I have learned my lesson,” Schwarzenegger said. “And the people, who always have the last word, sent a clear message -- cut the warfare, cool the rhetoric, find common ground and fix the problems together. To my fellow Californians, I say -- message received.”

After the governor finished the speech, Assembly Speaker Fabian Nunez (D-Los Angeles) playfully leaned a shoulder into the governor’s side -- a warm gesture from a political foe who has sparred repeatedly with Schwarzenegger.

The problem the governor and lawmakers face is monumental. An estimated 500,000 people move to California every year. The state must accommodate the new residents, repair damage done by past and current ones and make improvements required by federal and state law such as seismic retrofitting and new pollution controls.

“A new California is coming whether we plan for it or not,” Schwarzenegger said. “We cannot be overwhelmed by this reality. We cannot freeze in the face of this future.”

California’s repair and construction bill is staggering. Analysts estimate the tab at $75 billion over the next five years alone to bolster power plants, ports, dams, office buildings, prisons, mental hospitals, parks, levees, bridges and 50,000 miles of freeways.

While cautious about the details, some Democrats embraced the plan. U.S. Sen. Dianne Feinstein (D-Calif.) said the state’s growth over the next two decades was untenable and applauded Schwarzenegger’s 10-year plan as a “major step in remedying the situation.”

Schwarzenegger said he wanted his entire 10-year package approved by the Legislature this year. But lawmakers immediately objected to some elements, offering a picture of the possible political fight to come.

State Sen. Gloria Romero (D-Los Angeles), an influential negotiator on criminal justice legislation, criticized Schwarzenegger’s proposal to build two new prisons for 83,000 additional inmates over the next 10 years.

“We are not going to build ourselves out of this problem,” she said. “New prisons are not going to cut it.”

Nearly half the expense the governor proposes would be for transportation: 550 miles of new carpool lanes, 750 new highway miles, 600 miles of new commuter rail lines, 8,500 miles of bicycle and pedestrian paths.

As much as 9,000 miles of existing freeways would be repaired. A list of possible projects includes new carpool lanes for the 10 and 405 freeways and $290 million for inner-city rail lines in Los Angeles.

Schools would see a windfall as well: $26.3 billion to build charter and technical schools, modernize 140,000 classrooms and build 2,000 new small schools.

The state’s water system could see $35 billion for flood control and other projects.

The plan would max out the state’s credit for years. It would set a strict cap on how much California could borrow, and then use up almost all of that borrowing capacity through 2018.

Schwarzenegger’s cap would limit the state to using no more than 6% of its general fund in any given year for debt repayment -- the amount generally considered prudent on Wall Street. No future bond measure that would bring the state above that debt ratio would be permitted.

But the administration does not factor into its calculations the repayment of $15 billion in borrowing that voters approved in 2004 to help close a budget shortfall. Those payments eat up more than 1% of the state budget every year, fiscal analysts said.

Schwarzenegger’s track record on ambitious projects is mixed. In 2004, he launched a top-to-bottom review of state government called the California Performance Review, but its promise of saving billions and reshaping the bureaucracy fell flat. In November, voters rejected all four initiatives Schwarzenegger supported to reshape the political system as well.

But lawmakers were giving him the benefit of the doubt again Thursday.

“The idea is a good one. We need to start investing in our future,” said Sen. Dick Ackerman of Irvine, leader of the Senate’s Republican caucus. “What I like about this governor is that he tries major things -- he doesn’t always succeed -- that are going to improve the long-term health of the state.”

Ackerman lauded the governor for proposing no new taxes. He also said Republican lawmakers could support a specific type of bond that relies on fees instead of on the state’s general fund.

Bonds to improve ports and major transportation arteries could be repaid by levying new fees on container ships unloaded at California’s ports, for example.

But a plan that relies on tens of billions of dollars in federal funds, money from local governments and investments from private companies could prove optimistic.

Despite his promise to become known as the “Collectinator” in Washington, the governor has had limited success securing federal help for California. The trend in Congress lately has been to send California less money, not more.

Despite a personal appeal from the governor, Congress recently passed cuts that will cost California hundreds of millions of dollars annually. And as the federal government struggles to bring its deficit under control, the state could be squeezed tighter.

Administration officials say much of the federal money the governor’s plan anticipates is guaranteed by existing matching-fund formulas. But Congress could change those formulas at any time.

The plan counts on $14 billion in private investments for transportation projects. But the state has little experience undertaking such large projects through public-private partnerships, and its ability to raise that kind of cash from the private sector is untested.

John Theobald, a political communications expert at UC Davis, said that Schwarzenegger’s mammoth building plan is an attempt to walk the “tightrope” between Republicans leery of borrowing on such a scale and voters who want major public-sector projects.

If Schwarzenegger prevails, the construction projects will surely become his legacy, Theobald said.

“It’s a combination of very big policy,” he said, “and a very big dice roll.”

Jaime Regalado, director of the Pat Brown Institute at Cal State Los Angeles, said there is little question “there is some opportunism here” in Schwarzenegger’s rollout of a major public spending program.

Regalado also said the onus is on Schwarzenegger to prove he can follow through on such a proposal after two years of false starts and mixed results.

The question, Regalado said, is, “How credible is he, given the woeful performance of his office in terms of delivering on virtually anything? That will be really something to watch.”

Times staff writers Peter Nicholas, Dan Morain and Evan Halper contributed to this report.

*(BEGIN TEXT OF INFOBOX)

Governor’s plan

The governor proposed borrowing $68 billion over 10 years as part of a $222-billion plan to improve infrastructure. Much of the money would go to:

* Transportation: Hundreds of miles of highway lanes and commuter rail lines; new toll lanes, some for trucks only; and port modernization.

* Education: Two thousand new schools; modernization of 141,000 classrooms; new charter schools and vocational education facilities; and construction and renovation of state college and university buildings.

* Water: Levee and flood-control system maintenance and improvements; desalination programs; water-storage facilities; environmental protection; and conservation measures.

* Public safety: New county jails and detention facilities, and improvements to state parks, court buildings and offices.

*

(BEGIN TEXT OF INFOBOX)

EXCERPTS FROM THE STATE OF THE STATE ADDRESS

‘The Investments Must Go Hand-in-Hand With Budget Reform’

I’ve thought a lot about the last year and the mistakes I made and the lessons I’ve learned. What I feel good about is that I led from my heart.

Now it’s true that I was in too much of a hurry. I didn’t hear the majority of Californians when they were telling me they didn’t like the special election. I barreled ahead anyway when I should have listened.

I have absorbed my defeat and I have learned my lesson. And the people, who always have the last word, sent a clear message -- cut the warfare, cool the rhetoric, find common ground and fix the problems together. So to my fellow Californians, I say -- message received.

*

Over the years, some remarkable governors and some remarkable men and women who have gathered in this chamber have addressed the needs of the people. Tonight my mind especially goes back to former Govs. Earl Warren, Goodwin Knight, Pat Brown, Ronald Reagan, and to the legislators who have served those leaders.

In the face of massive change and huge challenges, they built the foundation of California’s prosperity.

*

Let me ask you, what California do you want in 20 or 30 years? What kind of highways will we drive on? What kind of schools will our children attend? What kind of jobs will we have? What kind of air will we breathe? And what kind of hospitals will care for our sick?

Now some would say, “How can we plan for 20 or 30 years when we can’t even meet our needs today?” Well, the answer is that we will never catch up, unless we know where we’re going. A new California is coming whether you plan for it or not.

California’s population is expected to increase by as much as 30% over the next 20 years. That is the equivalent of adding three new cities the size of Los Angeles.

*

California is already on the leading edge of the global economy, and it’s changing and growing by leaps and bounds. And yet we will let this advantage slip from our fingers if we don’t make the long-term investment in our ports, our roads, our schools, our information systems and all the other infrastructure required to compete in a world that thrives on innovation.

*

We cannot spend more than we have; but at the same time we cannot afford costly delay in investing in critical infrastructure. The reality is that we face more than $500 billion in infrastructure needs over the next 20 years.

With this first phase of our Strategic Growth Plan, we will take a 10-year chunk out of that need. This plan will leverage $70 billion in bonding capacity over the next 10 years to achieve a total investment of more than $200 billion. And we can do it without raising taxes.

*

Now, here’s the catch. Our ability to pay for these investments is directly tied to the fiscal discipline of the past two years. This discipline must continue. The investments must go hand-in-hand with budget reform.

*

We must remember that this is the state that represents a dream. If you talk about the Illinois dream or the Delaware dream or the Kentucky dream, no one would know what you meant or what you’re talking about. But our dream -- the California dream -- ah, that means something. People understand it.

It is the means to a better life, where anything is possible -- no matter where you came from, no matter who you are.

From Associated Press