Post-partisan budget

GOV. ARNOLD Schwarzenegger may have achieved the pinnacle of his vaunted post-partisanship this week by releasing a revised budget that simultaneously increases spending, thus annoying Republicans, and slashes benefits for many of the state’s neediest residents, alienating Democrats. In the process, he further crystallized the once-amorphous political philosophy that propelled him into office nearly four years ago and now sets the state’s course into the future, for good or for ill.

On the upside of the ledger is the governor’s continuing focus on narrowing the massive operating deficit he inherited from former Gov. Gray Davis. The revised 2007 budget includes a $1.4-billion structural gap, compared to $16 billion in 2003, when Sacramento was still suffering the hangover from the dotcom spending binge of the late 1990s. In moving California closer to living within its means, Schwarzenegger is setting the stage for a more economically rational future.

The dark underside of that fiscal sobriety is the governor’s unduly aggressive retirement of the economic recovery bonds, which got the state through the post-dotcom budget crisis, at the expense of programs that help the state’s most needy residents. Those bonds, passed in 2004, are not yet due, but the governor wants to pay them off now and hurt the people Californians chose to leave unscathed when they voted for financing the shortfall over a longer period: the disabled, the elderly and the children of the poor.

Schwarzenegger argues that the state shouldn’t be carrying those bonds if it can’t pay off its deficit. But he has made no secret of another key component of his vision for the future: yet more bonds, for building prisons, dams, roads, bridges, schools and water projects. The real reason for retiring the post-Davis recovery bonds may be to clear the books for new debt.

The governor’s modus operandi is to build for the future, but only by delaying or obscuring present pain by selling bonds, relying on one-time payments (such as privatizing the state’s student loan agency) and shifting money to the general fund from special accounts like the tobacco-settlement reserve. Such moves can be creative, but if overused, they simply become too clever by half.