Los Angeles Daily News, November 18, 2003

Arnold Schwarzenegger has promised "action, action, action, action" as governor of California. With so many areas ripe for his attention, the key question is where to start.

In his first act as governor, Schwarzenegger eliminated the tripling of the car tax put in place by his predecessor, leaving California with a budget shortfall of $14 billion. If a court throws out a deficit-finance bond issue approved by the Legislature earlier this year, an additional $10.7 billion will be added on, pushing the total deficit to almost $25 billion.

To his credit, the governor is already taking action in several areas to confront this looming crisis.

Schwarzenegger's staff is developing a budget that would give cities and counties back local property tax revenue to offset the loss of money from the car-tax repeal. His finance chief, Donna Arduin, has begun work on a comprehensive audit, looking for areas of waste. And Schwarzenegger has proposed a record $15 billion bond measure for the March 2004 ballot to restructure the state's existing debt.

These steps are promising in that they show initiative and leadership, two qualities that former Gov. Gray Davis sorely lacked. After his swearing-in on Monday, Schwarzenegger issued a proclamation convening a special session of the Legislature to fix the state's out-of-control workers' compensation system; to repeal Senate Bill 60, the illegal immigrant driver's license bill; and to begin work on closing the budget gap.

This is a good start.

Legislation was signed this past fall to fix the state workers' compensation system, but it does not go far enough. The system still imposes the highest employer premium rates in the country and delivers some of the lowest benefits for injured workers. Benefits should only be paid based on objective findings of doctors, and compensable injuries should be predominantly work-related. Litigation should be minimized by reducing the number of forms in the system and by appointing judges better qualified to serve on the appeals board.

The California Leadership Guide from the Pacific Research Institute outlines a plan for workers' compensation reform along these lines, as well as other recommendations in other key policy areas. Among them:

Consider innovative ideas like competitive sourcing, whereby routine activities performed by state agencies are contracted to the private sector at lower cost -- with savings of up to $8.2 billion.

A constitutional state tax and expenditure limitation that caps spending growth to the combined growth rates of inflation and population would be a giant step on the road to fiscal recovery. If there had been Colorado-style tax and spending limits in place in California since the start of Davis' first term, California would have enjoyed a $5 billion surplus earlier this year instead of a $38 billion deficit.

California's system for distributing and monitoring education money costs taxpayers millions of dollars annually. By replacing California's complex categorical spending regime with simplified block grants, the new governor can help get education money to where it's needed most -- in the classroom.

Repealing the recently signed Senate Bill 2, a bill that would mandate employer-provided health care coverage, is another crucial component of an economic-growth plan for the state. This bill will cost the already overregulated business sector an estimated $5.7 billion to $11.4 billion.

These recommendations represent just some of the many important steps the governor should take. Californians have placed their trust in Schwarzenegger because they believe he has the capacity to lead.

Andrew M. Gloger is a public policy fellow at the San Francisco-based Pacific Research Institute. Write to him by e-mail at agloger@pacificresearch.org.