News Articles

By Denis C. Theriault and Steven Harmon
MediaNews Sacramento Bureau
Posted: 01/08/2010 06:06:25 PM PST
Updated: 01/08/2010 06:13:03 PM PST

SACRAMENTO — Pressed by the weight of a $20 billion deficit, Gov. Arnold Schwarzenegger on Friday presented a state budget that slashes social services, transit funding and the California's prison system — while counting on $7 billion from the federal government to ward off yet another doomsday financial scenario.

The governor, meanwhile, vowed to keep parks open and hold the line on K-12 education funding. Further, he's allotted hundreds of millions in new funding for the state's universities.

And he wants lawmakers to start tackling his $83 billion spending plan immediately. In laying out his budget, Schwarzenegger called an emergency legislative session to ensure the state can pay its bills this spring.

But despite the governor's optimism, crisis may once again be unavoidable.

Much of his proposal relies on securing more federal money — and how much of it the state might receive, if any, is an open question.

If none of it materializes, Schwarzenegger grimly promised to scrap three key programs for the needy: CalWORKs, the state's welfare-to-work program; Healthy Families, which provides health insurance for needy children; and a program that provides home health care services for disabled and elderly residents.

Even if that federal money flows to the state, Schwarzenegger is still proposing $2.9 billion in cuts to health and human services, including reduced Medi-Cal eligibility and payments and cuts to CalWORKs grants. Several of those programs took severe hits last year, as Schwarzenegger and the Legislature struggled to close deficits totaling about $60 billion.

To soften the cuts, the governor would raise $2.4 billion more by closing tax loopholes.

Democrats pounced on the proposed cuts, which even Schwarzenegger called "Draconian."

"A fair question to ask the governor is, 'Who are you fighting for?'" said Senate Leader Darrell Steinberg, D-Sacramento.

Certainly not the people who've already made great sacrifices and are being asked to make more sacrifices."

Assemblyman Jim Nielsen, R-Redding, the vice chairman of the Assembly budget committee, said he doesn't like cutting social services but says it's all about refashioning the role of government.

"The budget challenge is an opportunity for us to rein in government," Nielsen said, "and get government under control. It gives us the opportunity to get the rope on and say whoa a minute."

Finance Director Ana Matosantos warned that if the governor's budget solutions aren't put in place by July 1, the constitutional deadline to pass a budget, then California risks yet another embarrassing summer of IOUs.

"We're not looking at the cash situation of last year," she said. "But we're looking at a difficult year."

This year's spending plan marks a grim bookend for Schwarzenegger, who swept into office in 2003 promising to rescue the state from its perennial financial woes but ultimately saw his bold agenda swallowed by them instead.

Only once during his tenure — amid a boom in state revenues in 2006 — did Schwarzenegger have money to lavish on his priorities and pay down the state's long-term debt.
The governor hinted at the shape of his budget in this week's State of the State address, pledging to protect education funding from further cuts while seeking billions in help from Washington, D.C., to blunt the impact of his budget cleaver.

But the reality that this year's budget would be among his most painful was implicit despite his optimistic tone.
The difficult budget approved by lawmakers and Schwarzenegger last summer once more only stitched over the state's structural budget deficit — closing $60 billion in deficits last year — and pushed much of the pain into the future.

What's more, billions of accounting maneuvers and key cost-savings estimates failed to materialize as expected amid political clashes and a slow-going economic recovery. Many of those gimmicks may not be available again, and federal stimulus money, which softened the brunt of some proposed cuts last year, is drying up.

Now, another year of haggling — over deep spending cuts, tax increases and funding priorities — all but promises to once again subsume all business in the Capitol.

Democrats have signaled they will hold fast against further cuts to the state's frayed safety net. Republicans insist that's where the debate must begin, and end. New taxes, they say, will crush any momentum once the economy revs up again.

While Democrats control a majority of both the Assembly and the Senate, budgets require two-thirds approval. That means leaders must peel off a handful of Republicans in support of their plans.

Add in the reality of an election year, in which political positions harden, and gridlock is all but certain.

Calling the governor's budget proposal "mean-spirited and unrealistic," Assemblyman Sandre Swanson, D-Oakland, said it would be met with a big rebuff from the Legislature.

"The only thing the governor's proposal clearly points out is that California has hit a wall," Swanson said. "Now, we're at a moment where we have to ask ourselves what kind of state will we be? Will we have a safety net that values children?"

Assemblyman Alberto Torrico, D-Fremont, said Schwarzenegger needs to start asking the wealthy and corporations to help the state out of its budget quandary — as previous Republican governors have done over the last 30 years.

"At some point, you gotta stop making seniors and disabled and kids pay for this recovery," said Torrico, who is running for attorney general, "and start to say to the big corporations, it's time for you to give your share."

The largest global recession since the Great Depression should not be the time to eliminate critical services, said Sen. Leland Yee, D-San Francisco/San Mateo.

"There are better ways to balance the budget rather than a thrash and burn strategy," Yee said. "Many of our poor, elderly and most vulnerable individuals simply would not survive this budget."

The budget should have shared sacrifice across the economic spectrum, said Assemblywoman Mary Hayashi, D-Castro Valley.

"Imposing a cuts-only budget falls solely on the shoulders of working people and the poor who have been most harmed by the recession," Hayashi said.

Other Democrats say that though the level of school funding is the same as last year, schools actually face cuts of $2.4 billion as costs continue to soar.

"Schools have increasing expenses, some have increasing enrollment and other dire circumstances," said Assemblyman Tom Torlakson, D-Antioch, who is running for state superintendent of schools. "Several hundred districts could go insolvent in the next year or two if trends continue. So, it's not good enough to just hold the line."