Looming cuts in California's spending on a wide range of programs from Medicaid to highways could cost the state up to $4billion a year in federal matching funds, finance experts said Wednesday.

The loss of those funds at a time California is starting a new fiscal year $38 billion in the red and without a budget plan in sight will magnify the impact of the crisis across the state.

"You might call it adding insult to injury,' said Tim Ransdell, director of the California Institute for Federal Policy Research, a Washington D.C.-based think tank. "California can ill afford losing $4,000, much less $4 billion this year.'

Whatever pain will be felt by the loss of federal matching grant funding will, of course, only compound the current budget woes.

Gov. Gray Davis has proposed spending cuts as well as a higher income tax rate for the state's top earners and a half-cent sales tax. Republicans want spending cuts with no tax increase.

According to a state auditor report released in May, Davis' spending cuts, combined with a drop in some social services caseloads and changes to the way federal funding formulas are calculated, spell a 7.3 percent or $4 billion drop in federal funds.

About $707 million of that decrease comes from cuts to Medi-Cal, California's version of state-sponsored health care, to which Davis has proposed a 15 percent cut. The program is financed by a mix of federal and state funds.

"Every dollar the state doesn't spend for Medicaid means 50 cents the state doesn't get from the (federal) government,' Ransdell said.

Highways hammered

Other programs expected to take a hit include highway planning and construction funds of which California received $2.5 billion in 2002 and foster care maintenance payments, for which the state received about $1 billion in 2002.

During that funding cycle, the state received more than $38 billion in cash from Capitol Hill to administer federal programs. Of the 52 programs administered by the state, 33 of them have cost-sharing requirements, according to the state auditor.

"Any reductions in available state funding for these programs thus will double the impact of state reductions because federal funding will drop proportionally,' Auditor Elaine Howle wrote in her report.

Sheila Shima, budget manager for the health team of the Los Angeles County Chief Administrator's Office, said most of the impact to the county from state cuts will be from the loss of general revenues like the vehicle license fees.

"Clearly, we're concerned about any loss of federal funds that means lower or fewer services to the people who need them,' Shima said.

County burden

But, she said, an expected decrease in federal aid represents more of an indirect burden to the county.

Davis spokeswoman Hilary McLean said education, public safety and health insurance for children are the governor's top priorities. She noted that despite the budget crunch, California Healthy Families a program that receives federal matching funds is slated to receive an increase in funding.

"If we have to choose, those are the top priorities,' McLean said. And, she acknowledged, in other areas California will indeed suffer a federal assistance loss. "You can't spend money you don't have on an investment, no matter how good it is,' she said.