Capitol and California – State Politics
Published: Sunday, Aug. 15, 2010 – 12:00 am | Page 1A

We’re more than 40 days into the state government’s new fiscal year. Democrats and Republicans still can’t agree on how to close the state’s estimated $19 billion deficit.

It wasn’t until recently, in fact, that Assembly and Senate legislative leaders settled on a detailed plan that has the support of both Democratic caucuses.

GOP legislative leaders and Gov. Arnold Schwarzenegger continue to push for the governor’s May proposal, though Republican lawmakers aren’t entirely on board.

The Republican governor says he thinks Democrats and Republicans are only about $4 billion apart in their negotiations. That is closer than anyone else is willing to suggest, but there are significant areas of agreement.

Democratic leaders have said for weeks that Republicans are willing to agree on ways to address more than half the deficit.

How close are we to having a state budget for the fiscal year that began July 1? Still several billion dollars away, at least. What follows is a look at the two plans – one backed by Democrats, the other by Republicans – on the negotiating table:


• Assume new federal dollars. Schwarzenegger’s budget relies upon $3.4 billion, while the Democratic plan projects $4.1 billion.

• Reduce the prison health care budget by $820 million.

• Reduce state personnel expenditures through attrition and delaying payments toward future health benefit obligations. Democrats project $678 million in savings; Schwarzenegger projects $548 million from the same proposals.

• Cut $1 billion from K-12 and community college funding for the 2009-10 fiscal year.

• Transfer $2.6 billion from special fund accounts.

• Raise $700 million through various new revenue ideas. GOP lawmakers oppose Schwarzenegger’s $76 million tax on property insurance policies, however.

• Make changes to Medi-Cal system. Save $182 million by moving seniors and disabled residents to managed care. Save $85 million by freezing hospital rates. Save $14 million by reducing radiology rates.

• Cut funding for In-Home Supportive Services. Schwarzenegger proposed saving $637 million, but Democrats have proposed a $250 million reduction. The governor’s plan relied upon unspecified cuts. The Democratic plan relies on leveraging as much as $200 million in new federal funds for IHSS.


• Assume the state will generate $585 million more by selling 11 office buildings.

• Assume the state will take in $1.4 billion in additional tax revenue based on higher projections by the state Legislative Analyst’s Office.


• Taxes. Democrats propose nearly $5 billion in new tax revenue. The change with the greatest impact on average taxpayers is a swap that hikes tax rates on income and vehicles but decreases the sales tax. Democrats also propose a new tax on oil production, suspending corporate tax delays and stricter enforcement of existing tax laws – including a mechanism to collect taxes from online purchases. Republicans oppose all of these ideas.

• Social service and health cuts. Republicans propose eliminating the state’s welfare-to-work program, CalWORKs, to save $1.2 billion. They propose cutting In-Home Supportive Services for low-income disabled residents by $637 million. They propose saving $750 million in Medi-Cal, in part by curtailing services and charging co-pays for patients. And they propose about $600 million in mental health funding for counties.

• Democrats support some cuts in IHSS and Medi-Cal, but not the most drastic ones. Democrats reject the CalWORKs elimination and mental health funding cut.

• State worker reductions. Republicans propose cutting state worker pay by 5 percent, increasing pension contributions and imposing one flexible furlough day a month. These would save about $1.5 billion. Democrats propose saving about $900 million from such agreements, though they want state worker unions to have the ability to negotiate those reductions.

• Size of reserve. Schwarzenegger wants a $1.2 billion reserve; Democrats want a $535 million reserve.

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