Last Tuesday, in his State of the State address, he told California that "never again will government be allowed to spend money it doesn't have." By Friday, alas, he had forgotten. He proposed in his budget that the state, well, spend money it doesn't have for the 2004-2005 fiscal year that begins July 1.

There are plenty of things to like in the budget. The governor would simplify school finance, giving more authority and control to local school districts. He would reform costly state employee pensions and reopen expensive contracts with prison guards and other unions. He would begin to reform how state government operates, bringing performance management techniques other governments long ago adopted.
But those reforms can't disguise the reality: Schwarzenegger's first budget is unbalanced and shortsighted. Proposing a deliberate deficit, he would have California fill the hole with the type of onetime maneuvers, gimmicks, rosy assumptions and borrowing that got California into its current mess.

His biggest fudge is unprecedented in the state's history: taking out a loan of $15 billion through the pass-the-buck bonds he and the Legislature have placed on the March ballot as Proposition 57.

Even with billions in painful spending cuts, many of them directed at college students, the sick and disabled and local government, his budget would leave the state with an ongoing $6 billion structural deficit, according the the Legislative Analyst's Office. In other words, the state would keep spending money it doesn't have.

That's become a familiar story, of course, in the state Capitol. But it's more important than ever in 2004. Schwarzenegger and lawmakers are drawing up a budget for what's likely to be the best budget year in the economic cycle. Schwarzenegger is projecting above-average growth in 2004, with the economy cooling some in 2005.

After that, the risks of another slowdown grow. Kenneth Rosen, chairman of the Center for Real Estate and Urban Economics at the University of California, Berkeley, forecasts that higher interest rates will burst the state's "housing bubble," slowing housing construction and the economy.

Economist Edward Leamer, director of the respected UCLA Anderson business forecast, says he is counseling companies and governments about the risk of overextended consumers and a recession in 2006 or 2007. "Now is not the time to be ramping up ... debt loads around the country for state governments," he says.

Yet that is exactly what Schwarzenegger proposes.

That is the wrong strategy for California. Good economic years are the time for getting the house in order, whether it's the house you live in or state government. It's not the moment to be pushing debt into an uncertain future, where paying it off may be even more difficult.

Fortunately, Californians seem to understand fiscal responsibility better than the governor and Legislature. According to the latest survey by the Public Policy Institute of California, only 8 percent of them prefer to borrow to paper over the deficit and only 35 percent support the governor's pass-the-buck bonds. Half of Californians sensibly want to eliminate the deficit using a mix of tax increases and spending cuts, far more than want to use tax hikes or spending cuts alone.

The only way to get what they want is to resist Schwarzenegger's entreaties to drink the Kool-Aid of debt on March 2. If they do, maybe, just maybe, the governor and Legislature will stop the evasions and face fiscal reality.