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"A checklist for terminating programs" by David Nott, President of the Los Angeles-based Reason Foundation

"For the people to win, politics as usual must lose," Gov.-elect Arnold Schwarzenegger said in his victory speech Tuesday. "I want to reach out to everybody."

That’s a serious departure from the Terminator’s campaign rhetoric about “cleaning house” in Sacramento. And it makes his transformation even more evident; Schwarzenegger has gone from actor to Governor.

Schwarzenegger has laid out a thoughtful plan for his first 100 days in office, saying he will, among other things, repeal the tripling of the car tax; push for a state spending limit; reform the workers’ compensation system; and obtain a detailed audit of state finances.

To implement these changes, and to be an effective leader, Schwarzenegger will unquestionably have to compromise with the Democrat-controlled state Legislature, and this is where things get dicey, particularly with the audit.

The state budget deficit for the fiscal year starting July 1, 2004, is estimated at anywhere from $8 billion to $20 billion, and a meticulous audit of the state’s finances will undoubtedly uncover additional problems and creative accounting.

Combine that with the fact that a court has already nixed $2 billion in bonds for state pensions and could very well strike down another $10 billion in planned bonds because voters never approved them, and we have the makings of a full-fledged budget disaster all over again.

The only way to deal with a mess of this magnitude is structural change, starting with Arnold’s audit.

As part of the inspection, each and every state program should be required to justify its existence by demonstrating relevance and results.

Longtime politicians and special interest groups like to scare people with cries of, “If the state cuts spending we’ll lose vital services and suffer dire consequences.” So let’s use the audit to define those consequences and make informed decisions about what is, and what isn’t, important.

We shouldn’t assume that since a program exists, it is needed. To continue, programs must answer key questions: Does the program provide an essential service to taxpayers and the state?

What do they spend and what do they accomplish?

Are the programs’ functions still needed or are they outdated and duplicative?

If the program were eliminated would anyone miss it?

Programs that cannot prove their necessity to taxpayers should be temporarily suspended during this fiscal crisis and reevaluated at a later date.

In conjunction with the audit, the state should establish an ongoing assessment on all state programs, modeled after the 10-member Sunset Advisory Commission in Texas. The Sunset Commission issues a report on each agency with a recommendation to abolish or continue the agency; holds public hearings on its findings; and sets a date on which an agency will be eliminated unless legislation is passed to continue its functions. As a result, 44 agencies have been abolished and another 11 have been consolidated.

Showing the proverbial bank statement will make policymakers accountable for results. If they continue to fund programs, against the commission’s advice, they’ll have to explain their reasoning and defend the expense.

The $38 billion deficit this year didn’t motivate California legislators to take a critical look at their spending habits, but the resounding recall results demonstrating Californians’ rabid thirst for fiscal responsibility and transparency just might.

Before the election, Senate leader John Burton, a San Francisco Democrat, said of Schwarzenegger’s plans for reform: “I think he’s got a little bit to learn. He ought to wait until he’s elected.” Well he’s been elected now, and it’s the Legislature’s leader and his colleagues who have a little bit to learn: Californians are ready to make tough choices and critically evaluate government spending. And we’re expecting Sacramento to do the same.