Wyatt Buchanan, Chronicle Sacramento Bureau

Tuesday, February 2, 2010

(02-02) 04:00 PST Sacramento — California’s leaders have been looking to Washington, D.C., for budget money they say is owed as a matter of law and fairness, but President Obama’s spending proposal released Monday shows he largely disagrees with those assertions.

The president has proposed giving California $1.5 billion of the $6.9 billion that Gov. Arnold Schwarzenegger and legislative leaders had sought during a highly publicized trip to the nation’s capital two weeks ago, according to the state Department of Finance.

The governor has warned of the wholesale elimination of social programs for the poor, sick and elderly if Washington isn’t forthcoming with the money.

“This represents a down payment on what California is owed, and the governor will continue to work with the state’s congressional delegation and federal officials to secure the balance,” said H.D. Palmer, spokesman for the Finance Department.

Administration officials had counted on the money as a significant part of the solution to the state’s $20 billion budget shortfall.

The $1.5 billion California would receive under Obama’s budget plan is part of $25 billion the president has proposed for all 50 states. It represents an extension in an increase of the amount of money the federal government reimburses the state for Medicaid expenses, which was part of the American Recovery and Reinvestment Act.

“The federal government is providing significant assistance to the states particularly through the Recovery Act,” said Adam Abrams, a White House spokesman. “As the president stated in his recent speech to the Brookings Institution, he supports extending further fiscal relief to the states as a whole – which would help California and states across the country during these challenging times.”

California leaders had asked for the extension for Medicaid, a program known as Medi-Cal in the state, along with extensions in other Recovery Act programs that were not included, according to the Finance Department. They also sought a permanent change in Medicaid reimbursement, $1 billion owed to the state because of what they said was a federal error, money for foster care and special education, and a full reimbursement of the cost to incarcerate illegal immigrant felons.

Obama’s budget for the 2011 fiscal year does include billions of dollars for California, as federal budgets do every year, and the state is set to receive a total of $85 billion in federal stimulus dollars. U.S. Sen. Dianne Feinstein called the proposed federal budget “a sober reflection of the challenges our country faces,” but she also said many pieces would be a “big help” to the state.

Feinstein and other congressional leaders from California have been cool to demands for assistance from leaders in Sacramento, saying a California-specific earmark would be a difficult sell in Congress.

A spokesman for House Speaker Nancy Pelosi, D-San Francisco, echoed Obama’s sentiment for state help through the Recovery Act.

“As we review the president’s budget, the speaker continues to believe that a jobs package and a comprehensive health insurance reform bill will be key to California’s economic recovery,” said Drew Hammill, Pelosi’s press secretary, noting that the jobs package already passed by the House would bring $6.4 billion to California.

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