Patt Morrison: Governor, thank you for joining us.
Governor Arnold Schwarzenegger: Thank you for having me.
Morrison: Before we get to the budget, I know it's a big story, it's a big deal, there's a report that if Terminator 4 is filmed in California, you're willing to do a cameo.
Schwarzenegger: That's right. You're absolutely correct. They've asked me several times if I want to be part of it, and I said, well, if you shoot it in California, I am more than happy to do something in the movie. And I'm very glad that they're shooting a fourth one in the first place, you know, to continue on with the story, because it's a great franchise.
But, you know, if they don't do it in California, then I will not participate, because I think it's important for me as governor, you know, to make sure that movies are being shot here in California, because we have the best place to shoot, we have the most talented people to shoot here. And now, you know, the way the dollar is, there's no more excuse to go, you know, to Canada, or somewhere else.
Morrison: And, of course, this is part of the creative thinking that you're looking for in budgeting.
Schwarzenegger: That's right. We always have to be creative, and I think that the bottom line is, we have to always think about stimulating the economy. Because the better our economy is doing, the more people that are at work, the more people that, you know, are paying their taxes, the better it is for our state revenues, and the more we can afford.
Morrison: The budget deficit seems to get bigger,
literally every day. Twenty billion dollars. Even Bill Gates can't write a check for that, and bake sales and car washes aren't gonna do it.
Schwarzenegger: Well, you know, it changes all the time, with budget numbers, because you're relying on revenues coming into the state. So sometimes you get bad news, sometimes you get good news. Just 14 days ago, I got really bad news that our revenues are coming in continuously
short, and it looked like that we would have a $20 billion deficit. Meaning, you know, the 17-and-a-half billion dollars, really, and keeping a two-and-a-half billion dollar reserve, so together, there will be $20 billion.
But then again, yesterday, in the middle of our budget discussions, I sit there, and my finance director came in and said, you know, we just got some
good news the last few hours. [Patt laughs] And I said, what is that? He says, well, there actually, there is a few billion dollars that came in unexpected. So, you know, we budget, you deal with numbers, and so it changes all the time. But I always look for the worst, and then we can always dial back from there, because there's so many times, I've seen this in the past, when we negotiated, you know, the budget, and tried to sign the budget, it was always this kind of optimism.
"Oh, next month will be better, so why don't we go and OK this program, and fund this program more? Next year will be more, it will be better economy, I know the economy comes back, I know we will make more revenues!" But then it didn't. You know, so I think it's better to just take the approach and say, let's take the worst of circumstances, and then go and go from there, rather than always painting a perfect picture, and then the revenues are not there.
Morrison: In February, you said you wanted to close tax loopholes. You figured there was two-and-a-half billion dollars there. Is that going to be part of the budget you present on May 14th?
Schwarzenegger: Well, first of all, I don't believe the two-and-a-half billion dollars. I think that our legislative analyst suggested to close the tax loopholes worth two-and-a-half billion dollars. I said that I'm more than happy to
look at the tax loopholes, but– because I always say everything is on the table, I'm willing to keep my mind open, and to let everyone participate here with their ideas.
But we have to make sure that, as we look at those tax loopholes that are really meant to be tax
incentives for businesses to go and do more business, and for businesses to come to California, we should look at them, and see if they're outdated, if they're still producing jobs and revenues for our state. And if they don't, we should get rid of it. And so I think one has to carefully look through those.
So there will be some dollars that we will be using from those, you know, getting rid of some of those tax loopholes, and there will be
other revenues that you have to look at, if it is lottery, or other areas, because we definitely are short of revenues, because everyone recognizes we can't make our budget all by just cutting, just cutting programs. Because there will be too draconian kind of cuts, so we have to be very careful to find a kind of a happy medium.
Morrison: If it can't be all cuts, where does the rest of the revenue come from? Are you going to be talking about new taxes?
Schwarzenegger: No. I think what I've talked about is, the legislators all know that you have to, the revenues that are from the lottery, we just have to license out the lottery to the private sector. They will be able to do a much better job, broaden it, and that could bring us in
billions and billions of dollars. So there's areas like that. We just have to get, you know, creative about it.
There's also, you know, people are talking about selling off some of the state's assets, because we shouldn't be in certain businesses that we are in. I mean, there's no reason that we all have to have all this land, and the buildings, and all this. And we should also start looking at the public/private partnerships that we just talked about out there, at the Global Conference. We don't all rely just on state money and on public money, but also come and let people invest in our state.
Morrison: When people hear about selling things, they get a little unsettled, because they think, "What are they selling? We're already worried about the parks, keeping the parks open." How severe is this going to be? What's going to be on the auction block, do you think?
Schwarzenegger: First of all, whenever you talk about selling, you put the team together, a bipartisan team. Everyone looks at it, and says, are we really in the restaurant business? Should we get rid of this restaurant business? Are we really in the massage parlor business? Maybe we should get rid of that.
Morrison: We're in the massage parlor business?!
Schwarzenegger: Of course, it was years ago, and when I came into office, the state still owned a place that was like a massage parlor. (clears throat) So, I mean, [...] why are we in those businesses? So, you know, we acquire certain things that we have no interest in running, so we should get rid of this. So of course, we are not going to get rid of, you know, really fine assets that we want to keep for the future. But I think we've got to be creative.
We've got to have Democrats and Republicans sit down, and talk seriously about, you know, how many cuts do we really want to make, what kind of revenues did we want to come up with, and look at the budget numbers, the latest budget numbers. This is why we have a process where, after the tax, people pay their taxes on April 15th, we have a May revise, where I revise the budget from January and look at what are the revenues showing. And work with the legislators after that, because our deadline is July 1st. That's when the new fiscal year begins.
Morrison: Now, you said that the cuts can't do everything, because they'd be so draconian. In January, you talked, when the deficit was 14-and-a-half billion, you said you're not even going to find
one percent, if you cut, but you've talked about 10% cuts across the board. Is that really fair when you've got agencies who, I'm sure, have been very responsible and very thrifty, and then other agencies who may have just let themselves bloat.
Schwarzenegger: Well, that really doesn't happen, because we have been very careful with all the agencies to make sure that the agency's really operating in a tight way, and don't waste any money. We are going through that very, you know, periodically. In our state, when I came into office, we really were focusing on that, because we know that there is always fraud, and waste, and abuse, and all of those kind of things in government.
And so I think that we are running the ship really tightly right now, and we also made it very clear to each one of the agencies, you know, to make those cuts, and they have been very disciplined, and made those cuts. And even though it's tough for some, because as you know, there's caseload increase. When you talk about your health care, there's more and more people that are requiring services.
So it's not like they're spending more money on just, on health care, on various different programs, it's just that there's more people now, so one has to be very sensitive about that. But it is a huge dilemma, I can tell you. No matter where you look, what department you look, it is a dilemma, because, not because the economy is not performing as well as it should, but just that our budget system is a dysfunctional budget system.
Which means that, when we have an increase in revenues of 10, 12 percent, they take
all of that money and spend it. So then when we all of a sudden have revenues that are flat, with no increase, then all of a sudden we have make cuts in all those programs, basically taking Californians on a roller coaster ride where they have to hold on for dear life. It is irresponsible to do, it is a system that has been–
Morrison: (crosstalk) So we're in the amusement park business too.
Schwarzenegger: Exactly. This has been a system that has been in place for decades, and I have been trying, since I've come into office, to straighten out the system, and to tell the legislators that we need to put the cap on our spending. That we cannot live beyond our means, because we know that, when you look at the last 10 years, we have an increase in revenues every year of 5.4%, so therefore, let's do that. Let's just spend 5.4% more every year, and when we have an increase in revenues of
10%, take that extra few billion dollars and put it in a rainy day fund, so when the revenues are flat, we can supplement the revenues. That's the idea.
Morrison: Of course, one of the things you campaigned on and effected when you went into office was to roll back the car tax. Are you thinking now, "Gee, I wish I hadn't done that," because you wouldn't be in this deficit fix with the state?
Schwarzenegger: No, not at all. Because look, the government cannot go when they make mistakes, or when they are incapable of solving a problem, to go to the people and punish the people. It is Sacramento that has over and over been in this situation where they're short of revenues. Look, in 2003, they were short of revenues; now, in 2008, we're again short of revenues, and they
still haven't learned the lesson.
At one point, they have to say, look, every six or seven years, we run into this problem where we are short of revenues, and every six or seven years, we run into this situation where we have a surge in revenues, and we spend it all. Why should we not fix the system once and for all? So I say,
never go to the people and go, and punish
them for the mistakes that the legislators have made.
They should work it out.
Morrison: When, uh– you're a great admirer, and you've speaking about infrastructure, including your remarks here today, you're a great admirer of what Pat Brown did. When Pat Brown came into office, the top marginal tax rate was 91%. When you came into office, it was 35%. Does that have
anything to do, not only with maybe the fix we find ourselves in, but the fact that you find, you're frustrated in what you'd like to for the water system, for the infrastructure system, in the state of California.
Schwarzenegger: Well, I think that, it is a sense, a matter of priority. You've got to go, as like a business, has to go and say, we have to put a certain amount of money aside for fixing our roof, for fixing the rugs, for fixing the plumbing, for adding an addition, or whatever it is, sort of fixing a new bench or whatever it is, sort of fixing a new bench, or whatever it is, I think that's what they need to do. That's what every business does, and that's what I did when I used to own apartment buildings, or when I had the restaurant and all those things.
The government doesn't do that. We don't put aside 3% of our annual budget and say, this 3% is for building infrastructure. And like I said in there, at the conference, I think it's important, when we have a hundred billion dollars of revenues coming in, that we take $3 billion and start rebuilding California, because we can't keep our infrastructure in the condition that it is in right now,
and we have to always do upkeep, and also we have to recognize we have an increasing population, so therefore we need more of everything.
If we had, have a water system that was built for 18 million people, today, we have twice the amount of people. We have 38 million people, as a matter of fact, and therefore we need
twice the amount of water, twice the amount of water infrastructure, but we haven't built it! So therefore, let's put a certain amount of money aside in our budget,
or we go with the bond route, which we did, where the people committed to $42 billion of bonds. The only disadvantage of bonds is, that it costs twice as much to build, because you have to pay for the interest. It's like when you buy a house today for $500,000, you know, eventually, by the time you have paid it off, it will cost you a million dollars.
So, that's the same with infrastructure and with bonds. So that's the disadvantage. The advantage of it is, is that you make a commitment, and then you have to stick to the commitment, and you build. And that's why now California finally is building again. We are seeing cranes around the state, we are building our infrastructure, our highways, freeways, tunnels, bridges, more schools, expand our university system, fixing our levees, more affordable housing, and this was only the foot in the door. Now we've got to continue building.
Morrison: Can we keep the foot in the door with the budget situation the way it is?
Schwarzenegger: Absolutely, because there's, you know, not directly related. We have to, like I said, find priorities, look at and pick priorities, and say infrastructure is important, because that makes people and goods being moved around the sate faster, and that's economic power. We have to keep up our infrastructure. We've got to build our roads.
And people, it's not fair that people pay their taxes, and they work hard, and they do everything they need to do, and then they get stuck in traffic for hours and hours, and they spend less time with their families, less time with their kids and the sports field, and all of this, or that kids are in overcrowded classrooms. We've got to solve those problems, and we've got to recognize we have an increase in population.
Morrison: Governor, in the years you've been in office, you've met with governors of other states as well. The initiative process is
almost peculiar to California. It's been able to advance your agenda, and in some ways, it has limited it. Is this one of those boxes that needs to be blown up and rebuilt? Does it need to be changed?
Schwarzenegger: I have suggested that we get together and, you know, revisit it. I
love the initiative process. I have to tell you, to be able to go directly to the people– not that it always works, and not that it is perfect, no, not by any means, but I think that if the legislators don't do something, then you can go directly to the people and get something done, like our after-school initiative, Proposition 49.
I mean, the legislators refused to put more money into after school programs, so we went, with Prop 49, went directly to the people, the people have approved it overwhelmingly, and now we have $428
million more in after school programs, so we can get those high risk kids
off the streets, and not commit crimes, not get involved in teenage pregnancy, and drugs, and gangs, and all of those kind of things, but keep them in the classroom. That was very important.
But the initiative system is also being abused, and I think what we are trying, what we
should try to do is, is sit down both of the parties, Democrats and Republicans, and revisit it, and look at it, and just say, you know, it's being abused, let's make certain changes, and then make certain changes. I am all, you know, for that. I think it has to be done in the right way, and really thoughtfully. It has to be thought through all the way.
Morrison: You've got until 2010 in office. At this point, would you have any do-overs in your governorship? The word that the kids use, if I could do this again, this is what I would do differently?
Schwarzenegger: You know, it's– I, myself, have very little interest in thinking that way. Because, when I look back and I say, you know, maybe I was too aggressive in the beginning, maybe I was too impatient in the beginning, maybe I
pushed too much, and all of this, if I wouldn't have done that, I wouldn't have
learned. What happened, by making mistakes is, and if you're smart, you
learn from your mistakes. And you say, well, this didn't work. I've got to use a different approach.
It's like in training. When I do a lift, and I fail, I have to analyze, why did I fail? Did I fail because, psychologically, I didn't
believe I could left it, or was it just I didn't train enough? Was it that I didn't have the right food before that lift? I have to analyze, and that's what I have done ever since I went to Sacramento. I've analyzed, and when I make mistakes, I correct the mistakes. I ask, I ask my legislative leaders, I ask Democrats and Republicans.
Morrison: And they don't hesitate!
Schwarzenegger: Well, they shouldn't! Because I'm asking for an honest opinion. So people who say, well, you know, it's just up here, it takes a little longer. You were a little bit impatient, and it's why you rubbed
me the wrong way, and it's why I voted against it, but I mean, maybe the next time, you should be more inclusive. Maybe you should have us come down the office, and talk and bring us in, early on in the process. So you learn like this.
So I feel that the legislators have been, you know, terrific to work with, and, you know, I learned my way up there, you know, in the, during the process. And so, I can't go back and say I would have done this differently, or this, because they all were kind of learning experiences. The important thing is that now, I move forward in a very optimistic and positive way, being as inclusive as possible, bringing all the stakeholders in, and recognizing the fact, and which I did from the beginning, that I want to always be the governor for
all the people. Not just Republicans, but Democrats, Republicans, independents, decline-to-state.
And yes, you will make decisions that are unpopular many times, because as governor, you have to look at the whole state, and all of the interests, not just one. So sometimes you will have protests, you will have people writing you letters where they disagree with you, or they're upset about something. You get phone calls sometimes like, which is perfectly fine. I always like to hear from the people.
Morrison: Last question: how do you think your governorship has changed California, and how has being governor changed you?
Schwarzenegger: Well, I think the most important thing is that we moved the state forward. I came in at a time when there was a crisis, where businesses were leaving the state, we had the worst credit rating, workers' compensation was the highest in the nation, and people just didn't want to do business with this state anymore. And so I came in and brought Democrats and Republicans together. That was the number one thing, because they couldn't get along on
anything, couldn't
agree on anything, and brought them both together.
And we started really solving things, started going and solving the workers' compensation problem, you know, raised the minimum wage, and started rebuilding California, and making a commitment for our infrastructure, and making a commitment to protect our environment, and to fight global warming by rolling back the greenhouse gas emissions, and, you know, to the 1990 level, and really be an environmental protector of, with the Ocean Action Plan, with the Green Building Initiative, with the Hydrogen Highway, and all of those kind of things, the Million Solar Roof Initiative and so on. And we stimulated the economy. Our revenues, when I came in, was $76 billion. Now, they are $96 billion, and we will continue on with our revenues like that. So, I think that the state has changed, the state has moved forward, and we have gotten very close to also, a health care reform package–
Morrison: Yes.
Schwarzenegger: – which will be very important. And how it changed me? I have
learned from this process, and became wiser, became smarter, and thus I have said, just recently, that the world has been my classroom. And, you know, for me, this has been the greatest learning experience. And to learn about so many things that, you know, I didn't think that much about before I became governor, and then to deal with those issues.
And, you know, it is one of the most
satisfying things, especially as an immigrant, to be able to go and get up in the morning, and think about, how can I serve my state? How can I volunteer? Because I am basically a volunteer. I don't take any money for this job, I have turned my back on the movie career, where I could have made $30 million for the next Terminator move, and just said, you know, I want to serve the state of California. I want to give something back, because this state has given me everything. So that has also been a great, great experience.
Morrison: Your wife's book title is "Who Do You Want To Be?" Who do you want to be after 2010?
Schwarzenegger: Well, I think that she maybe means it a little differently than that, (Patt laughs) but I mean, I think that, to me, I have absolutely no concerns, unlike my wife, who always has concerns. (Patt laughs) I have absolutely
no concerns about what I am going to be in 2011, because, until December 31st, 2010, I'm still governor.
But I mean, but I have no concerns, because I feel that if you do a good job with the work that you're doing, that you will have all kinds of opportunities available. If it is in entertainment, if it is in politics, if it is in business, if it is in sports. I mean, I have, you know, kind of worked in so many different areas, that it is wonderful to have all of those opportunities therefore available. And, you know, I'm a big believer in giving back and doing work for the state, and I will say we will definitely have something to with, also with again, being involved in some cause, and fighting for some cause.
Morrison: Look forward to finding out what that is. Governor, thank you very much, I hope you'll come back.
Schwarzenegger: Thank you very much.
Morrison: Thank you.
Schwarzenegger: I'll be back. (Patt laughs) Thank you.
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