- The Washington Times - Sunday, January 2, 2005

SACRAMENTO, Calif. (AP) — A year ago, newly elected Gov. Arnold Schwarzenegger faced a huge budget deficit, an unfriendly Legislature and uncertainty about his administration’s direction.

Little has changed as the Republican governor prepares to deliver his second State of the State speech Wednesday. California’s budget shortfall is $8 billion and climbing, Democrats are still bristling over Mr. Schwarzenegger’s calling them “losers” after the Nov. 2 elections, and many are questioning the governor’s priorities.

Some political analysts say Mr. Schwarzenegger’s speech will be critical to defining his agenda for this year and for the rest of his term.

“This is about the road to 2006 and beyond — not just getting an on-time budget this year or the litany of programs he’s going to propose,” said Allan Hoffenblum, a Republican consultant based in Los Angeles. “This is going to be about substantive changes.”

Expectations remain high for the governor, who most Californians agree was able to generate some positive results during his first year in office.

Buoyed by an improving economy, Mr. Schwarzenegger pushed a pro-business agenda and embarked on a trade mission to Japan to help change the state’s image as unfriendly to commerce.

Political gridlock in the Capitol has eased, thanks to his efforts to reach out to Democrats, and polls show that most voters think the state is headed in the right direction.

Still, even Mr. Schwarzenegger’s most ardent supporters say he faces tough decisions, including whether to raise taxes or cut programs to solve the state’s economic crisis.

Although he closed part of the state’s budget gap, estimated at one point at $17 billion, he did it with borrowed money, one-time fixes and accounting gimmicks that won’t be available in 2005.

“The fiscal crisis facing California is every bit as severe, if not more so, than it was when he tossed [Governor Gray Davis] out of office,” Mr. Hoffenblum said.

Mr. Schwarzenegger has said that he opposes higher taxes and that the budget can be balanced by cutting the growth rate of key programs. But he has offered few details on what he proposes to do.

The governor is expected to submit his budget plan to lawmakers next Monday.

“It all gets back to the budget,” said Raphael Sonenshein, a political science professor at California State University, Fullerton. “If you are not credible on the budget, people begin to think you are a little less credible on other things. You are taken less seriously.”

Although Mr. Schwarzenegger has made some inroads with Democrats, the state’s majority party, his early words, such as calling California lawmakers “girlie men,” may have cost him credibility in the Legislature.

Mr. Schwarzenegger could alienate Democrats even further by focusing in his speech on how legislative districts are drawn. If he appears intent on undermining Democratic power by redrawing legislative districts, he may be accused of ignoring the state’s more pressing financial concerns.

If Democrats are unwilling to accept some of his reforms, aides have hinted, the governor may take them to voters in an election he will call for late summer or fall.

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