If anyone can fix California's budget problems, it's probably Donna Arduin, the state's new finance director. But that doesn't mean that anybody can.
Arduin's new boss, Republican Governor Arnold Schwarzenegger, won a big victory when he convinced an initially reluctant legislature to approve a $15 billion bond and spending-limit package that will go before California voters in March. Even assuming voters approve the measure, though, the package will not clear away the underlying fiscal problems. Unless further action is taken, $14 billion annual deficits are projected for as far as the eye can see, according to Elizabeth Hill, the California legislative analyst.
The bonds, to be paid off by sales taxes, will be expensive to float given the state's near-junk finance rating and will have to compete with a $13 billion school bond on the same ballot. Schwarzenegger cut the deal with Democrats in December by agreeing to a less stringent spending limit than he originally wanted. Still, as Fred Silva of the Public Policy Institute of California points out, having a spending limit does not mean you aren't going to have deficits.
Not surprisingly, the 40-year-old Arduin says she shares the governor's views "that we must bring state spending under control." Unlike him, she has plenty of experience at the task. She held top- level finance jobs in Michigan, New York State and, most recently, Florida, cutting spending everywhere she went.
"She's gone from one fire to another," says Susan MacManus, a political scientist at the University of South Florida, who credits Arduin with being able to work successfully with high-profile governors by keeping a low profile herself. In Florida, Arduin skillfully navigated the state's baffling maze of trust funds to move money around and find savings. "She's quietly calculating and lethally competent," MacManus says.
Arduin has earned a reputation for slashing social service spending and moving to privatize government functions. Like many states, Florida on her watch last year made deep cuts to Medicaid and also froze enrollment in a children's health insurance program, creating a waiting list that grows by 3,000 each week. "Her job is to run government as basically as possible under the Republican mantra of smaller government and less taxes," says Florida state Representative Ron Greenstein, a Democrat.
Although he tangled with her often over spending cuts, Greenstein says Arduin is "one of the nicest people" he knows. "In government, she is a rare person who is straightforward--you might not like what she tells you, but she will never go back on her word." Arduin will not, however, enjoy much of a honeymoon with California legislators, who are not just mainly Democratic but mostly old-fashioned liberals. She won no points with them during her initial presentations to the budget committees when, rather than laying out the nuts and bolts of the governor's proposals, she lectured them on the sins of the past-- and walked out early during one session of questioning.
Depending on whom you ask, mandated spending programs account for anywhere from two-thirds to 90 percent of the California budget. The state could lay off all its employees and shutter every agency, prison and college, and it would save only $16.5 billion. To realistically address the long-term problem, Arduin will have to present major cuts to the state's biggest expenditures: schools, welfare recipients and public health.
There's no doubt that Arduin can find spending to ax. The question is whether there's a new political will in Sacramento, following the recall election, to make those kinds of cuts. The early evidence isn't exactly definitive on this issue.