State budget calls for big cuts

January 9th, 2010

SACRAMENTO — Gov. Arnold Schwarzenegger yesterday unveiled a $118.8 billion state spending plan that avoids general tax increases but proposes deep cuts in services for the neediest Californians, setting off an immediate battle with legislative Democrats.

After the recession left California with a $60 billion budget deficit in the past two years, declining tax revenue leaves the Republican governor’s proposed 2010-11 budget with a new hole of $19.9 billion. He proposes to fill that gap by cutting health, social-services and transportation programs, reducing the pay of state workers, rolling back recent corporate tax breaks and hitting up the federal government for money he claims is owed the state.

“For our economy, recovery is on the horizon,” Schwarzenegger said. “And I wish I could say this about our budget, but I can’t. Tough times still lie ahead.”

To plug the deficit, Schwarzenegger called for $8.5 billion in cuts to health and welfare, prisons and employee compensation. He will seek $4.5 billion through accounting maneuvers and raiding dedicated funds, and $6.9 billion from the federal government — the latter effort proving to be a nonstarter over the years.

Overall, the budget would reduce state general fund spending on operations by $3.1 billion to $82.9 billion, its lowest level in six years.

Republican legislators were generally pleased with the budget, but Democrats were incensed, particularly over another round of deep cuts in social services — cuts that would be even more severe if the hoped-for federal money fails to materialize.

“With regard to the bulk of the budget proposal, I have one reaction: You’ve got to be kidding,” said Senate President Pro Tempore Darrell Steinberg, D-Sacramento.

Sen. Denise Ducheny, a San Diego Democrat who chairs the Senate Budget Committee, said social services have already been slashed “beyond the bounds of reason.”

San Diego County Supervisor Ron Roberts, a Republican, also blistered the proposed health and welfare cuts.

“The proposal would rip the heart out of our social-service program while it appears they want to maintain a bloated state bureaucracy,” Roberts said. “This would be a nightmare for counties throughout the state. They’re saying, ‘You guys be the bad guys.’ At the local level, you have to tell people we’re not going to help you anymore. That’s not the way to do business.”

Although Schwarzenegger announced that his budget “protects education,” a complicated swap that would replace the gasoline tax with an excise tax would indirectly result in reduced revenues for K-12 schools.

The gas tax maneuver would also reduce state payments for local transit projects, drawing criticism from San Diego Mayor Jerry Sanders.

Although Sanders said he was “somewhat relieved” that the governor is not seeking to raid more from local government coffers, he added, “A lot of people depend on that transit. This makes it very difficult for them to get home and get to work, especially during the off hours.”

Schwarzenegger did increase the higher-education budget by $225 million in hopes of avoiding another increase in student fees. Previous increases have led to protests around the state.

“I’m extremely optimistic that the university will fare well in the upcoming budget discussion,” said Gary Matthews, vice chancellor for resource management and planning at the University of California San Diego. “The recognition by the governor that education is an investment was an extremely important move.” However, he added, “The reality is we still face some significant budget challenges over the next several years.”

Stephen Weber, president of San Diego State University, sounded a similar note.

“At first blush, this is very encouraging. It’s a recognition of the importance of investing in education and a proposal to begin restoring funding to higher ed,” Weber said. “We have taken some pretty huge hits in the last few years.”

Local school officials and teachers union leaders kept a low profile yesterday, though some school officials in San Diego County and elsewhere expressed cautious optimism about the budget.

Business groups generally praised the budget for not raising taxes during difficult economic times, but expressed wariness about what the heavily Democratic Legislature would do when it gets its hands on it.

“The big question is what the Legislature is going to do next on these cuts, whether they implement the cuts or identify new accounting gimmicks as they’ve done in the past,” said Lani Lutar, president of the San Diego County Taxpayers Association.

Schwarzenegger acknowledged that a succession of governors has sought to wrest money from the federal government with little success, mostly to cover declining Medicare payments and the cost of incarcerating people who are not in the country legally.

“Yet I promise the people of California that I will be relentless, that I will be fighting for that,” Schwarzenegger said.

The governor contended that California only gets 78 cents in services for every dollar its taxpayers send to Washington.

“We are looking for fairness,” he said. “We’re not asking the federal government to give us something. It’s our money.”

Schwarzenegger also wants to cut $1.2 billion from prisons, mostly through reducing medical care for prisoners — a move that likely would set off another legal battle with the court-appointed federal receiver who oversees the prison health care system.

“I want to remind the federal judges and politicians that California is not Washington,” Schwarzenegger said. “We do not have the luxury of printing money or running trillion-dollar deficits.”

Because of the ongoing budget crisis, state workers have been required to take three unpaid furlough days per month, which represents about a 14 percent pay cut.

Schwarzenegger proposes to end the furloughs and replace them with a 5 percent pay cut and a 5 percent increase in retirement contributions.

“The private sector got hit very hard. People got unemployed. We have a 12.5 percent unemployment rate,” he said. “People had to take reductions in their salaries and all of those things, and so the public sector also has to take a haircut.”

Schwarzenegger also revived two fights that he lost last year — allowing more oil drilling off the coast of Santa Barbara to generate money for parks, and imposing a 4.8 percent surcharge on home and business property insurance to pay for increased fire protection.

The Senate approved the drilling plan last year, but the Assembly rejected it.

“We went down that route last year and cast a vote I wasn’t pleased with, but did it out of necessity,” said Steinberg, the Senate Democratic leader. “I am not at all enthused about it.”

Senate Republican Leader Dennis Hollingsworth of Temecula said he supports the drilling proposal, but not the insurance surcharge.

“You all know I’m not a big fan,” Hollingsworth told a Capitol news conference. “Senate Republicans think public safety is our first priority, and we ought to be funding public safety adequately before we move to trying to add more taxes for something that’s a basic function of government.”