Arduin was first recruited to be the independent auditor for Schwarzenegger's transition team, charged with finding flab in California's mammoth $100-billion state budget. Despite the enormity of the task -- California faces a $38-billion shortfall -- she decided to stay.
A protege of supply-side guru David Stockman of the Ronald Reagan era, Arduin, 40, took a personal leave from her $122,981 job as director of Bush's Office of Planning and Budgeting in October and resigned on Nov. 17. She was replaced by Mike Hansen, a longtime legislative staffer who worked in Arduin's office for four years before becoming staff director of the House Appropriations Committee.
Meanwhile, Arduin is expected to take no prisoners in her recommendations to Schwarzenegger. Friends and foes in Florida, who have watched her lop off millions of dollars in programs from Florida's budget -- from legislative pet projects to eyeglasses for the poor -- say she'll relish the role.
"There is nobody better suited to wield the budget ax," says Sen. Ken Pruitt, R-Port St. Lucie, the Senate Appropriations chairman who has both clashed and cooperated with Arduin in the past. "She's going to go in there and absolutely rip everything apart."
By all accounts, Arduin caught the eye of the Bush family's national Republican network because of her steadfast loyalty to Gov. Bush and his administration's goal of lower taxes, less government and a smaller budget.
If she succeeds in finding ways to adapt California's budget to the fiscal theories espoused by the Bushes in Washington and Florida, Arduin could make it more politically palatable for the George W. Bush administration to direct discretionary federal aid money to the state that has 54 electoral votes in the presidential election next year.
Biography
A 1985 graduate of Duke University, Arduin worked for the Reagan White House as an intern in Stockman's Office of Management and Budget. She then moved to Wall Street, where she worked for Credit Bank of Japan, Bankers Trust Co. of New York and Morgan Stanley.
While in Stockman's office, she met Patricia Woodworth, another young supply-sider who would eventually become the budget director for Florida's first Republican governor of modern times, Bob Martinez.
Woodworth moved from Florida to Michigan to work for Gov. Richard Engler and lured Arduin there to be her chief deputy budget director. From there, the pair moved to New York, where Woodworth became director of Gov. George Pataki's budget office, and Arduin again was her top deputy.
When Woodworth left, Arduin had hopes of getting the top job, but she was passed over for someone with more political connections. She came to Florida and began working with Bush's budget transition team.
Arduin's biography lists these accomplishments:
- In Michigan, cutting taxes by $1 billion, eliminating a $700-million deficit and reducing the state workforce by 5%.
- In New York, cutting taxes by $10 billion, turning a $5-billion deficit into a $1-billion surplus and slashing 21,000 state jobs.
- And in Florida, cutting $8.1 billion in taxes and retaining $2.7 billion in reserves.
While Florida's governor traditionally has a smaller role in crafting the budget than in other states, Arduin's experience helped her advocate changes that consolidate the governor's power over the budget process, observers say.
Arduin pushed for lump-sum budgeting, moving away from the traditional line items dictated by the Legislature and into a system that would give agencies more flexibility but less money overall. The Florida Legislature fiercely resisted the concept -- including the governor's allies in the House, who didn't want to relinquish control over the only thing they are constitutionally required to pass.
Legislators also complained that Arduin kept changing the format of the budget, making it hard for them to compare the amount spent on state programs.
But Arduin, with the full support of the governor, succeeded in persuading lawmakers to reduce agency budgets to force major cutbacks in administrative costs and overhead. Those measures and billions in tax cuts -- from the intangibles tax on stocks and bonds to increased exemptions in the corporate income tax -- were easy during the flush years of the administration.
Arduin was also careful about managing the budget to influence public perception of the governor. For example, when it appeared that revenue was dropping below expectations and demand for Medicaid services and prisons was rising, she has been known to postpone budget-estimating conferences in which state economists are required to come up with forecasts about the impact of Medicaid, prisons and tobacco revenue. Her strategy would be to wait until after the governor's budget was released so that his budget would reflect more money than was actually there and leave the deeper cuts for the Legislature, lawmakers say.
As the economy chilled in 2001 and the recession following Sept. 11 hit, the budget recommendations out of Arduin's shop took a harsher hit on programs. The administration recommended increased fees and tuition, controversial shifts of funds from one account to another to make up the gap and deep program cuts that eliminated money for eyeglasses, hearing aids and dentures for poor seniors and forced 55,000 low-income children onto health insurance waiting lists.
Skeptical
Supporters of Arduin's clinical budget strategy began having doubts.
"We cut taxes when we had to, but when we're (ranked) No. 50 in education spending and we're 50 in graduation rates, we should be investing in our people," says Pruitt, who served as the House's budget committee chairman before moving to the Senate. "Florida has never spent money like drunken sailors the way California has. Donna and I just had a fundamental disagreement. She's more into immediate gratification. I believe you have to look at the long term."
Pruitt also complains that the governor has been too willing to pay for ongoing programs with money that won't be available the next year.
For example, lawmakers will start the next budget cycle $1.3 billion in the hole because programs were paid for with money borrowed from trust funds or one-time cash surpluses.
But supporters say the administration's minimalist view of government has also kept Florida from experiencing the deep budget holes other states are facing. Instead of plowing the surplus into increased spending, the tax cuts and program reductions effectively reduced the base budget.
Observers say Arduin will use some of the same strategies in California that she applied here: Reduce administration costs, merge agencies and functions, divert government services to the private sector and scale back social services. Most doubt, however, that those changes will be enough to repair the hole.
Arduin's friends say she is fearless about the challenge. "She's a pit bull and will be a great adversary to anyone who opposes her in California because for her there's no gray -- it's all black and white," says Rep. Ron Greenstein, D-Coconut Creek, the House Democrats' chief budget negotiator.