With Rene Sanchez Washington Post Staff Writer Tuesday, July 01, 2003; 2:00 p.m ET
California, the nation's most populous state, is on the brink of a fiscal disaster. Home to one of the world's largest economies, it has been staring in disbelief at the same dire predicament for months: a $38 billion deficit, the largest shortfall in its history and an extreme example of the budget woes afflicting many states. State lawmakers have until midnight Monday to reach a compromise with Gov. Gray Davis (D) -- himself the target of a possible recall vote -- on a budget that would wipe out the enormous deficit, but the odds of that happening appear slim. Washington Post staff writer Rene Sanchez will be online Tuesday, July 1 at 2 p.m. ET, to discuss the partisan political war surrounding California's budget woes and California politics in general. The transcript follows. Editor's Note: Washingtonpost.com moderators retain editorial control over Live Online discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions.
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Rene Sanchez: Greetings from California, which appears to be melting down politically and financially but at least it's another sunny day here, and the usual 70 degrees. I'm ready to take your questions
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Former Californian: Just between you and me, what's your prediction on how the recall election will go? If Davis is voted out, is it automatic that someone else on the ballot (only one so far?) becomes governor? I can't see Arnold Schwarzenegger running just yet, but maybe next time unless a Republican gets in now. I'm not sure how active Schwarzenegger has been in local politics except for one initiative effort. Reagan went from acting to the governor's office, but he'd been politically active for years and was known for delivering great speeches (not Arnold's strong point).
Rene Sanchez: The possible recall is mind-boggling. If there's an election and Davis is voted out, someone new becomes governor THE NEXT DAY. The word is that Schwarzenegger is seriously flirting with the idea, but whether he actually runs probably wont be clear until the end of July or early August. Some Repubs out here love Arnold because he's a political moderate and at least seems to have potential as a charming campaigner ...
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Washington, D.C.: How much is this budget crisis a result of the energy manipulation scam that was done there last year? Also, how could the budget woes get to this extent without some kind of intermediate action being taken? It seems too large to be ignored before it got to the end of the fiscal year.
Rene Sanchez: California would definitely have more money if it had not had to spend so much just to keep the lights on two years ago, but one of the biggest reasons it is in so much debt is that Silicon Valley crashed -- the state gets a ton of tax money from the huge tech companies headquartered there, more than $10 billion just a few years ago ...
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San Jose, Calif.: I just moved from Arlington, Va., to San Jose last week and I'm surprised to see that the local press and residents here seem to take this budget crisis and possible recall of their governor all in stride. It doesn't really seem to concern them. Is this just a "California thing" or is everyone just so used to their government being in shambles?
Rene Sanchez: Welcome to California. You're here just in time to pay a big new tax on vehicles. You raise an interesting point. Some days it seems like many people hardly notice the budget crisis -- but I think they will now, because if a deal is not struck soon checks will stop flowing to plenty of places. Then again, plenty of Californians just take these things in stride. One guy I interviewed a while back said about the budget crisis told me, "Hey, at least it never snows here, and I'm close to the beach.''
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Washington, D.C.: Rene,
Originally from California, I came to Washington, DC to further pursue my career ambitions. I have been considering returning to California. What is your advise for individuals seeking employment in California? Should we wait until the financial crisis is over?
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Rene Sanchez: California is such a huge state -- with 35 million people -- that depends on your career. If it's in tech, you might not want to pack your bags for a while ...
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Indianapolis, Ind.: Isn't one of the risks of the entire mess voter backlash for all the state elected government?
Rene Sanchez: What you're seeing in this growing recall movement is a possibly huge voter backlash. We're talking to voters signing recall petitions out here and they speak with such rage we may not be able to print what they say ...
If the recall makes the ballot, a political outsider could really capitalize on this mood
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Alexandria, Va.: If the drive to recall Gov. Davis succeeds then who is likely to run against him? How likely would that person be to win?
Rene Sanchez: Well the congressman bankrolling the recall, Darrell Issa, is definitely in. Everything else is speculation at this point, but it's quite possible that Schwarzenegger and the the Republican who lost to Davis last year, Bill Simon, may jump in. Also, a Green Party candidate says he is running. A crowded ballot could mean someone with a small percentage of votes could still win the whole thing ...
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Huntington Beach, Calif.: It seems to me as a resident of California, that term limits have really backfired in California. Is there any chance of this entire budget disaster causing a chance in this? Also, do you see a chance Gray Davis will resign once the recall makes the ballot (regardless of what he says now)?
Rene Sanchez: I wouldnt bet on Gray Davis resigning if the recall happens. It's far more likely that he will fight it relentlessly -- by trying to portray it as a right-wing coup attempt that will destroy the state
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Albany, N.Y.: My questions concerns the California recall process. My understanding is that if the recall gets on the ballot two questions will be asked voters. Question one is: Do you want to recall the Governor? Question two is: Who from the following list do you select to be the next Governor? If a person votes not to recall the Governor are they eligible to go to the second part of the ballot and vote for a "new" Governor or to retain Governor Davis? If voters are so eligible will voters who opt to vote against the recall know that they must vote for Governor Davis in the second part of the ballot in order to retain him? It seems that this could work against Governor Davis as voters who vote agaist recalling the Governor may not automatically vote in the second part of the ballot.
Rene Sanchez: A recall eleection could be extremely confusing to voters -- because they've never seen anything like it. And yes, someone could vote against the recall but still choose a success or to Davis in case that it succeeds. Weird.
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Silver Spring, Md.:
Rene,
How does your experience in covering Gray Davis and the California legislature compare to your covering Mayor Barry?
Also, I liked your Hell's Angels story.
Rene Sanchez: Marion Barry was more ... exciting. Davis is a tighyl scripted politician. You never knew what to expect day-to-day with Barry, who seemed to love the give-and-take with reporters. Thanks on the Hell's Angels story. Maybe biker gangs are facing budget cuts now, too
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Parkville, Md.: Could you break it down for us... how much of the current deficit can be blamed on:
(1) Tax cutting during the good times
(2) New government programs during the good times
(3) The recent energy crisis.
And if you could further break down #3:
How much of the expenditures of the recent energy crisis are the result of:
(1) Poor planning on the part of the state of California
(2) Energy market manipulation by Enron and others.
Thank you.
Rene Sanchez: Sorry if this sounds like I'm ducking, but the truth is all the things you name to blame. What's nearly impossible to say is rank them. A lot of things have gone wrong for one reason or another out here in the past few years ...
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Northfield, Minn.: Do the fiscal problems and Davis's apparent widespread unpopularity have potential to damage what in recent years has been a Democratic lock on California at the statewide and presidential level? I'd like to hear your best take on this (admittedly speculative) question.
Rene Sanchez: The recall is such a potential nuclear weapon on state politics, anything could happen. But keep in mind that there are well over a million more registered Dems than Repubs in California, so it is unlikely that even a recall would suddenly shake up all of state politics and create a new Republican dominance ...
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San Bernardino, Calif.: What kind of budget are the Republicans really proposing? It seems that there is no good solution and the "no new taxes" mantra will get them in trouble if they do win the governorship.
Rene Sanchez: Your're right. There is no good solution. They will eventually have to pick their poison. Yesterday some Republicans were proposing sizeable cuts to education instead of a sales tax increase, and no doubt that would anger many voters, too
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Washington, D.C.: When a State like California finds itself in such a fiscal disaster, what happens at the city level? Are LA officials, and SF officials and Sacramento officials being asked to consider budget/program cuts as part of a strategy? Or will cities simply hear the bad news and have to make adjustments? It seems to be the sweeping issues at the state level could have HUGE impacts at the local level, for years to come.
Rene Sanchez: Cities and town around California won't be able to escape this problem -- especially if the car tax just enacted gets overturned in court. That's a bug source of their revenue, and without it local pain could be huge
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Arlington, Va.: Even some conservatives from California have told me that the state's budget problems are partially due to the impact of Proposition 13 which, I believe, made it hard to raise real estate taxes to pay the bills. Is there any move to repeal Propostion 13?
Rene Sanchez: There is talk of amending Prop 13, which is getting some of the blame for the fiscal crisis. But nothing big is close to happening on that front yet ...
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Rene Sanchez: I had been braced for more Schwarzenegger questions. Maybe everyone is out watching Terminator 3 already?
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Washington, D.C.: I've noticed several top aides to Gov. Davis have recently left, including press secretary Roger Salazar. Were their departures owing to the low job approval and negative press associated with Gov. Davis? I recall Salazars very brief tenure in the press shop of the Clinton White House, and he was a tad pugnacious, even to those of us in-house.
Rene Sanchez: Some of the governor's aides and advisers, including his Carville-ian top poltical adviser Garry South, have simply left to work for Democratic presidential campaigns. Remember, even before the recall pssoibility, Davis was a lame duck because of term limits
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Richmond, Va.: I get the impression that although the Democrats are in the majority, the 3/4 of state house vote required gives the Republicans as much blame in this situation. Where are the adults when they are needed to sit down and come to a mature financial dicision that will be in the interest of the the states citizens. Or, is this just a way for one hand to top the other at the cost of the whole state??
Rene Sanchez: Eventually, there will have to be compromise among the adults in the legislature. But right now watching you're seeing a full-blast partisan battle over political ideologies
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Richmond, Va.: Excuse me, but how can one attribute a $38 billion shortfall -- one third of the state budget, according to your story -- to an economic downturn? Has the economy really contracted 33 percent? Even if it has, making spending decisions on the assumption that Silicon Valley's go-go years would continue indefinitely seems grossly irresponsible. Who is responsible for building these wildly inflated assumptions into fiscal policy?
Rene Sanchez: Good question. One thing to note, though, is that California gets a very large percentage of its annual money from taxes on its wealthiest individuals and companies -- and they have taken a beating in the past few years, especially in Silicon Valley
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Harrisburg, Pa.: How is Governor Davis responding? If I were him, I would be on the offensive and start questioning the previous Governor and the legislature for the botched electric competition law that helped mess up the economy (since the energy issue seems to have been the crisis that began his troubles). Who honestly thought when you allow someone to charge as much as they can they won't try to raise rates? What is the Governor's strategy on defending himself?
Rene Sanchez: Dabvis and his team are just beginning to respond with force against the recall. They are trying to portray the guy bankrolling it, congressman Darrell Issa, as a car thief and rabid conservative leading a coup attempt.
If the recall makes the ballot, Californians may be in for the most negative political ad season they have ever seen
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Corona, Calif.: A democratic government can only work when people are willing to compromize. California with a budget larger than many countries allowed a disaster to occur. Can you discuss how the concept of term limits has help lead to this disaster.
Rene Sanchez: Some people blame term limits. They say it has created a legislature without experienced old pros who see the need and have to political skills to find compromise.
But California would probably be in big financial hole without term limits, too
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Rochester, N.Y.: What is your best assessment of whether George W. Bush can be competitive in California -- as Republicans were not in the 96 and 2000 elections -- as he seeks re-election in 2004?
Rene Sanchez: Well polls out right now suggest that he's fairly popular, because of the war on terrorism and Iraq. But its a long way to November 2004. The Bush team tried really hard to make a strong showing in California last time by spending million of dollars and still lost big to Gore, who hardly spent a dime or any time here.
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Long Beach, Calif.: I consider the predatory attacks on California's power grid circa early 2000 to be payback to the Golden State for drubbing Bush by millions of votes. Considering that Cheney "didn't have the time" to talk to our Senators and Congresspeople, makes it obvious. Why should our state's GOP try to make matters worse by goring Davis when he's down? Do you feel this will work, or will it backfire?
Rene Sanchez: The possible recall is so wild, no one can predict anything yet. But some Republicans do fear it could backfire. They think that if the recall makes the ballot, some of the prominent Dems out here who have pledged not to run will change their mind. And if voters rally around one of them, the GOP could be left with a new Democratic governor, more popular than Davis. Not saying that's likely, but certainly quite possible ...
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For family in California: Was wondering if you had any comments about the after effects of the budget fiasco in terms of how the local governments will be affected. I have a brother who works for L.A. county and my mom is a nurse working at a San Bernadino county hospital. I'm wondering if the layoffs, budget cuts, etc. will hit them as well? Thanks!
Rene Sanchez: Well I cant answer your question specifically, but most counties are considering deep cuts in health care because of the budet crisis
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Arlington, Va.: How much does illegal immigration have to do with the budget crisis? Rising health care cost for individuals in this situation w/o health insurance is sure to hurt the state economy.
Rene Sanchez: No doubt it plays some role, but few officials out here are suggesting that illegal immigration is a big reason the state is so broke ...
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Alexandria, Va.: Do you as Post correspondent have occasion to interact with Gov. Davis personally? It's my general sense that many reporters do not care for him, or for the way he treats reporters. Is this true?
Rene Sanchez: No reporter interacts that much with Davis. He's not a back-slapping, gregarious pol. He's a manager. But I dont think the press hates him or has a constantly tense relationship with him ...
I've got time for one or two more questions ...
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Washington, D.C.: Why hasn't this story been more prominent in the news and does the deficit have anything to do with the contract that they gave Enron for utilities?
Rene Sanchez: Well Iraq is rightfully dominating the news right now ... as for the state deficit, tne energy crisis does have a role. It ate up some of California's surplus two years agi. At one point, the state was spending roughly $40 million a day just to avoid rolling blackouts. And Davis did lock in to expensive contracts with energy providers ...
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Oakland, Calif.: Will Calif. reduce their expenditures on medi-cal, esp the payments to providers?
Rene Sanchez: That's likely. Many nursing homes around the state already are bracing to take a big hit ...
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Washington, D.C. - former Calif. : It makes me so angry to hear about this recall - where were all these voters/candidates the first time around? Do you think this will affect future voter turnout?
Rene Sanchez: If it happens, the recall will be such an unprecedented effort, no telling what affects will have. But some folks out here predict that if it succeeds, California could soon become crazed with recalls, because there could always be a wealthy person willing to spend a few million bucks to get voter signatures ...
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Rene Sanchez: Hey that's all the time I have. Thanks for the good questions, and stay tuned. The fate of the recall could be clear as early as August, so in the words of a film star who shall remain nameless, I'll be back -- to talk about it
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washingtonpost.com:
That wraps up today's show. Thanks to everyone who joined the discussion.
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