From Jerry-Rigged to Petered Out: Lessons from the Deukmejian Era for Contemporary California State Budgeting

FROM JERRY­RIGGED TO PETERED OUT: LESSONS FROM THE DEUKMEJIAN ERA FOR CONTEMPORARY CALIFORNIA STATE BUDGETING Daniel J.B. Mitchell, UCLA Ho­Su Wu Professor of Management and Public Policy The new governor took office in the midst of a major state budget crisis. At the time he took office, it was unclear that state could pay its bills if drastic action were not taken. Yet the incoming governor was committed to a no­tax­increase program. Through borrowing, the state managed to surmount its budget crisis. As the economy recovered and resulting tax revenue flowed in, it even was able to engage in major construction projects. When he stood for re­ election, the governor was overwhelmingly returned to office for a second term. Sadly, however, the economy began to slow during that second term. Fears mounted that the state could face a renewed budget crisis. This description may seem to depict the career to date of Arnold Schwarzenegger. He inherited a budget crisis from Gray Davis who he replaced in the 2003 recall. But the introductory vignette actually refers to the story of George Deukmejian (“Duke”) who was first elected in 1982, inheriting a budget crisis from Jerry Brown. (Deukmejian’s construction projects leaned towards prisons for most of his terms in office, needed as state sentencing laws tightened, rather than the roads and other infrastructure pushed by Schwarzenegger.) And as it turned out, the economic downturn that began to take shape towards the end of Deukmejian’s second term indeed did produce a major budget crisis, a legacy he left for his successor, Pete Wilson. While the consensus economic forecast for California at this writing is not for recession, some slowing is anticipated. As described in the budget chapter of California Budget Options 2007, Wilson spent the better part of his first term wrestling with the Deukmejian legacy – even after imposing a major tax increase a la Governor Ronald Reagan. Unique Budget Crises “The only thing new in the world is the history you don't know.” Harry S. Truman Is the history of the Deukmejian era just that – history? Or does it have relevance for contemporary state budgeting? In past budget chapters, we have noted that there have been a series of budget crises faced by California governors over the decades. Each one was thought to be unique. Ronald Reagan – elected governor in 1966 – inherited a budget crisis from Pat Brown. That crisis was largely the result of enhanced state spending under Brown, a personality clash between Pat Brown and the then­leader of the state Assembly, “Big Daddy” Jesse Unruh, and fuzzy thinking about state budgeting. While fuzzy budget thinking endures – a problem we have also reviewed in previous editions of California Policy Options – the Reagan episode (in which the new governor reluctantly put through a major tax increase) seemed unique at the time.