The Test of Leadership: Keeping Faith with the Next Generation

It’s always great to come back to the Sacramento Press Club. I want to thank you for inviting me here today to share my thoughts with you on Proposition 57, the Governor’s budget proposals, and the future of our State. I welcome the opportunity to speak with you today because I know how important your role is in fostering a serious debate about the governor’s borrowing and budget plans. And I am heartened to see that discussion finally coming to life in communities, in homes, and in workplaces across this state. Because I do not remember an issue that has raised more fundamental questions about who we are and what we stand for and what kind of a future we’re going to leave for our children and for the generations to come.

I mean that.

And I’m not just talking about the apprehensions of a State Treasurer, about the view of the world from behind a green eyeshade: the concerns for the principles of sound accounting; for the fate of the state’s credit rating; for the time-honored belief that says that debt should be incurred for investment, not consumption; for the logic that says you shouldn’t mortgage your house to live beyond your means.

As vital as these concerns are, I believe that the borrowing and budget priorities dominating Governor Schwarzenegger’s first hundred days in office raise an even more basic set of questions. Whether we are willing to courageously and fairly grapple with the fiscal crisis that confronts us. Whether we are going to shunt our problems onto the next generation of Californians. Whether it is right to sacrifice our children’s prosperity in order to avoid confronting tough decisions today. In short, whether we are going to accept a much dimmer vision of the future of California and of the possibilities of our people.

These questions are not theoretical. Just look at what Governor Schwarzenegger has done in his first 100 days. While forwarding a $15 billion bill to our kids, the governor is taking a wrecking ball to the very investments that will build our future wealth and strength. His proposals to slash funding for our colleges and universities, to raise tuition and fees, to cut financial aid, and to cap enrollment threaten to put college out of reach for middle class families and to damage our future economic prospects. Meanwhile, his plan to cut the state’s Healthy Families program, will deny health insurance to over 100,000 California kids, taking basic care away from those who can least afford to make the sacrifice while costing us all far more in the long run. And, his proposal to grab $2.1 billion in transportation funds to balance the budget will cost jobs today and harm our economy and quality of life in the future.

Now, believe me, as Treasurer, I am well aware of the difficulties this budget crisis posed for the new governor—of its structural nature, of the intransigence of legislators who have refused to consider a fair balance of taxes and cuts, of the political costs and consequences of taking the long view, of seeking to reform our budget process while protecting investments in our future.

But instead of seizing on his mandate, instead of harnessing the enormous energy that swept him to office, instead of challenging the special interests and the culture of denial and defeatism which has crippled our budget and our politics, this governor in his first hundred days has taken the cheap way out. Borrowing against our future instead of asking how we can build our future.

At this very moment of crisis, when the Governor should be expending his wealth of political capital to mobilize the civic leadership of this state in the cause of sacrifice and investment in our future, he has instead assembled a grand coalition of accommodation without great purpose or vision. Where camaraderie has been mistaken for commitment. And where collaboration has been mistaken for collective will.

Ladies and gentlemen, I still believe—and I know that the vast majority of Californians still believe--that we can do great things. In spite of all our problems, we have within our grasp the promise of greatness that always propelled California forward.

California is not a poor, Third World country. We have a $1.4 trillion economy, a gross state product that is the 6th largest in the world. But a false assumption has settled like a fog in Sacramento —clouding the vision of all too many — an assumption that says that in this society of abundant wealth, in the richest state in the wealthiest nation in the history of humankind, we cannot ask the richest among us to reinvest a small amount of their wealth back into our people and into our economic future. An assumption that says that we can no longer afford to fund first-class schools and universities. That we have no alternative but to ask our children to sacrifice for us.

That’s not leadership.

What’s worse, the governor is now traveling the state issuing dire warnings of an “Armageddon”—his words, not mine—an “Armageddon” of budget cuts should his bond plan fail. Brandishing this threat like a cudgel, the Governor is offering the voters a false choice between burdening our children with billions of dollars in new debt on one hand and enacting even deeper cuts in schools and healthcare and services for our kids on the other.

A choice between the bad and the unacceptable.

That’s not leadership.

The time has come to stand up for fiscal responsibility, fairness, and our future.

Last week, I asked the governor to consider a reasonable alternative to his bond-financing plan should Proposition 57 fail. I even went so far as to lay out a specific plan that provides sufficient revenue to repay our short-term obligations and to retire our accumulated deficit while providing for additional cash flow and budgetary needs. This plan asks Californians to make a modest sacrifice so that our children don’t have to. Specifically, it calls for temporarily setting aside ¼-cent of the existing sales tax, which would raise $4 billion over three years, and temporarily reinstating the 10 and 11 percent brackets on the top income earners in the state, which would generate $6.8 billion over three years.

Simply restoring the Reagan-Wilson tax rates on the wealthiest Californians. Simply putting in place the tax rates that have existed for 25 of the last 37 years. Simply asking the richest 1% - who are slated to receive over $12 billion in federal tax cuts this year – to pay a small portion of that tax break - $2.4 billion this year – to the state so our kids are not stuck with the bill for our debts.

Hardly ‘Armageddon.’

I haven’t heard back from the governor.

Now, we all know that Governor Schwarzenegger claims to oppose new taxes to balance the budget, but make no mistake about it: The governor’s plan to increase fees at our universities and state and community colleges— and for a host of other state services—is nothing more than a hidden tax increase on middle class families—the very families struggling the hardest to keep up with the rising cost of living.

And while cutting critical services, curtailing educational opportunities and making our children pay our bills, the governor’s budget fails to close a single corporate tax loophole or to ask a single millionaire to pay a dime more to help California get back on its feet. In the end, we all know that the true cost of the governor’s budget and borrowing plans will be borne by working Californians and their children.

And instead of seizing the opportunity to fight for long-needed fiscal reform, the governor’s budget turns our priorities upside-down, creating a sort of reverse-inheritance that bequeaths to our children a bankrupt estate of bills and burdens. The $4 billion interest cost of Proposition 57 would alone be enough to construct 400 new elementary schools. Enough on an annual basis to restore the cuts he is proposing to our colleges and universities. And, as we all know, Proposition 57 does not even solve our state’s budget problems. Even if the measure passes, we will still face a $14 billion structural deficit in the next fiscal year and substantial deficits for the years to come.

It is an abdication of leadership.

I have always believed that the true hallmark of leadership is the willingness to make a tough, unpopular decision for the simple reason that it is right. To sacrifice today for a better tomorrow. To give opportunity to those without power or fortune. To weigh the interests of those not yet old enough to vote. I still believe that we can do great things for California if we ask more of ourselves and more of our people.

We have big challenges ahead of us. We need to think big – meeting those challenges in a way that lives up to the legacy of our forebears and in a way that is worthy of our children.

Today, we are a nation state of 35 million people, growing to 46 million by the year 2020. We are going to have to fight hard each and every day to maintain what have been our competitive advantages in the global economy—the best quality of life, the best quality of enterprise, and, yes, the best-trained work force in the world. We will not prevail as a global economic power unless we invest in education, in our communities and in our people. We cannot look to our colleges and universities every time we face a budget shortfall. We cannot limit the potential of all our people just to protect the privileged few.

Before I was Treasurer, I spent fifteen years working in the private sector. And I believe that we have a continuing obligation to foster an environment in which businesses can grow and create jobs and to make government less expensive. In this regard, I know that any budget solution must have a fair balance of revenues and cuts.

But make no mistake about it: California’s advantage in the global economy will never be to be the cheapest. We must be the best. We cannot compete with Indonesia, Malaysia or China in making goods at the lowest possible cost. Our advantage will always be in our unrivaled quality of life, in our ingenuity, and most of all, in our people.

In this increasingly competitive global economy, now is not the time to take our foot off the pedal. Now is the time to make the investments that lay down the foundation for our sustained economic progress. And I want to say clearly here and now, that a budget that caps enrollments at CSU and UC and that increases graduate student tuition by 40 percent in areas like math and the sciences and engineering and teacher training is taking us in precisely the wrong direction.

The notion that we should invest in our young people to build our economic strength is hardly a radical idea. When Ronald Reagan was governor, we spent 5.6 cents on every dollar we made, every dollar of personal income, on teaching our kids. Today we spend 3.9 cents.

And, now, with Proposition 57 on the ballot, we see major newspapers for the first time in our state’s history saying “no” to school bonds because we are being overwhelmed by the governor’s proposal to indebt our kids. The Los Angeles Times. The San Diego Union-Tribune. The Modesto Bee. The Pasadena Star News. All opposing bonds for schools in the shadow of the Schwarzenegger budget and borrowing plan.

In one fell swoop, the Governor’s deficit bond will increase our State’s indebtedness by 46 percent—debt to pay our debts, not to build our future. All at a time when the need to invest has never been greater. At the very moment when we are at grave risk of becoming a society of diminished opportunity for too many in our state.

We are moving perilously toward two Californias, one in which a select few do very well and the rest struggle to survive. California already faces a widening gap between the rich and poor, between the wealthy and everyone else. Here in the nation’s wealthiest state, one in five children lives in poverty. Seven million Californians have no health insurance. The median income of the poorest 20 percent is just $14,000 per year—incredibly, at the same level it was in 1979. Ultimately, our social fabric cannot sustain this kind of division. Our economy cannot be competitive with this kind of disparity.

Ladies and gentlemen, we must again attempt to do great things for California and our future.

Every one of us in this room owes a profound debt of gratitude to past generations who showed the kind of leadership so sorely lacking in this time of crisis. To those who made the necessary sacrifices that built this state. To those whose leadership created the fabric of California’s prosperity.

And we owe thanks to all those who kept faith with the belief that it is our obligation to create a better future for our children. I am a first generation American of Greek descent. My mother became a citizen in 1963 – my grandparents on my father’s side emigrated to this country after the turn of the 20th Century. The defining ethic of my family, like so many others, was that our grandparents and parents would have done anything, anything at all, to give their children a better life. My grandmother on my father’s side never spoke a word of English. But she worked day and night as a seamstress so that my father could attend the nation’s greatest public university—U.C. Berkeley. Her devotion and the contributions of all Californians who supported our public schools altered our whole family’s fortune. I would not be here today were it not for her faith and the faith of a previous generation of leaders.

But our parents, and their parents, and their parents before them, did not just leave us the benefits of their sacrifice. They bequeathed to us something far more valuable—the idea that when it came our time to lead, we would keep the covenant between the past and the future and make our own sacrifices for the next generation.

Earlier this year, I met with students at high schools and colleges across the state who are participating in college outreach programs that Governor Schwarzenegger is now proposing to cut. It was one of the most moving experiences I have had as Treasurer. Because these young people’s lives truly embody California’s struggles and aspirations.

At San Diego City College, I met with four students in the MESA program—the Math Engineering Science Achievement outreach program. None of their parents had gone to college, and all of the kids in this program were working at jobs just to make ends meet. Because of the MESA program, Izzy Beth Rodriguez, Barry Cordero, Michelle Scott and Jovanni Sarria are poised to go on to our great university system, to study biology, engineering and biomedical science and to make their contribution to California’s future.

At Oakland’s McClymonds High, the alma mater of Bill Russell and Paul Silas, I met Antoine Davis, a young African-American student who gave powerful testament to the educational outreach programs that afforded him a chance to succeed. Antoine is student body president and editor of the school newspaper, and I know that he is on his way to a brilliant university career.

And at Watsonville High, I met Jenny Gama. Jenny’s mother told me how she came from Mexico and learned English so she could help her children build better lives for themselves. When Jenny entered 7th grade, her mother realized she could no longer help Jenny with her school work, because she had never completed 7th grade herself. Jenny received the help she needed through the university’s outreach efforts and will be first in her family to go to college. She is studying to become a doctor.

Last October, Governor Schwarzenegger was elected with a strong mandate to change the way business was done in Sacramento. The people of California believed he would provide the leadership that had been lacking for so long. And make no mistake about it: he had the opportunity in his first hundred days to take this state in a new direction by putting our fiscal house in order, making the tough decisions needed to broaden opportunity, and creating a better future for our children.

I believe that the governor missed that opportunity.

But the fundamental question still before us is: will we fulfill our obligations—will we honor our covenants—to future generations?

I believe we can and we must.

This is what I intend to fight for.

Thank you for listening.