Governor's Budget Cuts, Borrows Tuesday, January 11, 2005 Sacramento -- Gov. Arnold Schwarzenegger proposed an $85.7 billion budget Monday that would cut assistance to the elderly, poor and disabled and once again relies on borrowing to help close what he now describes as a $9.1 billion deficit. In a plan that does not raise taxes, Schwarzenegger said he had no choice but to make difficult decisions such as eliminating cost-of-living increases for the disabled, slashing welfare for families and not giving schools $1.1 billion that they are owed this year. "Of course we would like to spend much more money on those various important different programs and on education, but the fact is that's all the money we have, and we must live within our means," he said. "There is great virtue in providing services to the people, but it is also virtuous to be wise and responsible with the hard-earned money people paid to the state in taxes." Schwarzenegger, calling California's formula-driven budget system lunacy, said the real solution to the state's continuing fiscal woes will come only when voters approve his budget-control proposals. The 2005-06 plan would increase spending on K-12 education, but the governor wants to suspend Proposition 98, the voter-approved measure that sets school funding, so that he can limit the increase. With state revenues increasing 6.8 percent, the governor's budget calls for a 4.2 percent increase in spending and relies heavily on borrowing. About $1.3 billion in transportation money would be diverted to help the state's general fund. The budget would use $1.7 billion of the deficit- reduction bonds approved by voters last year, leaving $2 billion for use in future years. Schwarzenegger said the state's continuing debt will be eliminated in 2006-07, if his budget is approved and lawmakers and voters accept a budget- system overhaul that requires across-the-board spending cuts if expenditures outpace revenues and legislators and the governor are unable to balance the budget on their own. Without budget reform, Schwarzenegger aides say, the state will face a $6 billion debt next year. The budget release begins a monthslong process in which Democrats, who control a majority of the Legislature, wrangle with the governor and their minority Republican colleagues over how to balance the state's books. Since Schwarzenegger was elected in a recall in 2003, legislative Democrats have for the most part backed away from insisting that a tax increase is necessary to balance the budget. On Monday, they continued to press Schwarzenegger to find revenue in other places -- such as the federal government -- while continuing to promise to protect the poor and middle class. "Democrats are not going to settle for simply saying, 'Let's live within our means' and balance the budget on the backs of California's middle class, senior citizens and K-12 education," said Assembly Speaker Fabian Nuñez, D-Los Angeles. "We have to find bold, big, innovative ideas like telling the federal government to give us our fair share, and finding people who are cheating California's tax system, so that we can bring more revenues in line to where they actually need to be." Still, Nuñez said the governor had presented an honest budget. Democratic Treasurer Phil Angelides, who is running for governor in 2006 and has not shied away from taking on the governor, disagreed. "There is no morality to this budget, nor is there fiscal responsibility, " said Angelides, who vowed to travel across the state to oppose it. A tax increase for the state's wealthiest residents would be the fairest way of dealing with the budget gap, said Angelides, who suggested that Schwarzenegger lacks the courage to suggest new taxes to his business supporters. Assemblyman Mark Leno, D-San Francisco, agreed, saying that while there needs to be cuts, "I don't see equity. It's glaring when only the wealthy and his contributors are exempt." The governor plans to barnstorm the state to rally support for his proposals in the budget and his fiscal reforms. Even though the budget would increase spending, it contains severe cuts, especially in health and human services. More than 550,000 recipients of Medi-Cal, the state's version of health insurance for the poor, would pay monthly premiums for the first time under a Schwarzenegger proposal. The state would lower the salaries of health care workers who visit poor blind and disabled people at home, proposing to pay the minimum wage in a move advocates say could dramatically lower the workforce and reduce quality of care. The annual increases in cost-of-living payments to welfare recipients and 1.2 million elderly, blind and disabled would not be granted and would no longer be automatic. And a federally funded cost-of-living increase to the same group would go into state coffers instead of to recipients. The freeze would lock in payments to one elderly or disabled individual at $812 a month. The cuts in health and social programs would save $1.2 billion and are sure to play a large role in the upcoming political fight over the budget. Seniors and the disabled who depend on a housing-tax break also would be hit. The administration wants to slash the income level needed to qualify, from $37,000 to $13,200. Many of the programs targeted are ones that were always fiercely defended by former Senate President Pro Tem John Burton of San Francisco. With the powerful Burton gone because of term limits, political insiders will watch to see if other Democratic lawmakers step up and fight for the poor as effectively as Burton did. Sen. Wes Chesbo, D-Arcata, said Democrats aren't going to let up. "Democrats have not given up their conscience," said the chairman of the Senate Budget Committee. "Balancing the budget on the backs of poor people is not a Democrat solution." Kimberly Belshe, Schwarzenegger's secretary of health and human services, defended the governor's budget, ticking off the growth in health and social programs during the last six years. She noted that Medi-Cal spending was up 60 percent and payments for in-home health services had grown by 120 percent. Last year, the governor backed away from cuts to several programs -- including health care for children and other services for the developmentally disabled -- under pressure from patient advocates. He increased money for the state's AIDS drug assistance program, providing another $29.4 million to cover increased caseloads. The proposed budget also hits retirement plans for state workers and teachers. The budget saves $469 million by eliminating the state contribution to teachers' retirement, leaving either school districts or teachers themselves to make up the difference. State employees' contribution to their retirement would be raised to 50 percent, saving $205 million. The state wants to negotiate in all contracts as they expire the right to furlough workers for up to five days and the elimination of two vacation days. The governor also found himself continuing to defend his decision not to give additional money owed to education, even though schools are getting a 7 percent increase in funds. Education leaders said the governor broke his promise he made with them last year. "We had $5 billion in revenues and they wanted $4.7 billion," Schwarzenegger said. "We have to divide it up. There is only so much money that we have in the state budget, and we have to be responsible." The state's deficit -- pegged at $8.1 billion just last week -- grew by $1 billion because the administration is trying to create a $500 million reserve and the state settled a lawsuit brought by victims of a levee break in Yuba County in 1986. |