Schwarzenegger lays out bleak Calif. budget, calls for deeper cuts to health, social programs

Schwarzenegger lays out bleak California budget

SACRAMENTO, Calif. — Gov. Arnold Schwarzenegger on Friday called for eliminating California’s welfare-to-work program, one of the deep cuts he proposed to close a $19 billion budget deficit in the coming fiscal year.

Slashing the welfare program would affect 1.4 million people, two-thirds of them children.

In releasing his revised budget plan, the Republican governor laid out the most severe cuts to health and welfare programs since the state tumbled into recession nearly three years ago. He said cuts to government services over the past few years have done away with the “low-hanging fruit.”

“We now have to use the ax to eliminate some of those programs,” he said.

The Republican governor announced his revised budget plan for the fiscal year that begins in July, as the state’s 12.6 percent unemployment rate ranks among the highest in the nation and tax revenue remains low. In April, personal income tax was $3 billion less than projected, which wiped away earlier revenue gains.

The state’s general fund spending will be $83.4 billion for the new fiscal year, which the administration says brings government spending to 1998 levels after adjusting for population and inflation. The deficit accounts for more than 20 percent of all projected spending.

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

Gina Jackson, a single mother who lives in Fremont in the San Francisco Bay area, said she would not be able finish her college degree in political and social science without the state’s assistance. She currently receives about $1,000 a month to cover after-school care for two of her four children.

“I certainly can’t take my kids to school with me every single day,” said Jackson, 45, who was laid off from her job as an administrative assistant two years ago.

The governor and Republican lawmakers have vowed not to raise taxes, as the Legislature did last year, ensuring that spending cuts will be the main solution. That could leave single mothers, foster youth, children from low-income families, the disabled and seniors who rely on state services feeling most of the pain from the recession’s continued effects on California government.

Schwarzenegger acknowledged the cuts will be painful, but said he has no other options because the state’s tax revenue has plummeted.

“We are left with nothing but tough choices, as you can see,” said Schwarzenegger, who appeared somber and at times frustrated in presenting his updated budget plan.

Schwarzenegger and lawmakers have made cuts, borrowing and adjustments of about $60 billion over the past two years as tax revenue fell far behind annual spending obligations. Among the examples: Dental and vision care benefits were eliminated for those insured under Medi-Cal, the state’s version of the federal Medicaid program.

The administration said Friday it would restore vision coverage as required under new federal law but the governor proposed limiting prescription drug benefits and doctor’s visits.

To help close the budget gap, the governor is asking lawmakers to change the way the state calculates education funding to save the state more than $2 billion, which would hold year-over-year spending roughly flat for public schools. Overall funding for K-12 schools and community colleges has already dropped by 12 percent over the past three years.

The governor also wants to eliminate state subsidies for child care, which would affect 142,000 children.

Schwarzenegger also made good on his threat from earlier this year to eliminate the state’s welfare-to-work program unless the federal government gave California an additional $6.9 billion, which Schwarzenegger maintains is its fair share. So far, the state has received about $3 billion.

He did not follow through on a similar threat to eliminate Healthy Families, which provides health care to nearly 700,000 children from low-income families, because of requirements under the new federal health care law.

Instead, Schwarzenegger proposed cutting $15 million from the program and shifting more of the costs to recipients, including raising the co-payment for emergency room visits from $15 to $50.

Democratic leaders responded forcefully to his latest budget proposal, saying they will not allow programs for the needy to be gutted.

They pledged to find a way to maintain core health and social programs, such as in-home care for seniors and welfare assistance for single mothers. It’s not clear how those programs will be sustained at current levels without a tax increase, which Schwarzenegger opposes, or even more money from the federal government.

Democrats want to close tax credits and loopholes, noting that the state allows $50 billion worth of tax deductions.

“We will not pass a budget that eliminates CalWORKS. We will not be party to devastating families,” said Senate President Pro Tem Darrell Steinberg, D-Sacramento. “What kind of civilized society maintains business tax breaks and eliminates child care? That’s not the California I take pride in living in.”

Assemblyman Jim Nielson, R-Yuba City, vice chairman of the Assembly Budget Committee, said he hoped CalWORKS would not be cut entirely, but conceded it could come to that.

“If we are going to fund it at any level, then we have to balance the budget around and shift dollars from other sources,” Nielsen said.

In recent years, Schwarzenegger and Republicans won a series of corporate tax credits and giveaways, costing the state treasury an estimated $2 billion a year. They say such tax cuts prompt businesses to create jobs, but Democrats said there is no evidence they have done so.

While Democrats control both houses of the Legislature, Republican support is needed because of the two-thirds vote threshold required to pass a budget and tax increases. Schwarzenegger and the Legislature approved one of the largest tax increases in state history a year ago, raising the personal income and sales taxes, as well as the vehicle license fee.

Republican lawmakers say such a move is off the table this year.

“Until we get serious about job creation in the private sector, California’s fiscal problems will continue,” Republican Sen. Bob Dutton of Rancho Cucamonga, vice chairman of the Senate Budget Committee, said in a statement. “We won’t restore California’s economy by trying to tax our way out of our budget problems.”

Even last year’s temporary tax increases were not enough to put California on firm fiscal footing. The national recession continued to batter the economy of the nation’s most populous state, which has been wracked by high home foreclosures and job losses across almost all sectors of the economy.

All the tax increases passed last year are set to expire in June 2011.

Associated Press Writers Cathy Bussewitz, Don Thompson and Juliet Williams contributed to this report.