http://www.nytimes.com/2004/01/10/national/10CALI.html?pagewanted=print&position=
January 10, 2004
Governor Seeks Big Cuts in California's Spending Plan
By JOHN M. BRODER
SACRAMENTO, Jan. 9 Gov. Arnold Schwarzenegger
presented his first budget on Friday, a $76 billion spending plan for
the state of California that includes significant cuts in health care,
public education and payments to local governments.
Mr. Schwarzenegger acknowledged that the reductions would be painful to
many of the poorest Californians but said that he was forced by
"irresponsible" spending under Gov. Gray Davis and the
Democratic-dominated Legislature to make those cuts.
"Over the past five years, the politicians have made a mess of the
California budget, and now it's time to clean it up," the governor said.
Governor Schwarzenegger, a Republican, said the state faced even more
severe cuts if Californians rejected a $15 billion deficit reduction
bond that will be on the ballot on March 2. His budget contains no new
broad-based taxes but includes increases in tuition at state
universities and in a variety of fees, including user fees for state
parks.
"We will not raise taxes," Mr. Schwarzenegger said. "Higher taxes will
punish working families. It will kill jobs and drive businesses away.
It will stall the recovery we need to pay for essential programs."
Mr. Schwarzenegger presented his budget plan in a direct and somber
tone, with little of the levity that has marked many of his other
public appearances since taking office in November. He spoke in the
same auditorium where California's secretary of state, Kevin Shelley,
made the new governor's improbable candidacy possible last July, when
he announced that recall organizers had gathered more than enough
signatures to put the recall question on a fall special election ballot.
The new governor promised in his campaign and in his State of the State
address earlier this week to "blow up" government agencies that were
not performing and make state government more efficient. But there was
little evidence of a major restructuring in the budget blueprint
presented on Friday. Some analysts called it a moderate document that
could have been prepared by Mr. Davis, whom Mr. Schwarzenegger replaced
in November.
The general fund portion of the budget came to $76 billion, a drop from
the $78 billion the state anticipates spending in the current year,
which ends June 30. Including special earmarked funds and bond
revenues, the proposal projects total state spending next year of $99.1
billion.
The budget includes a modest increase in state tax revenue over the
current year, based on projections of an improving economy. It also
includes $500 million in potential revenue from Indian casinos. Under
agreement with the state, gaming tribes currently do not pay taxes to
the state but pay modest amounts to offset the local impact of the
casinos. Mr. Schwarzenegger is hoping to negotiate a deal that would
allow expansion of gambling operations in exchange for payments to the
state.
The governor anticipated criticism from advocates for the poor,
university officials and representatives of local government, who are
all seeing their programs cut.
"Everyone will be worried about what this means," Mr. Schwarzenegger
said. "What it means is we have to cut back for the next two years
until we get out of this crisis. It's that simple."
Mr. Schwarzenegger promised during the campaign not to cut financing
for education, and this budget does include a $2 billion increase in
spending for kindergarten through high school classes next year. But
schools would have been entitled to $2 billion more than that under the
state's complex education financing formula. Mr. Schwarzenegger
negotiated a deal with the state's teachers' union to make that
reduction with the promise that schools would not face further cuts in
later years.
The budget proposed reducing the number of incoming freshmen and
raising fees for all students at the University of California and
California State University systems.
The governor's proposal does not contain any increase in sales or
income taxes, but relies on fund shifts, borrowing and one-time
accounting moves to cover more than half of the $14 billion shortfall
between spending and projected revenue for the fiscal year beginning
July 1. The plan anticipates $3 billion in proceeds from the $15
billion bond on the March ballot. The remainder of the bond proceeds
will be used to cover deficits in the current fiscal year.
The governor's plan cuts spending by more than $4.6 billion, with the
largest reduction, roughly $2.7 billion, coming from health and human
services programs. The proposal limits the number of new children
enrolled in health programs. It also raises deductibles and co-payments
for recipients of Medi-Cal, the state's name for the Medicaid program,
and cuts payments to medical providers.
Democrats and advocacy groups said that Mr. Schwarzenegger was singling
out the most vulnerable populations for the deepest cuts.
Anthony Wright, executive director of Health Access California, a
consumer group, said: "Under this proposal, hundreds of thousands of
children and others would be denied basic care, and millions of
Californians would have to pay more to get basic health services. The
governor is putting the burden of this crisis on low- and
moderate-income families, rather than restoring the tax brackets for
himself and other wealthy Californians, so they can share in the
solution."
Representatives of county governments, which would lose $1.3 billion,
also voiced opposition.
Steve Szalay, executive director of the California State Association of
Counties, said that counties delivered vital services, including public
safety, sanitation and health programs. He said the proposed cuts, on
top of more than $1 billion in reductions last year, would be
devastating.
Democrats in the Legislature were somewhat measured in their reactions.
They realize that Mr. Schwarzenegger's resounding victory last fall and
his ability to communicate directly with the public have changed the
political calculus in Sacramento. California's constitution requires a
two-thirds majority to pass a budget, and while Democrats dominate both
chambers of the Legislature, they do not hold two-thirds of the seats.
Under Mr. Davis, most Democrats expressed belief that the budget could
not be balanced without raising new revenue. Now, however, they appear
willing to try.
"If he can find a budget solution that more equitably distributes the
pain without raising taxes," said Speaker-elect Fabian Nuñez, a
Democrat from Los Angeles, "then we're willing to talk."
The governor said he hoped he could get Democrats to go along with his
proposals, as they have for much of his early agenda. In a lighter
moment in his news conference he said, "I don't have a specific plan on
how I'm going to deal with each one of the Legislators and how many
cigars I need to smoke with them when I get together with them and all
of those kinds of things."
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