(Love the down-payment angle as Arnold tries to sell off future revenue sources. – promoted by Lucas O’Connor)

I recently wrote to Governor Schwarzenegger regarding the California High Speed Rail(HSR) initiative that’s been in limbo for some years now and covered very well at Calitics. Scheduled to go before voters in November ’08, Arnold is slashing money for the high speed rail authority in his 2007 budget and asking California legistators to postpone indefinitely the $9.95-billion rail bond that is slated to appear next year.

Below is my letter and the canned response:

(Cross-posted at Eco|Centric.)

From: “mailto:[email protected]“
To: [email protected]
Sent: Wednesday, May 16, 2007 9:00:11 AM

Subject: Re: Show some love for high speed rail

Thank you for writing to Governor Schwarzenegger to share your thoughts and concerns about highspeed rail. The Governor appreciates hearing from people who care about the important issues facing our great state.

In November 2006, California voters approved one of the largest bond packages in the state’s history. This money represents a considerable down payment on repairing and building our infrastructure and boosting the public services necessary to preserve our quality of life. And, with the tremendous population growth expected for California over the next two decades, the Governor has put forward an even broader proposal that will include funding for flood control, schools, courts and the correctional system.

Because of the critical need for funding these other forms of vital infrastructure, California has a limited ability to borrow money for a full high-speed rail bond measure right now. Governor Schwarzenegger’s comprehensive Strategic Growth Plan, and its varying bond components, cannot happen simultaneously with the high-speed rail bond without putting the state into a position of spending General Fund dollars at too-high levels. This approach instead protects California’s credit rating and support for other important state programs.

But the Governor’s proposed budget does recognize that high-speed rail is a viable transit option worth exploring for the future, and so it includes $1.2 million for staff support of the High-Speed Rail Authority. He is also willing to consider other potential payment options for such a rail system, including private financing.

Again, thank you for taking the time to write and share your thoughts with Governor Schwarzenegger. He welcomes any comments that can help improve the future of California.

Sincerely,
Office of Constituent Affairs

(cross-posted from Working Californians)

The May Revised budget was released by Arnold yesterday.  He wants to pay off some bonds early, sell off State assets and make cuts to welfare for children, the blind and elderly.  That prompted John Meyers to ask Arnold if that was like “making an extra mortgage payment when you can’t pay the utility bills.”  Naturally, Arnold did not have a good answer, simply saying it was not an ideal situation, but he wanted to pay off more debt.

Yes, the state is facing a revenue slump for the first time in years, but like Fabian Nunez says, this budget it “mean spirited”.  Its priorities are out of whack.

Lawmakers’ skepticism of the privatization plans is just one obstacle the governor faces. Democrats do not accept Schwarzenegger’s assertion that the state is so deep in the red that it cannot avoid removing thousands of families from the state’s welfare program, freezing cost-of-living adjustments for low-income elderly and disabled and raiding public transportation accounts for more than $1 billion.

“I wish we could fund all of those programs,” Schwarzenegger said at an afternoon news conference. “But I have an obligation, which is a promise to the people of California that I will bring down the structural deficit to zero, that we will be fiscally responsible.”

Your priority is to pay off our debt early, pleasing Wall Street instead of aiding the poor, disabled and elderly.  Where is the sense it that?  Closing the structural deficit is a good thing, but it should not come at the cost of our long term assets and the most vulnerable Californians.

Democratic leaders, who worked relatively harmoniously with Schwarzenegger last year, criticized his proposals, calling them quick fixes that disproportionately hurt the less affluent.

“When it’s all said and done, this is reminiscent of the pre-postpartisanship governor,” said Assembly Speaker Fabian Nuñez (D-Los Angeles), referring to Schwarzenegger’s depiction of his bipartisan leadership style since his fiscally conservative political program was rejected by voters in the 2005 special election.

The governor’s budget “punishes middle-class, working-class and poor Californians,” Nuñez said.

This is not a long term solution to our state’s fiscal problems, in fact it goes the opposite way by selling off our assets for short term gains during a relatively minor budget squeeze.  Sometimes the real Arnold rears his ugly head.  This is one of those times.

For more see Frank Russo’s coverage of Perata’s and Nunez’s press conferences and dday’s post below.

Arnold Schwarzenegger has finally managed to bring people with differing viewpoints together to agree in a post-partisan fashion.  See, nobody likes his revised budget plan, as Bob Salladay reports.  Conservatives think that it doesn’t go far enough, spends too much, and relies on too many shaky budgeting gimmicks, like privatizing the lottery for a short-term cash infusion.  Democratic leaders have rightly called it mean-spirited and cruel for slashing aid to the poor and cutting public transit funding, among other things.  The state’s pundit class has sneered at the cynical nature of saying that you could balance the budget responsibly to begin with.  And the Legislative Analyst’s Office, who are supposed to play it right down the middle, criticize the revision as well.

The administration has attempted to address a $2 billion decline in the state’s fiscal outlook. Due to several overly optimistic assumptions, however, the May Revision overstates its reserve by about $1.7 billion-leaving an estimated reserve of $529 million. Even this reserve level would be subject to considerable risks and pressures. As a result, the Legislature will face a significant challenge to develop a 2007-08 budget that realistically reflects revenues and spending while maintaining a prudent reserve. As it sets its own priorities, it should identify solutions that realistically balance the state’s finances on an ongoing basis while also avoiding new ongoing commitments (absent identified funding to pay for them).

The Governor is more about fantasy than reality, anyway, so it shouldn’t be suprising that his budget numbers would be a carefully crafted fiction.

A budget is a moral document.  Priorities in the budget mirror priorities in the real world, what kind of California you want to see.  Arnold Schwarzenegger wants to see a California where investment bankers get rich while the poor and the middle class who struggle to survive are left on their own.  And this would have been worse if the state didn’t find a little more unexpected revenue at the end of last month.  Nobody should be surprised that this Governor automatically thinks “cut the poor” when faced with a budget crunch.  That translates directly to who he values in society.  This isn’t the result of Arnold “reverting back” to his pre-post-partisan self, as Speaker Nunez claimed in his statement.  This is who he’s always been.

UPDATE: One thing that should be stated is that the Governor is very much an acolyte of Reaganomics.  He puts everything on credit and passes the problems off to future executives and future generations.

Among the big news from today’s announcement of Arnold’s May Revise is the proposal to sell off EdFund for $1 billion. EdFund is a public non-profit that manages $27 billion in student loans. Arnold plans to sell it off for the one-time windfall it might provide, even while his revised budget takes even more money from public transportation and social services.

Why is this such a catastrophically bad idea? Because even as people complain about screwing us young folks over with state bond debt, privatized student loans put us in a FAR worse financial situation, crippling young folks and young families right when their entrepreneurial and creative energies are at their peak.

Sallie Mae provides the cautionary tale. Originally a public non-profit, Sallie Mae was privatized between 1997 and 2004, and remains the nation’s largest holder of student loan debt (EdFund is #2).

The privatization has led to financial stress for millions of Americans. Sallie Mae execs, as described by the excellent Student Loan Justice site, gave themselves massive payouts and sought to improve profits. How? By screwing borrowers.

Sallie Mae makes more money from a defaulted loan than from a borrower who is paying as agreed. Such a borrower must begin making larger payments, with interest capitalized and tens of thousands of dollars in penalties added. Since they make so much money this way, they have little incentive to help borrowers return to solvency. Instead they seek to inflate the collection debt. And since student loans cannot be discharged in bankruptcy, and can only be refinanced once, Sallie Mae has you over a barrel.

Student Loan Justice has chilling stories from Californians who have been victimized by the privatized Sallie Mae:

I have been on top of my loan from the start and it just keeps growing.

I too borrowed money for student loans and when I graduated in 1994 Sallie Mae called me and convinced me to consolidate my guaranteed student loans. I had one small loan of $2500.00 that was unsubsidized the rest of $35000.00 was subsidized. They told me nothing  about this. It took me four years to get them to tell me what happened to my loan. See, I was a single mother of two and didn’t get a job right from college. In order to keep my certification I had 5 years to complete 18 more credits. So my plan was to accrue 2 years or so of interest until I got a job and could go back to school and be in deferment. The deferment would have put my loans on hold and I would not accrue interest. This is what they told me. In the third year I didn’t have a full time job, but I did start back at school half time. So my loans should have become defered without interest acrruing. Well that didn’t happen. When I called (which was often) Sallie Mae they told me “My loans were none of my business and why don’t you just get a job.” After several years I started to record the comments and rude remarks. They told me I wasn’t allowed to record the conversation. After 8 years Sallie Mae sends me another notice. This time the note has a place called Ombudsman. Ombudsman was supposed to be a go between. She was all supportive and ready to go after Sallie Mae and a week later she called and said “That is the nature of your loan, so pay it.” I have been paying a small amount for 2 years. I pay $100.00 a month. Edfund has my loan now and are threatening to garnish my wages. When they do this I will have to quit my job. I have my grandson and when they garnish my wages I won’t be able to pay for daycare. Your right, they don’t care about the human element. All I want to do is pay back my loan. The original loan of $37,000.00. I am now ordered to pay $86,000.00. I thought the same thing you did. That they would make an offer and I could begin to manage my loan. The Edfund person told me why would we do that. We wouldn’t make any money. I have been on top of my loan from the start and it just keeps growing. I am a teacher that works in a low income school and will never be able to do what they are demanding. I truly believe in my soul that Sallie Mae is just as responsible for this getting out of hand. They can’t tell me about ignorance isn’t an excuse. I didn’t have the knowledge to ask the right questions. I had to take their word and they told me all my loans were subsidized. Now they have a form that separates subsidized and unsubsidized loans. They didn’t have this when I signed their promissary note.

The horror stories are truly frightening, of wrecked lives and dashed dreams. Some on other state pages talk of committing suicide to get rid of the debt burden. And as the current kickbacks scandal involving Nelnet and other private lenders widens, the true danger of privatized student loans becomes even clearer.

California’s foolish refusal to make hard choices about taxes, choosing instead to balance its budgets on the backs of students, forced millions of students and their families to take out loans.  Arnold’s desire to privatize EdFund will cause a serious financial crisis for millions more Californians. It is an unconscionable and indefensible act, one that California Democrats have no other choice to oppose.

Privatizing the lottery would be merely foolish. Privatizing EdFund would be a catastrophe. Let’s make sure it doesn’t happen.

The state of California is not generating the revenue that they expected.  This is clear and it’s been known for some time.  The original budget that the Governor proposed, based on those sunny estimates, is obsolete.  In order to balance the budget, spending will have to decrease or revenue increased.  We know what choice the Republican will make.

Gov. Arnold Schwarzenegger is likely to call for state spending cuts beyond those he proposed in January when he presents a revised budget to the Legislature next week, administration officials said Tuesday […]

In January, Schwarzenegger outlined a $103 billion general-fund budget for the 2007-08 fiscal year and proposed balancing it by withholding cost-of-living increases for welfare recipients, cutting welfare payments to children whose parents fail to comply with work requirements, and reducing aid to the homeless, among other things.

The cuts to welfare will remain in the budget the Republican governor is slated to unveil on Monday, Palmer said. That could set up a showdown with Democratic lawmakers, who have made it clear they oppose reducing the social safety net for children.

But don’t worry, there’s a Plan B; privatizing the lottery!

over…

Gov. Arnold Schwarzenegger is poised to call for privatizing the state lottery, a move that would bring California a cash infusion of as much as $37 billion to help solve pressing budget problems but also could sacrifice a major revenue source for decades to come.

….It comes at a time when the state is facing only a modest budget deficit for the coming fiscal year – about $1 billion. But billions more in bond payments will be due soon after.

This is “kick-the-can-down-the-road” budgeting, and it’s no different than George Bush trying to run out the clock on Iraq so that the next executive has to clean up the mess.  It’s irresponsible to put so much of a debt burden on future generations.  We’re looking at hundreds of billions of dollars in debt for decades and decades, in bond issues and the loss of revenue for short-term gain.  Kevin Drum thunders on this, and he’s absolutely correct:

Once again, Arnold “We Have To Stop This Crazy Deficit Spending” Schwarzenegger is desperately trying to figure out a way to increase our deficit spending so that he can continue to pretend that he hasn’t raised taxes. That’s all this is about.

He’s already done this once with his deficit bonds, which will have to be repaid out of increased taxes eventually, and now, in order to make sure that “eventually” is sometime after he leaves office, he wants to raid the lottery to tide himself over. The result, of course, will be lower revenue in the future and therefore higher taxes. But not on his watch.

Schwarzenegger may have a sunnier persona than George Bush, but the cynicism on offer here is even worse than Bush’s. Arnold knows perfectly well he’s raising taxes. He’s just hoping the rest of us are greedy enough to allow ourselves to be convinced otherwise.

We’re going to have three and a half more years of this nonsense, of this focus on short-term glitz at the expense of long-term security.  We are getting played, and I would like to see some of our Democratic leaders in this state make this point forcefully.

(cross-posted at Working Californians)

This may not be regular WC fare, but it goes to the heart of why Arnold simply cannot be trusted.

Everybody remembers Arnold’s infamous line on the Tonight Show, the day he declared his candidacy during the recall:

I have plenty of money. Nobody can buy me off.

If we are to take him at his word, then the $114 million he has raised in 3 years has had no effect on him what so ever.  And the fact that he is selling out his house to those who write him a check for $250,000 and get private meetings with the him does not influence his governing decisions.

Included in the price: access to the governor. The biggest donors are being invited to four additional private meetings with Schwarzenegger, according to the invitation. “Members will also be included in regular conference calls with the governor and leading and well-known Californians from the public and private sector,” the invite says. In the past, Schwarzenegger’s sale of private meetings to donors has been questioned by campaign ethics watchdogs, who ask: Can a special interest group meet with the governor without having to give a donation? (Yes.)

Hey, wait a minute! Isn’t it budget season?  Didn’t Arnold just propose to pass a law banning fundraising while the budget is being negotiated?

Gov. Arnold Schwarzenegger, redefining his position on overhauling campaign finance laws, said Thursday that lawmakers should not be allowed to raise funds as they consider a crush of bills at the end of their session and the governor should not be allowed to raise money during the late-summer bill-signing period.

In the past few weeks, Schwarzenegger has revived his ambition of changing campaign finance rules, saying he wanted to ban fundraising between mid-May when the governor issues his updated budget proposal and mid-summer when the budget is typically approved.

I thought he had plenty of money and couldn’t be bought off.  So, why is he proposing the ban?  Is he only worried about non-moviestars being swayed by money?  Is that why he hasn’t voluntarily started doing it himself?

Once again Julie Soderlund is trotted out to defend Arnold’s massive hypocrisy and offers a laughable response.

Julie Soderlund, the governor’s campaign committee spokeswoman, said the private meetings with wealthy donors are a chance for the governor to “present his vision for California, not the other way around.” In other words, the meetings are not designed for donors to seek special treatment for their pet issues, but to hear him give a speech and talk about his agenda.

So, are you telling me that Arnold is going to talk non-stop through all of these private meetings and the people who paid $250,000 to be in them will have their mouthes duct taped?  Somehow I don’t see that happening.  That is not why they are paying “staggering” amounts of cash to the governor.

Why the heck does Arnold need the money anyways.  Didn’t he just get re-elected?  It is not like he has declared his candidacy for another office yet.

For one, he still has considerable expenses. Schwarzenegger’s private jets cost hundreds of thousands of dollars to lease. The 501(c)4 California Recovery Team can accept unlimited donations, unlike the governor’s re-election campaign account, and the money can be used for his jet as long as he’s flying somewhere talking about his policies. Soderlund said the CRT will pay for “legislative advocacy” — helping the governor sell his agenda in Sacramento, from health care reform to rebuilding the state’s infrastructure.

And don’t forget those massive bonuses he paid to his staff from his campaign funds.  They made bank and may just be profiting from this venture too.

Bottom line: Arnold is getting his big business backers to drop $250k each for private meetings so he can fly his private jet and pay big bonuses to his staff.  He claims he is only talking to them, not the other way around.  He believes there should be a law against fundraising during this “crucial period”, but is doing it anyways.

(See also Maviglio’s post from a few weekends on why this ban is pretty pointless in the first place.)

P.S. I swear I read somewhere an article that insinuated that Arnold’s staff was discouraging him from doing this in the first place, but I can’t find it.  Anyone know what I am talking about?

(whoops forgot to promote – promoted by juls)

(cross-posted from Working Californians)

Surprise, surprise, Arnold’s budget isn’t balanced.  The Sacramento reporter’s favorite number source, Legislative Analyst Elizabeth Hill, came out with her report on the governor’s budget.  She doesn’t buy what Arnold is selling, to the dune of a $2.6 billion shortfall.  We do have some reserve cash left over from the current fiscal year to minimize the blow, but Arnold’s plan is still short $726 million.

John Meyers:

That’s a far cry from Schwarzenegger’s bold statement in January that his budget had wiped out the state’s red ink.

Beyond that, the LAO report forecasts an even larger deficit in 2008-09 of $3.4 billion, and slightly smaller deficits throughout the rest of this decade.

There are several differences between Hill’s lengthy report and the governor’s own fiscal projections. But one of the most easily digestible may be this: the LAO says Governor Schwarzenegger’s team has overestimated revenues in the coming year by a whopping $2 billion. The big difference, says Hill’s report, is that her analysts think personal income tax revenues will be “weaker” than projected by the governor.

These are of course predictions, but Hill is a trusted non-partisan source.  The full report is available here, for all of those number geeks out there.

Bob Salladay has a few more highlights from the report:

• Unfairly increases fees for students at the University of California and Cal State universities by 7% and 10% respectively, when expenditures are increasing only 2.4%. But Hill agrees that the method of setting CSU and UC faculty salaries is based on a “misleading” methodology and should be changed.

Arnold is attempting to balance the budget on the backs of UC and CSU students.  There is no reason to have increases that high, when expenses are not increasing at the same rate.  The expenditure growth rate provides another strong argument for a fair contract between the California Faculty Association and the state.  After watching years of huge tuition increases and massive executive’s pay hikes, it is past time to bring CSU faculty’s compensation into line with similar institutions in other states.  (See SpeakOut for more on the issue)

• Spends too much money on building prisons, which could lead to “surplus capacity.”

Bricks and mortar are around for a long time.  Hill contends that Arnold is proposing to build more prisons than we will need years down the road.  We are facing a massive overcrowding now, but we may not need to house the same number of inmates years down the road.

• Unfairly cuts $160 million to fix state parks, especially since California’s parks already have a $900 million list of broken toilets, torn up trails and other problems.

My aunt has worked for State Parks for a long time.  Every year it seems like they face more and more drastic cuts, sending the parks into further disrepair.  The number of parks she is in charge of has increased exponentially and it is always a battle to get maintenance funding for anything.  Arnold’s budget would exacerbate an disaster situation.  Our state parks need basic attention, so that we can all take advantage of our increasingly diminishing wild spaces.  Delaying maintenance means the expenses of repair go up as does the damage by humans to the space.

The legislature will use Hill’s analysis to inform their decisions on modifying the budget.  Tough choices will have to be made, but without Arnold’s rose colored glasses on.

On Monday, the San Diego City Council voted 5-3 to require the mayor (at the moment, the increasingly autocratic Jerry Sanders) to get City Council approval before making cuts to the budget which would affect the level of service provided to residents.

Councilwoman (and two-time almost mayor) Donna Frye laid into Mayor Sanders, reminding people “‘It wasn’t because there was too much public process’ that the city got into its current financial problems, … ‘It was because there was too little public input.'”

Jerry Sanders, for his part, is a bit nonplussed about the whole sharing of power thing, and demonstrated that he isn’t above claiming to be the only useful elected official or throwing around allegations of impropriety as long as it never turns out that the recipient is rubber and he is, in fact, glue:

I will ask voters a relatively straightforward question: Which do you prefer, a mayor intent on implementing reforms and maximizing tax dollars, or a city government that fights reforms and is controlled by special interests?

For a bit of context, San Diego has Proposition F on the books, also known as the “strong mayor” prop.  This was passed in 2004 in response to the pension funding crisis, and mostly because Jerry Sanders came in promising to fix everyone’s problems if everyone would just stay out of his way.  With ethics scandals, the pension crisis, and the resignation of Mayor Dick Murphy, people were happy to give up 70 years of the mayor as more of a manager.  So Jerry Sanders got his way, and is, as a result, pretty used to getting his way since.

But now, even those who voted against this measure aren’t too pleased with how things are working out.  Two of the ‘no’ votes came from Council President Scott Peters and Councilman Kevin Faulconer, who like the idea but not the specific measure.  “‘One of the things Prop. F did create was a strong-mayor form of government, not an ‘only-mayor’ form of government,’ Peters said.”

Now, this is going to likely end up being a protracted and ugly fight.  Sanders won’t sign this legislation, and the 5-3 vote isn’t enough to override him.  If the City Council were to override, the mayor has already started talking about putting it on the ballot if he doesn’t get his way.  On the other hand, if Peters and Faulconer get language that they like, there would be seven votes in favor of dialing back mayoral power.

Sanders, for his part, is rolling out all sorts of straight-from-the-home-office scare tactics, admonishing those who would deign to have an actual public process that the fire department wouldn’t be able to respond to big fires without council approval, because service would be impacted too greatly.  Quite frankly, if that’s the best he’s got, I look forward to him talking about more.  Lots more.  In the meantime, at least the city council is starting to stand up for functional, participatory government.

Update: I almost forgot, hat tip to the Center on Policy Initiatives for reminding me in their email that I wanted to write about this.