Budget Mess Could Mean Summer of Fiscal Doom

By JUDY LIN
|  Saturday, May 15, 2010  |  Updated 5:39 PM PDT
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Gov. Arnold Schwarzenegger listens to a reporters question concerning the state budget approved by the legislature, during a Capitol news conference in Sacramento, Calif., Friday, July 24, 2009. Lawmakers worked through the night to approve a complex package of spending cuts, local government raids and accounting maneuvers to fill California's gigantic budget deficit. Schwarzenegger is expected to sign the budget bills after making further cuts, early next week.(AP Photo/Rich Pedroncelli)

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Having already cut billions from state programs and tried tax increases, Gov. Arnold Schwarzenegger and legislative leaders from both parties say they are in no mood to compromise as they face California's latest summer of fiscal gloom.

Schwarzenegger on Friday released his revised spending plan for the fiscal year that begins in July, forcing state leaders to tackle another massive shortfall -- this one estimated at $19.1 billion -- and consider deep cuts. The financial distress has been brought on by a recession that has seen jobs evaporate and tax revenue to state and local governments plunge.

At times somber, the Republican governor called for his deepest cuts to date on social welfare and health programs for the needy. He even proposed eliminating the state's main welfare program, which would affect 1.4 million people.

"California no longer has low-hanging fruit. In fact, we no longer have any medium-hanging fruit, nor any high-hanging fruit," Schwarzenegger said. "We have to take the ladder away and shake the whole tree."

Democrats say lawmakers have done enough shaking in recent years, cutting billions of dollars from state programs. Republicans say more cost-cutting is the only way to deal with the state's declining revenue. They refuse to raise taxes again, after the Legislature imposed a series of temporary tax increases last year.

"This lean budget proposal has something for everyone to hate, but you can't spend what you don't have," said Sen. Bob Huff, R-Diamond Bar.

The different reactions to the latest budget hole reflect the polarization in the state Capitol. Neither Democrats nor Republicans seem eager to compromise amid a politically charged atmosphere in which many of them are running for re-election or a higher office.

Schwarzenegger, meanwhile, is looking to make good on his original promise to voters from 2003 that he would reform the state's budgeting system, and says he won't budge unless lawmakers agree to his terms. He leaves office in January.

A prolonged budget stalemate, like those that have plagued California in recent years, would leave millions of Californians in a sort of financial limbo all summer. School districts have issued pink slips to nearly 22,000 teachers, hundreds of thousands of low-income families face uncertainty over health care and other benefits, and roughly 1 million children could be removed from the welfare rolls.

"How are we going to survive?" asked Keiyanna Coldcleigh of Antioch.

The 30-year-old single mother receives state assistance for after-school care to look after her 9-year-old son while she works as a manager at an In-N-Out Burger. That assistance would be eliminated under the budget Schwarzenegger proposed Friday.

Assemblyman Chuck DeVore, R-Irvine, blamed Democratic lawmakers who control a majority of the Legislature, saying they were responsible for the deficit because of years of overspending. His comments, like those of other Republicans, reflect a hold-the-line mentality against any kind of tax or fee increase.

"The public employee unions and Democrat lawmakers howling about proposed cuts should look no farther than the nearest mirror for the cause of this crisis," said DeVore, who is seeking the Republican nomination for U.S. Senate.

Schwarzenegger and Republican lawmakers also are pushing pension reform, saying high retiree costs for state workers are taking up an ever-larger share of the annual budget.

The administration says its $83.4 billion general fund brings state government spending to 1998 levels, after adjusting for population growth and inflation. The structural problem with California's budget is that tax revenues typically run behind annual spending obligations, even in good years. The problem has become glaring since the recession hit roughly three years ago.

Among the options Schwarzenegger presented is eliminating CalWORKS, the state's welfare-to-work program. The program provides a maximum of $694 in monthly cash assistance for families and helps single mothers with child care and job training.

He also proposed cutting the state's medical program for the poor by reducing eligibility, limiting doctor's visits to 10 per year, reducing funding for hearing aids and increasing copays.

"I think the prison inmates at this point are getting better medical care, better health care than we are," said Sandra Varga, 60, of Los Angeles.

She has been in a wheelchair since 2004 when a medical error left her paralyzed on the left side of her body and receives in-home care and health insurance coverage under the state's Medi-Cal program.

Democrats vowed to fight Schwarzenegger's budget cuts. They want to close tax credits and loopholes, noting that the state allows $50 billion worth of tax deductions.

They questioned the governor's values when he is willing to sacrifice programs for the poor, elderly and frail but unwilling to close corporate tax credits and loopholes that cost the state billions of dollars annually.

Schwarzenegger said he tried to craft a proposal that reflects California's values, but one that doesn't spend more than what state taxpayers are willing to give. Democratic legislative leaders weren't buying that explanation, foreshadowing what likely will be another drawn-out budget battle over the summer.

"The governor's suggestions are clearly more reflective of a hyper-partisan political agenda than in finding real solutions to our problems," said Assembly Speaker John Perez, D-Los Angeles. "Putting Californians back to work is the fundamental priority for Californians, and we do not have the luxury of another bruising summer of ideological warfare."
     
 

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