Published in Sacramento Bee, http://www.sacbee.com/1095/story/2062713.html
by By Steve Wiegand, Tuesday, Jul. 28, 2009
Gov. Arnold Schwarzenegger signed a 27-bill "good, bad and ugly" budget-balancing package today that imposes deeper cuts in programs that range from operating state parks to preventing AIDS and puts aside a relatively paltry $500 million reserve.
"This has been a very tough budget, probably the toughest since I have been here in Sacramento," the governor said as he signed the bills before a horde of reporters and aides packed into a Capitol conference room. "I'm the only one responsible for these cuts ... but we dealt with it because I think it's important to have a reserve."
Schwarzenegger characterized what amounted to re-balancing the budget adopted last February for the fiscal year that started July 1 as "good, bad and ugly:"
• Good because it contains no tax increases, "lives within our means" and includes reforms of some programs.
• Bad because of severe cuts in virtually every state program that serves California's most needy populations. "That's why you don't see us celebrating."
• Ugly because the package legislators sent Schwarzenegger on Friday lacked a reserve and was $156 million short of balanced, forcing the governor to make even deeper cuts. "That's ugly, when already we've cut so much," he said.
The governor also warned that more cuts might be in the offing if the state's economy continues to deteriorate.
"We are not out of the troubled waters yet," he said. "We are ready if our revenues drop further to make the necessary cuts to again live within our means."
At least one legislative leader took immediate umbrage to the cuts, challenging whether the governor had the legal authority to make further reductions in a budget adopted in February.
"We will fight to restore every dollar of additional cuts to health and human services," Senate President Darrell Steinberg said in a prepared statement. "We question whether the majority of these vetoes are legal.
"The Governor has the right to blue pencil an appropriation. The funding levels identified in the budget revision in many cases are not new appropriations. This is not the last word."
To eliminate the $156 million deficit and create the $500 million reserve, Schwarzenegger made $489 million in additional cuts, borrowed $50 million from one of the state's special funds and found about $117 million in savings from money not spent in the last fiscal year.
The biggest single cut was $80 million in funds allocated to counties to finance programs that investigate and remediate cases of child abuse and neglect. Administration officials said the program had been spared in earlier rounds of budget cuts.
"The situation has just gotten to the point we can't exempt them anymore," said Mike Genest, Schwarzenegger's finance director.
Other cuts include:
• $60.6 million from funds used to pay for Medi-Cal eligibility workers at the county level. Aid to recipients was not cut, but they will likely have to wait longer for service.
• $50 million from the Healthy Families Program, a 12-year-old program that provides low-cost medical insurance to low-income families that don't qualify for Medi-Cal. New enrollments were frozen two weeks ago due to budget cuts; officials say that unless other funding is found, some families now on the program will be disenrolled.
• $52.1 million from the Office of AIDS Prevention and Treatment. Officials said the cut means the elimination of all services except providing drug assistance and monitoring the number of cases.
• $27.8 million from the Williamson Act program, which provides money to counties that give tax breaks to landowners who keep their land as open space. Because the governor couldn't unilaterally abolish the program, he cut the budget to a token $1,000.
• $6.2 million from state parks. Coupled with earlier cuts, the added reduction could mean as many as 100 of the state's 279 parks could close in October. But officials cautioned that local governments with nearby parks, or public-private partnerships, might save some parks.
Officials are banking on the package being enough to convince Wall Street lenders to provide the state with $8 billion to $10 billion in loans to help with California's cash-flow needs, and allow state Controller John Chiang to stop paying many of the state's bills with IOUs.
"It's not going to be as easy as it has in the past," Genest said of the prospects of securing the loans.
Genest said administration officials would be huddling with Chiang and state Treasurer Bill Lockyer to figure out exactly how much in loans the state should seek, and when Chiang can turn off the IOUs.
But he acknowledged that even if all of the lawmakers' and governor's machinations work, the state has no unforeseen emergencies and no one successfully sues the state to thwart some budget-balancing effort, California's books might still be from $7 billion to $8 billion out of whack by the end of this fiscal year.
"No one can predict with certainty what's going to happen," he said.
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