Monday, November 12 , 2018, 5:00 pm | Fair 72º


Harris Sherline: The Deficit Hits the Fan in California

Schwarzenegger continues to lead the state down a path of fiscal disaster

In an ironic turn of events, California — the nation’s worst financial scofflaw — may be about to take the lead in responding to the severe financial crises of its own making.

Harris Sherline
Harris Sherline

In a case of the pot calling the kettle black, Gov. Arnold Schwarzenegger announced that he will seek “terrible cuts” to deal with a budget deficit in excess of $18 billion for the current fiscal year, which ends June 30. The cuts he has asked the Legislature to make include eliminating the state’s welfare program and significantly reducing in-home health care for the elderly and disabled. He also proposed dropping state-subsidized child care for all but preschool children.

After nearly eight years of saying one thing and doing another, Schwarzenegger finally appears to be about to get fiscal religion. While the Democratic-controlled Legislature is already floating proposals for raising taxes, the “Governator” is suddenly talking about “some really terrible cuts.”

Whatever the severity of Schwarzenegger’s recommendations, to his credit, one thing he did not propose was any increase in taxes. Well, I say, it’s about time! Where has he been for the past 7½ years?

Actually, he did cut taxes — at least one tax — immediately after taking office in 2003, when he rolled back the tripling of the car tax. Subsequently, however, it has been all downhill.

California’s politicos have been playing games with the state’s budget process for years, but it looks as though they won’t be able to avoid facing reality much longer, although there is little doubt that they will try. California’s fiscal rating is in the tank. The interest rate on new issues of the state’s bonds are threatening to rise into the stratosphere, and the potential of being unable to pay our bills looms large.

So, as we march into the eye of a financial storm, the Legislature is still trying to paper over California’s budget deficit, estimated at $18 billion to $20 billion. The state’s controller recently reported that California took in $1.3 billion less in taxes (through April) than predicted.

What else did Schwarzenegger do? He jumped on the bandwagon of the environmental naysayers and, almost immediately after the oil disaster in the Gulf of Mexico, he promptly cut off perhaps the one major potential source for generating enough revenue to bail California out by declaring all drilling off the coast verboten. At the same time, he has actively helped shepherd the state’s implementation of the disastrous AB 32, a law that will effect the owners of every truck in the state so severely that many of them will be forced to go.

What a guy. What a courageous politician.

For nine of the past 10 years, California’s spending has exceeded the state’s population growth and the rate of inflation, but Schwarzenegger has done next to nothing to try to hold the line, in spite of his ability to exercise the line-item veto. At the same time, the excessive regulatory environment he has helped create has been a major factor in inducing the flight of businesses from the state.

Schwarzenegger has done little or nothing to stem the tide of businesses leaving California, while other states, such as Colorado, Idaho and Nevada, have aggressively courted them with favorable tax treatment and financial aid. Jan Norman recently blogged that about 129 businesses have left California for greener pastures — taking their payrolls, investment capital and tax dollars with them. They are just the tip of the financial iceberg that threatens to sink California’s ship of state.

There’s only one way California’s unimpeded march into deficitland can end, and that’s in fiscal disaster. Why the people who have been in charge of running the state do not, cannot or are unwilling to face reality is a mystery. It’s obvious to me, much of the public and the responsible media outlets. Sadly, however, that doesn’t seem to phase those who won’t look, especially when Schwarzenegger sets the wrong example by failing to provide the leadership that’s needed.

I voted for Schwarzenegger, but at this point I can hardly wait for him to leave office. I only hope he doesn’t reappear somewhere else on the political scene, where we could be forced to continue tolerating his public presence.

My concern is that we could end up having to suffer through another four years of “Governor Moonbeam.” I’m not sure which would be worse, “Governor Moonbeam” or “The Governator.”

— Harris R. Sherline is a retired CPA and former chairman and CEO of Santa Ynez Valley Hospital who has lived in Santa Barbara County for more than 30 years. He stays active writing opinion columns and his blog,

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