Arnold: meet backfill

Arnold Schwarzenegger is now officially California’s 38th governor; and minutes after being sworn in, he kept one of his campaign promises. He rolled back the tripling of vehicle registration fees which former Governor Gray Davis had implemented last spring.

The state’s 28-million vehicle owners thought that was great, but most of them probably don’t realize that such revenues go to local governments for police and fire protection as well as library services. The rollback means California cities and counties will lose about $4 billion unless Schwarzenegger can find a way for the state to make up this lost revenue.

That’s what the state had to do when the vehicle registration tax fee was slashed one-third under Republican Pete Wilson and Democrat Davis. This is known as "backfill" and applies in other areas as well.

The problem dates back to when Californians voted for Proposition 13 which froze property taxes at 1970s levels. One effect was to transfer control of many taxes from local governments to Sacramento. The Legislature also mandated certain levels of services at the local level — especially in Welfare and Education — for which it did not provide adequate state funding.

Inevitably, the cities and counties found they could not meet the mandates nor pay the fines imposed for failing to comply. The state took over more and more control of local governance by providing "backfill" funds and establishing state-wide standards.

As long as California’s economy remained strong and growing, this system could function, however fitfully, even as it led to increasing problems in local welfare and education. But it was necessary to take a long-term approach to California problems — something that politicians are rarely inclined to do.

The state’s current crisis began in 2000, when most of a one-time, $12-billion windfall of income taxes was committed to permanent new spending and tax cuts. Gray Davis and the Legislature knew it could be risky; but they believed the economy would continue to grow or at least remain adequate for the usual political Band-Aid financing of short-term loans and jiggery-pokery bookkeeping.

They were wrong.

The dot-coms crashed, Silicon Valley revenue died, and the state was victimized by energy companies which created a power crisis for their own profiteering. The 2000 permanent budget spending now resulted in an annual deficit of $8-billion. In three years, Davis and the Legislature ran up $25-billion in debt.

Seeing their chance, Republican legislators stone-walled the Democrat majority on borrowing to meet the shortfall; and this year, they also held up the 2003-2004 budget while going after Davis in a recall campaign.

It worked. Davis was out; the Terminator was in.

The Republicans are still a minority in Sacramento; but with Schwarzenegger as governor, they have gained the initiative in running the state. However, it’s like battling for the bridge of the Titanic after it hit the iceberg. California is still in deep trouble.

Last week, the mayors of California’s seven largest cities descended on Sacramento to seek "backfill" for police, fire and emergency services. Schwarzenegger has promised to provide it — but nobody knows where the money will come from. His fellow Republicans want more budget cuts and small if any loans. The state already faces a $17 billion shortfall; and this "backfill" would add $4 billion more.

So — less than an hour — into his governorship — Schwarzenegger plunged himself knee-deep into the swamp of California finances; and those low-lying shapes in the morass aren’t logs. They’re alligators — Democrats and lobbyists and right-wind Republicans — just waiting to get their teeth in Arnold’s butt.