The Governor’s Axe
1 September 2006 | Duke Magazine
The governor of Florida combines the savvy of a seasoned politician with a sense of humor that would better befit a junior-high student. No one comes through Jeb Bush’s office in Tallahassee without getting at least a gentle ribbing; the man likes to joke around. But when he talks about Donna Arduin, his tone changes, his eyebrows settle, and he begins to celebrate his state and the fiscal health he wholeheartedly attributes to his former budget manager. “What state improved to a triple-A bond rating during these tough times? What state ran an $8.6-billion surplus? She’s the budget king.”
Arduin so effectively revamped Florida’s budget, Bush says, that she made it possible for him to make good on almost all his campaign promises, cut taxes, and build a surplus, all despite an economy that continued to lean on tourism even after 9/11 made Americans reluctant to travel.
Arduin’s work in Florida put her at the top of Arnold Schwarzenegger’s short list when he took over California and needed someone to whip his state into fiscal solvency, so Bush reluctantly let her go for a month to oversee an audit. Schwarzenegger put her on his cabinet, a month turned into a year, and Arduin never came back. “I gave Arduin to California on loan,” Bush says, with a mischievous grin. “Typical of California that they don’t pay back their loans.”
Arduin, who graduated from Duke in 1985 with majors in economics and public policy, says she is “libertarian—as in philosophy, not political-party affiliation.” Which seems appropriate, because being a libertarian in politics is something of a paradoxical endeavor. “I joined government to shrink it,” she says. Bush is of a similar ilk: When a predecessor in the governor’s office named him the state’s secretary of commerce, his first move was to eliminate his own agency. With parallel philosophies on how to manage an economy, Bush and Arduin get along like old war buddies. During Bush’s first term, that’s more or less what they were.
That first year, Arduin and the governor set fire to the Florida assembly. “When the budget came in for approval, we vetoed over $300 million in pork-barrel spending,” says Arduin. “The next day, nobody in the capitol would even talk to me.”
Arduin received plenty of criticism from both sides of the aisle over cuts she made to Florida’s budget, but after making a splash in the Sunshine State, she faced a ready corps of critics in California. More visibility brought more acute criticism of her controversial policies, scrutiny was unrelenting, and Arduin was routinely blasted. Her $900 million cuts in Medi-Cal, the state’s Medicaid program, and $800 million in programs intended to bring welfare recipients into the workforce stirred up a veritable infantry of opponents, to whom she responds succinctly: “The state was spending $15 billion more than it was taking in.”
Physicians spoke out about cuts to California health programs that Arduin oversaw, including a limit on the number of children allowed into the Healthy Families Program, and slashes in the state’s contribution to Medi-Cal. “It’s unconscionable to take the economic savings that we know the state has got to do and put that burden literally on the life of a young child,” Alan Lewis, a physician at Children’s Hospital Los Angeles, told the Los Angeles Times. “This is looking a child in the eye and saying, ‘No, you’re going to have to wait to be treated.’ “
But Arduin says she merely “proposed eliminating the entitlement nature of a lot of those programs. When Arnold went into the budget, it was all about spending programs on autopilot.” Spending levels on many of those programs had been statutorily mandated, she says, but funding hadn’t, so “if you just sat back and let the programs run, there would never be enough revenue. The legislature was almost not even needed in California.”
Still, criticisms abounded, especially about programs like welfare and Welfare to Work. One critic characterized Arduin’s cuts as “sanctioning children for what adults do.”
“The idea is to teach them to fish rather than give them a fish,” Arduin says. “And they need a little push sometimes. The system has become a vicious cycle. It traps people.” But even if her tough-love approach to social programs changes the behavior of 90 percent of parents on welfare, she says she’ll inevitably “hear an argument on the other side” that the children of the other 10 percent “will suffer.” She dismisses such statements as baseless political fodder. “There’s no evidence that if you give a welfare recipient cash, they’re spending it on their kids.”
Arduin has learned to stick to her principles and ignore criticisms she characterizes as sensationalistic, unfounded, and often compromised by their source. “If you’re a not-for-profit provider, you’re concerned about your funding stream. Instead of expressing concern that the country’s not going to pick up their tab, they talk about who’s going to get hurt. It’s a great way to make noise.”
On a cool Monday night in March, Donna Arduin pulls a Mercedes E-class up to the Governor’s Club in Tallahassee and hands the keys to a valet. She walks into a room full of state senators and lobbyists and makes her way from table to table. A player piano sends lounge music wafting over a steady rhythm of chatter and low rumbles of laughter, the noise mingling with smoke eddying from expensive cigars. A plasma screen shows FOX News on mute, but the Florida lawmakers, who have put their Blackberrys and Palm Pilots on tables next to single-malts and merlots, are too engrossed in conversation to notice.
Still, no conversation survives Arduin’s presence—as soon as she makes her subtle overture to a table of Florida’s landed elite, they’re out of their seats hugging her and kissing her on the cheek.
It’s the legislative period in Florida, which is condensed into two months of what Arduin calls a “frat party, at least as I remember them.” So much legislation gets done over drinks at nightspots like the Governor’s Club that Arduin’s boyfriend, Dave Ericks, a lobbyist, decided to buy one. It seems to make sense: The Florida Assembly’s Republican majority comprises mostly expats from the private sector who’ve made their fortunes and live by the philosophy that a little diversion is lubricant for productivity. Arduin swears they get as much done in two months as any other state does in a year. But tonight at the Governor’s Club, it’s all about Arduin. She’s been more or less absent for two years—away working with Schwarzenegger, then starting up Arduin, Laffer & Moore, the private economic-consulting firm that now takes up the lion’s share of her time.
Some treat her with a filial affection, some with cautious deference, and some try timidly to engage her in debate; tonight the hot topic is a report her new firm has been commissioned to do—and will present tomorrow—about why the state should fund a medical school for the University of Central Florida in Orlando.
“Why not just make a satellite of UF?” a lobbyist asks her.
“All the research dollars and professors will go to the main campus.”
“So why not try to build up Gainesville?”
“Well,” she says, “no one wants to be in Gainesville.” Then, with a soft poke at the city’s better-known staples, she adds, “except professors and horses.”
Arduin has a long face, dark eyes, and a short, round nose. She is thin and fit, a strong woman who can be delicate in manner when she needs to be. Her cheeks are rosy, and her features are as soft as her voice, so the decidedly unpopular decisions she delivers come out like powdered sugar. “When you think of someone who’s managed four state budgets, your first thought is not her, it’s George Schultz, or me, some graybeard,” says Arthur Laffer, the well-known supply-side economist who’s been advising U.S. presidents since Nixon and is now a partner in Arduin’s firm. “But what you see is a young, attractive, aggressive woman. It’s not central casting.” Arduin’s charm not only tempers what her critics would characterize as her dearth of fiscal generosity, it also gives her something of an Ann Coulter esteem in Republican circles. She’s respected and adored, even though she’s made herself the fat-camp counselor of pork-barrel spending—and she knows where the kids hide the candy bars.
On Tuesday morning at 5:00, Arduin’s mind is already moving at 100 miles an hour. As if today’s presentation wasn’t enough pressure, she sits on the board of Centracore Properties Trust (CPT), a $200-million company that’s just entered crisis mode. The company leases correctional facilities to operators like the GEO Group Inc., which issued a statement yesterday that it did not plan to renew its lease with CPT. Investors interpreted the announcement as a vote of no-confidence, and, by the closing bell, CPT shares had taken an 11 percent hit. Arduin’s pretty sure she knows what’s going on: GEO is trying to sink CPT’s stock price so it can gobble up enough shares to take over the company.
By 8:00, she’s in the Mercedes, whirring south, downloading e-mail and answering calls, simultaneously tweaking today’s presentation and coordinating CPT’s next move. She gets on the phone with Jeannie Woodford, California’s director of state prisons. “I wanted to see if you were interested ...” Arduin leads without a drop of desperation. The plan is to persuade California to lease the prisons directly from CPT, cut out GEO, and “announce it now,” to pump the stock back up before GEO can afford to buy a controlling share. There’s already been a lot of movement on the stock, and it’s fallen steadily from $28. By day’s end, shares will be trading at $19.
Still a few hours from Orlando, Arduin conducts business as she travels through the part of north Florida where Motel Six billboards boast of AARP discounts and a cartoon blonde on a road sign beckons passersby to Dolly Parton’s Dixie Stampede. Arduin points out a sign that says “Ten, Twenty, Life,” a zero-clemency initiative she worked on with Jeb Bush. “If you use a gun in a crime, you get ten years automatically,” Arduin says. “If you shoot it, you get twenty. If you kill someone, you get life. Part of the deal with Democrats was that we had to advertise so people knew about the law.” A few miles later, the Mercedes passes a billboard advertising a retail firearms outlet.
Today’s meeting is with the editorial board of the Orlando Sentinel, which has run some negative press on the plans for the new medical school. Arduin’s team needs to sell the editors on their economic-impact analysis to generate some positive publicity.
Arduin conducts the meeting by varying the warmth of her smile; she’s as frugal and deliberate with her words as she once was with the state’s checkbook. She has a way of making her smile seem stern, and she uses it along with a few soft-spoken words and a nod to refocus the conversation when it strays off course. In this manner she weaves UCF President John C. Hitt’s enthusiasm for the project into economist Perry Wong’s mastery of regional economics, manufacturing a convincing argument while deftly curtailing a meeting participant’s tendency to stray, as if it were a line-item extravagance.
Donna Arduin’s intellectual awakening came during the prosperous years of the Reagan administration, which she observed from the viewpoint of a wide-eyed undergraduate. The idea that you could manufacture your own success story if you worked hard enough hit home—growing up in Midland, Michigan, Arduin was a living Horatio Alger story. Her father was a high-school basketball coach who took a second job to send his three kids to prep school, and Arduin had to win multiple scholarships and juggle a grab bag of jobs to put herself through Duke. “I have no sympathy for people who want handouts from the government,” she says. And it’s not because she’s bitter that she had to work so hard to get by. It’s because she’s not.
When her professors would criticize her class for lacking the fervor the previous generation channeled into protests and demonstrations, Arduin took exception. “Life’s pretty good,” she would say. “I don’t really have anything to protest.” Arduin was by no means wealthy; it’s just that, to her, the supply-side economics of “the real president” seemed to be working pretty well. And, as a public-policy and economics major, she saw that the market handled things better than the government, that taxes kept money out of consumers’ hands where it belonged, and that private-sector spending was better than government spending. Arduin was beginning to develop her allegiance to the Republican Party.
Right out of Duke, Arduin went to work as an analyst for Morgan Stanley in New York and Tokyo. She stayed with Morgan Stanley for seven years, until Patti Woodworth, who was director of Michigan’s Office of Management and Budget and who had given Arduin a summer internship during college, lured her back to Michigan to work as her deputy. After one term under Governor John Engler, Arduin followed Woodworth to New York and served as deputy budget director under Governor George Pataki. The next stop was Florida.
Today Arduin’s loyalties are more complex than cut-and-dried conservatism, but her libertarian ideals align her with the party of Lincoln on more than just fiscal issues. However, after thirteen years of the kind of seasoning that comes from being dogged by relentless reporters, she’s reluctant to speak out on issues she’s not in a position to influence—and impervious to penetrating questions about some of the more sensitive social issues politicians must confront today.
Arduin anchors her libertarian philosophy to the ideological immortals. She keeps a copy of the Federalist Papers (signed by Tom Feeney, the ultra-conservative Florida Congressman) in her office, and applies its edicts in her policy decisions. She’s made a libertarian mantra out of the Jeffersonian quote “that government which governs best, governs least,” and in her own way realizes the message by taking a good hard look at any government program. When she first moved to California to work for Schwarzenegger, she toured the legislative chamber in Sacramento with some friends who were members of the assembly, and asked if she could push the buttons and cast a pretend vote. They said sure. So she walked up and pushed the red button to vote “No.”
“Typical,” they said. “She votes no without even knowing what she’s voting for.”
And while some would characterize Arduin’s general skepticism about government programs as a reverse-Robin Hood exploitation of the poor, she sees it more as defending taxpayers: “The revenue coming in,” she says, “comes from the people who work really hard and pay the money to the state. Most of those people aren’t getting back in services what they pay in. You don’t read stories about them. You don’t read stories about the person who’s working two jobs to take care of their family and pay taxes to the state so the folks you’re reading about in the papers can take all of these services.”
She’s well prepared for the criticism she receives because one of her guiding principles is, if you have your hand in economics, you damned well better know your policy. She’s well acquainted with the policy ramifications of her budget decisions, and, since her undergraduate days, has considered economics and public policy inseparable.
In Florida one of her structural changes—in addition to adding express elevators between her floor and the governor’s—was combining the budget and policy departments. Before she came, the budget director’s policy advisers seldom even attended meetings with the governor; Arduin had hers run them. (Jeb Bush recently appointed Arduin to the Florida’s Property Tax Reform Commission. “I have big plans,” she says. “I am speaking on a panel on state budget and taxes at a summit in Orlando next week. Jack Kemp is before us, and Newt [Gingrich] after, so I will be in conservative heaven.”)
But if Arduin’s constant inclination to break with custom when she thinks something can be done better flusters traditionalists, she’s learned to weather the fallout. “When I cut $400 million in pay raises for California correctional officers, we considered getting me a bodyguard,” she recalls. And although she doesn’t seem concerned with how many friends she has, even senators who’ve lost their pet projects to Arduin’s unwavering fiscal conservatism eventually come to respect her. Arduin says she’s known ever since she took the meat cleaver to her first state budget that, in this job, you have to dig in for the long haul. Back in 1991, after Arduin and Patti Woodworth carved $5 billion in programs out of the Michigan state budget, Governor John Engler’s approval rating fell to 13 percent. Arduin didn’t blink. They cut taxes, businesses crept back into Michigan, and, come election time, Engler breezed right into his second term.
The morning after the meeting with the Orlando Sentinel’s editorial board, Arduin is on her way back to Tallahassee, where Dave Ericks lives. She pulls up the Sentinel’s website and reads a glowing editorial about the plans for the UCF medical school. Jeannie Woodford from the California Department of Corrections and Rehabilitation tells her over the phone that they’re “very interested” in leasing from CPT, and will soon propose a deal that not only leases the properties but commissions CPT to build more. Arduin checks the analyst report on CPT stock. It’s been upgraded to “buy,” and has climbed back up to $23. So far, it’s been a good day, although there’s still plenty of meat left in her schedule for the week. Tonight she’ll be back in Orlando, where tomorrow she’ll make a presentation on the medical school to the UCF board of trustees, then fly to San Diego for a conference with her partner Arthur Laffer.
On Saturday, after watching Duke win the second-round game in the NCAA tournament, Arduin heads for the airport to fly back to Tallahassee. Waiting at a red light, she looks through the window at a homeless man sitting on the curb, holding up a cardboard sign that reads “Anything helps—Smile—God Bless.”
It’s an uncomfortable moment. The homeless man sees her, they make eye contact, he smiles, she looks away. Then, she turns back and, too softly for him to hear—but with conviction—says, “Get a job.”