Ronald Reagan is being celebrated on the centennial of his birth Feb. 6 as a president who renewed the shaken confidence of Americans during a time of economic anxiety and demonstrated leadership in helping to end the Cold War.
These are genuine accomplishments, but the centennial is also an occasion for contemplating Reagan’s performance as a two-term governor of California. The Golden State currently faces a monumental fiscal imbalance that Gov. Jerry Brown is trying to correct with a painful mix of budget cuts and taxes. Reagan would understand the predicament. On national issues, modern conservatives have often asked: “What would Ronald Reagan do?” As far as California’s budget deficit is concerned, an instructive variant of this question would be: “What did Ronald Reagan actually do?”
When Reagan became governor in 1967, California was in flux. The state had symbolized the good life for Americans for much of its existence, but population pressures and pollution were beginning to take their toll. There had been urban riots in Watts and Oakland, recurrent demonstrations at the University of California, and labor organizing in the fields.
Reagan had capitalized on this unrest and defeated the two-term incumbent Democratic governor, Jerry’s father, Pat Brown, in a landslide. The Sacramento press corps, of which I was a member, suspected that Reagan, who had never spent a day in public office, was in over his head. So did many legislators, mindful that Reagan during the campaign had responded to a question about what kind of governor he would be with a trademark quip: “I don’t know, I’ve never played a governor.”
California had a budget that was larger than all but six nations in the world, and the role of governor was demanding, made more so by the shared inexperience of people Reagan had brought to Sacramento. As Reagan’s communications director, Lyn Nofziger, bluntly described the Reagan team, himself included, “we were novice amateurs.” It took the better part of a year to weed out the less suitable amateurs, including a finance director and chief of staff, and replace them with capable people.
Reagan had his share of early stumbles as governor but he grasped immediately the same essential truth that Jerry Brown understands today, which is that state government has to deal candidly with its financial problems. Reagan had inherited a deficit from Pat Brown, a successful New Deal-style governor who had left his stamp on California’s flourishing universities and unsurpassed freeway system. But by 1966 Brown was near the end of his tether and anxious to avoid a tax increase in an election year. He did so with a sleight-of-hand accounting change that enabled him to draw on future revenues, leaving Reagan with nine months of revenues to pay for 12 months of services. Reagan had promised to “squeeze, cut and trim” state government but realized that cuts alone would not balance the budget. A week after he took office he told his aides that he would seek a tax increase while voters remembered who was responsible for it.
The political context in which Reagan operated was more congenial to realism than it is today. California Republicans in the 1960s thought of themselves as more fiscally prudent than their Democratic counterparts, but they knew that the state Constitution required a balanced budget and they didn’t regard a tax increase as a crime against nature. Indeed, many Republican legislators of that period had creative ideas about spending government money for legitimate social purposes, among them a trail-blazing bill to provide subsidized community treatment centers for the mentally ill that was the brainchild of one of the Legislature’s most conservative Republicans.
Reagan is often remembered today for his declarations that government was the problem rather than the solution. The concern of many Republican legislators when he became governor was that he would apply this notion too literally.
“A lot of people, including me, thought (Reagan) would be ideological,” former Gov. George Deukmejian told me in 2002. “We learned quickly that he was very practical.”
Deukmejian, a future governor, was then the Republican state senator who carried Reagan’s tax bill. By the time it reached Reagan’s desk, its price tag was $1 billion, at the time the largest tax increase ever signed into law by any governor of any state. In 2011 dollars that would be an increase of $6.5 billion.
The composition of the tax increase was even more remarkable than its amount. An economist who analyzed the bill without knowing the authorship might have concluded that the bill was crafted by a New Deal Democrat, as Reagan had once been. Corporate taxes nearly doubled, to 9 percent during Reagan’s governorship from 5.5 percent, with most of the increase coming in this first tax bill. The tax on banks rose to 13 percent from 9.5 percent. The maximum on personal income taxes rose to 11 percent from 7 percent, and tax brackets were narrowed to put more people in higher brackets. Low-income seniors who owned their homes received a substantial refund of their property taxes.
Jerry Brown, then 36 years old, succeeded Reagan as governor in 1975. Despite the relief provided in the 1967 tax bill, property taxes soared in the 1970s as local governments expanded. Many Californians feared they would lose their homes because they couldn’t pay their tax bills, creating a political climate in which a folksy populist named Howard Jarvis put forth a ballot initiative that rolled property taxes back to their 1975 levels and imposed a two-thirds requirement to pass state and local tax increases. Brown opposed the initiative — the now-famous Proposition 13 — but neither he nor the Legislature, which was sitting on a pile of surplus money that could have been used for property-tax relief, did anything constructive to head it off. Proposition 13 passed overwhelmingly that June, and Brown, seeking re-election later that year, overnight became its advocate and implementer.
Now 72 years old and newly elected, Jerry Brown is trying to restore fiscal stability to California, where 12.5 percent of the work force is jobless and state revenues are recovering slowly from the Great Recession. He is haunted — some would say hamstrung — by the legacy of Proposition 13 and its two-thirds requirement and perhaps hampered even more by the bipartisan legacy of the past decade in which governors and the Legislature have papered over budget shortfalls with gimmicks and borrowing that would put Pat Brown to shame.
The first rule when one is in such a hole is to stop digging, and Brown is certainly trying to do that. Facing a two-year deficit of $25 billion, he has proposed an honest budget that has the potential to offend nearly everyone. Brown would make up for half of the $25 billion shortfall with budget cuts in programs dear to Democrats, including $3 billion in health care and welfare benefits for the poor. He would close the other half of the deficit with an extension of temporary 2009 tax increases that are due to expire July 1. These include a surcharge on the state income tax, a higher sales tax and an increase in vehicle license fees. These tax extensions have evoked predictable howls from Republicans, who don’t even want them to come to a vote. But Brown promised in his campaign that he wouldn’t enact any tax increase without approval of the voters, and he is now trying to put the entire package on the ballot in June.
It is a high-stakes gamble, to be sure, and Brown wasn’t much of a gambler in his first tenure as governor. Now, with the fiscal integrity of California on the line, he is facing up to the problems as Reagan did more than four decades ago. They weren’t mutual fans when they both shared the political stage but the Old Reagan and the New Jerry Brown have something in common. Reagan put ideology aside in 1967 in the interests of fiscal stability. And rather than telling voters what they want to hear, Brown now is telling them what they need to do to restore fiscal solvency to the once great state of California. Good for both of them.
— Summerland resident Lou Cannon is a longtime national political writer and acclaimed presidential biographer. His most recent book — co-authored with his son, Carl — is Reagan’s Disciple: George W. Bush’s Troubled Quest for a Presidential Legacy. Cannon also is an editorial adviser to State Net Capitol Journal, which published this column originally.
