Schwarzenegger’s bid to address a $19.9-billion gap seeks steep cuts in education, healthcare, social services and transit. Republicans applaud the lack of tax cuts; Democrats see a fiscal retread.

By Evan Halper and Shane Goldmacher

January 9, 2010

Reporting from Sacramento – Gov. Arnold Schwarzenegger warned Friday that the state remained deep in fiscal crisis and proposed steep reductions in almost every major government program, but many lawmakers quickly dismissed his ideas as stale and vowed to push for alternatives such as tax hikes.

His proposal, aimed at closing a $19.9-billion gap, and the response to it foreshadow another year of paralysis in Sacramento as the governor and lawmakers struggle with the latest crippling shortfall.

The new budget blueprint — the governor’s last before term limits force him from office — comes after the state’s epic financial problems have already become a target of ridicule around the world. Even after $60 billion in program cuts, tax increases and federal stimulus money over the last year, California’s books are so far out of balance that the state is once again in danger of having to issue IOUs.

The governor announced that he would declare a fiscal emergency and immediately call the Legislature into a special session to make budget cuts. His plan includes no new broad-based tax increases. It relies instead on seeking billions of dollars in new federal money and on steep reductions in education, healthcare and social services, as well as cuts in mass transit, state worker pay and environmental programs.

“California is not Washington. We don’t have the luxury of printing money or running trillion-dollar deficits,” Schwarzenegger said at a news conference Friday morning. “I refuse to raise taxes, because there are so many areas where California can be smarter, more efficient and save precious taxpayer dollars.”

Republicans and business groups were supportive of the framework. “Tough choices are going to have to be made in this budget, but they are no different from the tough choices that every California family has had to make in these tough times,” said Senate Republican Leader Dennis Hollingsworth of Murrieta.

But Democrats who dominate the Legislature, labor unions and advocates for the poor were dismissive.

“With regard to the bulk of the budget proposal, I have one reaction: You’ve got to be kidding,” said Senate leader Darrell Steinberg (D-Sacramento). Assembly Speaker Karen Bass (D-Los Angeles) called the proposal a “big pile of denial.”

They and other Democrats derided Schwarzenegger’s plan as a retread of ideas they dismissed last year. “This is a recycled budget,” said Senate Budget Committee Chairwoman Denise Ducheny (D-San Diego). “These are exactly the same proposals he made last year. We talked about them, we rejected them, we did as much as we thought we could do, and he’s come back with the same ones that he had before.”

Democrats did applaud the part of the governor’s plan that relies on the federal government stepping forward with $6.9 billion in new funds for the state — money that he says California is owed as a result of various federal mandates. But it is far from clear that those funds will materialize. Members of California’s congressional delegation cautioned the state against relying on Washington to backfill California’s budget hole.

Rep. Zoe Lofgren of San Jose, head of the California Democratic delegation in the House, said Schwarzenegger “sounds like he’s trying to avoid responsibility. He’s the governor. We’re not. There has been a financial storm brewing in California for years. They haven’t dealt with it.”

If the new federal funds don’t come, the governor has proposed additional cuts that include eliminating the CalWorks welfare program and the state’s large network of subsidized in-home healthcare providers for the poor, elderly and disabled.

Health insurance for 900,000 poor children could also be eliminated if the federal funds don’t materialize, as well as large corporate tax breaks that have recently been put in place.

Even if help from Washington arrived, California would still face severe cutbacks.

Under the governor’s plan, state funding formulas would be changed to reduce payments to schools and community colleges by $2.4 billion. The proposed cuts come after school spending has already been rolled back considerably and many districts have been forced to impose layoffs, eliminate programs and increase class sizes.

Schools would be given the option of reducing the academic year by up to five days to absorb the effect of the cuts. Specific programs targeted for cuts include class-size reduction.

School groups expressed outrage at the proposed cuts, after the governor vowed earlier this week in his State of the State address to protect school funding in his budget. “We are stunned and perplexed,” said Kevin Gordon, a lobbyist for hundreds of school districts.

The governor would slash Medi-Cal healthcare for the poor while raising premiums and patient co-payments. Medi-Cal benefits for new, legal immigrants who have lived in the country less than five years would be eliminated.

Meanwhile, fewer children from low-income families would be eligible for subsidized health insurance; those that would remain on the rolls would pay more and no longer receive vision coverage. Voters, who last year rejected proposals to scale back costly social services programs created by citizen initiative, would be given another option to do so.

Some $950 million would be cut from the In-Home Supportive Services program, which helps the elderly, infirm and disabled live independently. The governor would tighten eligibility requirements for the program and pay minimum wage to those providing the in-home care. Similar cuts were approved last year but have been blocked by the courts. The governor assumes that the state will prevail in those cases — which is not assured.

He also proposed eliminating adult day healthcare — another option short of sending the elderly and sick to nursing homes. The move would save $104 million.

Monthly cash grants to the low-income elderly and disabled would be cut from $845 to $830, the federal minimum.

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