The well regarded CATO Institute in Washington, D.C., has released their annual Fiscal Policy Report Card
Legislature: Democratic
Grade: C
Took Office: November 2003
When he first came to office, there were high hopes that Arnold Schwarzenegger would make major reforms to California’s bloated budget. In his first year in office, Schwarzenegger did provide modest tax relief and he managed to restrain the state budget. However, part of his budget fix at the time — the issuance of $15 billion in bonds to paper over the state’s deficit — foreshadowed the irresponsible fiscal policies to come. In just two years — fiscal 2005 to fiscal 2008 — the state budget exploded from $80 billion to $101 billion. While the governor’s budgets have usually proposed moderate spending increases, the legislature seems to roll over him and enact much larger increases. The governor himself has proposed costly new programs, including a universal health care plan and an expensive scheme to limit greenhouse gasses.
The governor’s record on taxes is mixed. He has resisted numerous tax increases proposed by the legislature, but in 2007 he proposed a huge payroll tax hike to fund his health care plan. In 2008, he proposed raising the state sales tax by one percentage point to raise $5 billion annually. The governor has also presided over large increases in state debt, which will likely mean tax increases down the road. In addition to the initial $15 billion debt package, the governor supported a huge $37 billion bond package for infrastructure in 2006, and this year he wants to close the state budget gap by issuing $15 billion in bonds that securitize future lottery earnings. It is true that Schwarzenegger has had to deal with a state legislature full of big spenders, but he is not the frugal-minded reformer that he appeared to be when he first came to office.