possibility of such an increase. He may have hoped to
i.e., what would happen if no budget changes were
have a car tax increase as fiscal bargaining chip later in
made. If the projection is exaggerated, but offset by
the process. Or he may have hoped that by siding with
equivalent cuts in spending, the budget predicament is
the Republicans at this stage of the process he might
made more dramatic, possibly influencing legislative
make them more cooperative later.
cooperation. There is no net effect on the projected outcome, but the large gross dollar magnitude might
But keeping the car tax off the table proved difficult.
jar the legislature into going along.
Legislative Analyst Elizabeth Hill criticized the governor for depriving local governments of the
Another part of the problem was the time dimension.
backfill. “The state made a policy decision to give tax
Multiyear projections are routinely compared with the
relief (when the car tax was cut), and we think that
one-year general fund budget, thus producing
the same entity of government that makes the decision
a large and shocking comparative number. This
about tax relief should bear that burden.”
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apples-and-oranges approach—multiyear vs. one year —may simply confuse the process of fiscal decision-
By late January, the Assembly had proposed a bill
making. It is certainly questionable whether sowing
that would make midyear spending cuts in 2002-03,
confusion produces legislative cooperation or better
but effectively linked the cuts to Davis pulling the car
eventual results.
tax trigger. Davis indicated he would veto such a bill, saying he wanted a “total budget solution” instead. 5 6
Davis was not the first governor to use the apples-and-
However, he did not rule out the possibility that the
oranges approach to budget presentation approach
trigger would eventually be pulled under existing
nor, as it turned out under Schwarzenegger, the last.
law if the budget problem worsened. Eventually, the
Nonetheless, the debate over the size and presentation
governor and the controller produced a legal opinion
of the fiscal problem created a credibility issue for the
that the car tax increase could be triggered by an
governor. Lack of any obvious budget agreement in
opinion of the finance director. With that opinion
February led Moody’s to join the other two rating agencies
on the record, the legislature then approved some
in downgrading California bonds, the first of three
midyear spending cuts.
such downgrades by that agency during calendar 2003.
AN ENDANGERED GOVERNOR?
At about the time the car tax veto was becoming the focus in Sacramento, recall papers were served on the governor, charging him with “gross mismanagement of California Finances.”5 8 Initially, the threat of a recall was not taken very seriously by the Davis
Both the legislative analyst and legislative Republicans
administration. Serving such papers is merely the first
argued that Davis’ proposal for a midyear correction
step in the recall process, allowing a voters’ petition to
of 2002-03 and for the coming 2003-04 had overstated
be circulated.
the problem, perhaps to dramatize the real dilemma and pressure the legislature. The new finance director
Two prior recalls against Davis had been in fact been
—former state senator Steve Peace—attributed
served by groups angry over immigration and about
alternative projections to a “green eyeshade debate”
electricity, but those efforts had dissipated. Recalls had
over methodology.57 The controversy centered around
also been filed against all earlier governors going back
estimates of the so-called “workload” projections,
to the mid-1930s, except for two, without success.5 9
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