The Swarm

Mix it up with The Bee's editorial board.

November 10, 2008
Transcript: Schwarzenegger on budget crisis, furloughs and other topics
BB GOV BOARD 010.JPGBelow are some excerpts from our interview today with Gov. Arnold Schwarzenegger on the state's $11.2 billion revenue shortfall, state worker furloughs, the car tax, the initiative process and other topics.

To listen to audio of the interview, click the link on this page.


On why he proposed one-day-a month furloughs for state workers:

Schwarzenegger: It comes under the auspices of, everyone gets a little hair cut. If everyone sacrifices a little bit, I think we can make it through here. It is the same question as...why do you make cuts from law enforcement. Why do you make cuts from prisons? Why do you make cuts from education. Why do you make cuts from health care?
You have got to look at the whole inventory of things that are available. I thought by closing some of these holidays and also having people, you know, take off one day a month it could save the state some money, and it does. Mike, what are those numbers?

Finance Director Mike Genest: The furlough itself we have at $263 (million) this year and $451 (million) next year. And that is just the general fund.

Question: Would this be across the board or would you consider exempting some state position that generate revenue, such as tax collection?

Schwarzenegger: They will be exempt, yes.

Car tax and other taxes

Question: Another question one of our readers posed is, why not reinsitute the "car tax," the vehicle license fee?

Schwarzenegger: Everyone has different ideas of what taxes to do. Those are the taxes I have proposed. Then there will be other proposals, like those coming up in our big five meetings...

Question: So you would be open to reinstituting the car tax?

Schwarzenegger: Let me put it in a blanket statement and not specific to the car tax. I am open to discussing anything with the legislative leaders to come up with ideas to solve that problem.

On his past opposition to new taxes...

Schwarzenegger: I was the one who said no new taxes. No additional taxes. But I also never signed a no-tax pledge, because I always made it clear if there is an emergency, we would have to rethink our philosophy and not get stuck in our ideology. You can have an ideology, and I have mine, but I don't get stuck in it. We have to be able to improvise when there is a state of emergency or something unusual happens...
I have always said, in my interviews, flip flopping is getting a bad rap....I personally fin it attractive in people that I have thought one way up until now, but I just learned something, and because of that I have changed my mind...
People have to learn all the time and discover new ideas and stuff like that.

The initiative process

Question: Shouldn't something be done with initative process that obligates the state to spend money it doesn't have?

Schwarzeneegger: I think the initiative process should definitely be looked at. You could see it this time. We had initiative all opposing each other. One initiative was tough on crime, one initiative was easy on crime...

It ought to be streamlined. There ought to be a process where people get input. They have to take it through some panel for review. Or with the legislators...People with initiatives would like to get that input so you get some sense out of the whole thing.
I also think there should be a rule where you can't go past a certain amount of spending or debt, I should say...

The initiative idea is a great idea, especially when you have legislators that are not creating the action...But we have to look at all those things.


On his relationship with the incoming administration of President-elect Barack Obama:

Schwarzenegger: I will do everything we can, as a state, to work with the federal government, with this new president and I will do everything I personally I can to make him successful... I am not looking for a job. I made that also clear. I will be be here until I finish my term. There is so much to be accomplished...

On whether his wife, Maria Shriver, is happy with the election results...

Schwarzenegger: Oh man. I am always so happy when Maria is happy. I think we all know that.

The $11.2 billion shortfall

Question: Do you think lawmakers of both parties aware of the scope of this revenue shortfall, and the need to make tough decisions?

Schwarzenegger: They know now that it is $11.2 billion that needs to be solved. I think they also know...that we have only sold part of our RANs (Revenue Anticipation Notes), and therefore there's another $2 billion to go. That will not be easy if the financial community looks at us and we can't fix the problems we have now. People will be reluctant to invest in California. So the decisions, or lack of decisions, will have an affect on that. And if we don't have the RAN, at the end of February, we will run out of money.

So, do they want to be the ones who create that, or do they want to be part of the solution? That is the judgment they have to make this November...

I have faith they will work on it. Maybe not exactly what I propose. But they will bring in their ideas, ideas of how to create extra revenues or ideas of how to make certain cuts...I welcome all this, because there is nothing I would like more than if someone comes up with a magic - and says, have you ever thought about this and we create another $5 billion.

Genest: When it comes to selling the RANS itself, they have to be paid back before the end of the fiscal year. They always want to see our cash flow analysis to make sure we have cash in the bank to pay them back. Right now, with these new numbers, our cash flow analysis shows we won't. So they wouldn't sell us a RAN unless we can show them how we would pay them back.

On whether he he thinks any Republicans have changed their minds from last year, when they refused to support a tax increase.

Schwarzenegger: We are going to get into that this afternoon, and I can give you a better read on that. But right now, I believe they are just as interested in fixing the problem as I am.

It is a different situation, much more severe problem than we had two months ago. And it is after an election that might be helping, even though Republicans are running around saying no new taxes and so on.

On Perata's comment that it will have to come down to putting a tax increase measure on the ballot.

I never plan for failure. So right now I am planning for success. There is always a time when you will come to a realization on whether you have been successful or failed, but I would not go in before it is over planning on failure. If you do that, you won't be successful on anything.

Question: Would you see that as a failure?

Schwarzenegger: If legislators and I cannot solve the issue this November, then they have failed.
Genest: We can't wait for the election. I don't know when the election will be, but it can't be any sooner than March I think.
Schwarzenegger: The special election maybe is in June.
Genest: We'll we'll be out of money way before then.
Schwarzenegger: That is for sure.
Genest: We need action, now.

Personal income tax and union contracts

Why not use a personal income tax instead of a sales tax?

Schwarzenegger: Have I considered it? Yes. But the reason I am against it is for so long we have piled onto the personal income tax. I think we are relying so much on income tax that it is the very thing that has done us in. If we weren't so reliant on income tax, we'd have a tax that would represent the economy instead of Wall Street...

Question: But if this is a temporary tax anyway, wouldn't volatility be less of an issue?

Schwarzenegger: Yes, I understand, but the very reason we established a tax commission is because we want to get rid of this. (Points to a chart showing gyrations in personal income tax revenue.) But if I say, I want to get rid of this because this system but while we are at it, we want to pile on. That is why I am very reluctant about it.

Question: Are you just focused on this year's shortfall or are you trying to lay the groundwork for a larger restructuring?

Schwarzenegger: I see this as an emergency situation. This is a temporary tax increase, not a permanent tax increase.

Question: What about union contracts?

Schwarzenegger: One thing we know, we want to pay the workers their fair share. We also want to give them their benefits. The question is, what is affordable as far as benefits and salaries are concerned. I think it is wrong, as we have in the past, to go and give more unemployed benefits to workers not addressing where the revenue is supposed to come from, knowing that eventually it will catch up with us and we will be in deep trouble. That is why one of our proposal is to look at our unemployment benefits, knowing they are running out now.

Perata and Prop. 11

Question: How would you characterize your relationship with Sen. Perata?

Schwarzenegger: Very friendly. I am aware he was trying to derail Proposition 11 but you know that is the way it is in this business. I learned that a long time ago. When I sit with Sen. Perata the only thing that is important is, let us work together to make good decisions for the state. What he does on the political side doesn't matter to me...

I think he made it very clear where he was with Proposition 11. He said, I hate to take politics out of politics. That is the way he feels. But we were very happy that we won anyway, and that he couldn't find more money to spend against it.

How much difference do you think will Prop. 11 make?

Schwarzenegger: It will make no difference right now, but as time goes on, it will make a lot of difference. There will be a lot of districts that will become competitive districts, with Democrats and Republicans. And they (voters) will be looking for the best person, rather than just being locked in and having one choice...

It is a shameful process right now. It is really hurting the people and our democracy. ..But as those seats become more competitive, you will see immediately better performance in Sacramento, because you will have to come back to your districts and say here is what I have accomplished...

The road ahead, perks for legislators, etc.

Question: Is this the biggest challenge of your time in office?

Schwarzenegger: Yes it is the most challenging time. It is a time where you have to listen to a lot of people and different ideas...

Question: So who are you listening to?

Schwarzenegger: Politicians in both parties. People who have been in office and retired just a short time ago. I am always interested in what other states are doing. And this is one of the instructions that I always give my team, in the horseshoe - never think about just reinventing the wheel. The first thing I would tell the tax commission is look at what the rest of the country is doing. Which state has the best system in place and then lets copy those system and add our own spin to improve upon it.

On whether he would furlough his own employees right now, by executive order..

Schwarzenegger: I don't know the law or what I can do or what not. I put it out there as part of this overall package, so we have enough money to carry on and go on.

Question: But what about your own shop? Couldn't you do it unilaterally?

Schwarzenegger: Probably. We have done our own 10 percent cut last year.

Question: What about the Legislature? Some of our readers are angry that lawmakers and their employees are not looking at cuts when they are facing furloughs?

Schwarzenegger: The people as you know are not very happy with their Legislators. So I think it is natural for them to say, why don't we cut their hours, why don't we take their benefits away, and why don't we do this, and why don't we do that. That's a natural reaction.

But the only thing I can suggest, and I made this suggestion earlier, if they don't come in with a budget on time, then I would immediately take their salary away. No back pay, either. That money is gone.

And also the per diem. Gone. And they can't work on any other legislation. So lets really make it tough to delay and not have a budget in this state. This is inexcusable.

Photo by The Bee's Brian Baer

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About The Swarm

The Swarm is written by members of The Sacramento Bee's editorial board. They meet daily and are separate from the newsroom. Views included here are those of individual writers, and do not necessarily reflect those of a majority of the board or the positions expressed in The Bee's editorials.

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