That was Arnold Schwarzenegger’s response on Friday when given his first opportunity to reassure voters that his infrastructure bond proposal was fiscally responsible. He’s going to need to do better.
This upcoming week’s budget announcement provides Schwarzenegger with an opportunity to explain in detail how a building campaign of this magnitude can be done without hemorraging red ink for the next several decades. While many leading conservatives have immediately denounced the bond package, it appears that the window may still be open for Schwarzenegger to explain how his proposal can be financed in a responsible way.
State Senator Tom McClintock, Jon Coupal of the Howard Jarvis Taxpayers Association, and Lew Uhler of the National Tax Limitation Committee, perhaps the three most respected voices of fiscal conservatism in the state, have all reacted cautiously to Schwarzenegger’s proposal. Each has acknowledged the need for California to address its transportation requirements, and each has offered guidelines under which a project like this would be acceptable. Wall Street has weighed in favorably, pointing to the advantages of long term planning and capital investment. But that support is based on the importance of keeping debt service on the bonds to less than six percent of the state budget and of the state passing and maintaining a balanced budget. Convincing wary Republicans that he can accomplish these goals without raising taxes will require a more serious conversation than the governor has yet attempted.
The measured tone of these reactions suggest that the window is open for Schwarzenegger to make the case. Judging from the responses offered by McClintock and the others, it appears that it is possible to engage on this type of transportation and building plan while maintaing some level of fiscal responsibility. In the first few days after the State of the State address, the governor understandably emphasized the roads, schools, and levees that would be constructed under his proposal. But it’s time for him to shift gears and talk about the way he plans to pay the bills for all this building.
Republican legislators are understandably anxious about the governor’s direction. But they represent outer suburban and rural voters who are disproportionately impacted by the increasing commute times on California’s roads and by the threat posed by inadequate flood protection. Most know that their constituents would welcome better roads and new levees. But the devil is in the details — and more specifically — in the funding.
An integral part of conservative philosophy is planning wisely and carefully for the future. Currently, general obligation and revenue bonds are thrown onto the ballot every spring and fall with little regard for how they impact the state’s overall needs. Considering the requirements for improving the state’s inadequate transportation and flood control systems as part of a comprehensive, long-term plan is much smarter than the current disjointed process. And if it’s done right, it can be cheaper as well. So the choice to be considered is not between Schwarzenegger’s bond package and no capital spending at all, but rather between his proposal and the level and nature of bonding likely to take place over the next ten years under the current piecemeal funding system.
Perhaps the case can be made that the overall price tag for meeting the state’s construction needs would be higher without a growth strategy that relied on planning rather than improvisation. Perhaps the case can be made for a strong emphasis on revenue bonds financed by those who directly benefit from a particular project. Perhaps the case can be made that, while a six percent debt ceiling does not preclude the possibility of a future governor or legislature raising taxes, that it does not increase the chances of that happening either.
Perhaps, but right now we don’t know. McClintock, Coupal, and Uhler have all told us how the bonding can be done under the principles of fiscal conservatism. Now it’s Schwarzenegger’s turn.