Gov. Arnold Schwarzenegger and the Legislature must decide whether to cut spending or increase taxes if they hope to address impending budget crises, infrastructure deficiencies and the lack of health-care coverage for all Californians.

That was the assessment of California's future delivered Friday by Dan Walters, a syndicated Sacramento Bee columnist who has spent 40 years covering state government.

Many believe Walters has the best track record of any state Capitol observer when it comes to predicting the future of California.

Walters delivered his assessment of Schwarzenegger and the state of the state Friday at the annual UCSB Economic Forecast Project's presentation of the San Luis Obispo County Economic Outlook in the Performing Arts Center at Cal Poly.

Last year, Walters predicted Schwarzenegger would win re-election this year, even though at the time the governor's approval rating had fallen from 70 percent to 30 percent.

“He came back by reinventing himself,” Walters said, noting that in the previous year Schwarzenegger had made “every mistake in the book.”

“He's always willing to try something new that might lead to success,” he said. “He'll try something, and if it doesn't work, he'll back up and try something else. ... That's unusual for a politician.”

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After failing to push through his own agenda with the voters a year ago, Walters said, the governor in January developed a new platform of infrastructure improvement that won the Legislature's support.

As a result, the state issued $40 million in infrastructure bonds to address crumbling roadways and weakening levees.

“But realistically, that's a drop in the bucket,” he said. “We do not need $40 million; we need hundreds of millions of dollars.”

Walters noted California's population is expected to increase by 5 million to 6 million every decade, which means 500,000 more vehicles on state roads every year.

“We need $100 million on our highways alone,” he said. “Where is a sustainable program?”

The infrastructure bonds are general obligation bonds, he said, which means the money will come from the general fund, which is already running a multibillion-dollar deficit. And there is no plan to make up the difference.

“In a time of revenue growth, to be still running a deficit indicates something is seriously wrong,” he said.

But Walters said it appears Schwarzenegger's main focus in the coming year will be health care, not the budget deficit nor the shortfall in infrastructure spending.

Of California's 37 million residents, about 7 million do not have health-care coverage - the fourth-worst rate in the United States, Walters said.

But those without coverage are what he called “the working poor,” while 95 percent of those who vote in elections have coverage. That will make it hard to gain voter support for any health-care program, he predicted.

And providing health-care coverage for those 7 million people will be enormously expensive - an estimated $6 billion a year, he said.

“The governor has said he will oppose all new taxes, so how will he do it?” Walters asked. “He may end up taking a ‘swipe' at it, like he made a ‘swipe' at the infrastructure.”

Walters said the state still has a structural budget deficit of $5 billion a year, “and it will get wider even if the state remains prosperous.”

“Schwarzenegger was elected to clean up the state's mess, and he has not done so,” Walters said. “The governor and the Legislature must decide to seriously cut spending or raise taxes.”

Mike Hodgson can be reached at 739-2221 or mhodgson@santa

mariatimes.com.

Nov. 18, 2006