|Office of the Chancellor / Public Affairs||
Friday, May 14, 2004
San Francisco Chronicle 5-14-04
Betting on the future
Sacramento -- Gov. Arnold Schwarzenegger presented a revised budget Thursday that back-tracked on deep cuts to some health programs for the poor while still rejecting tax increases, a balancing act he hopes will catapult the spending plan to on-time approval by the Legislature.
The governor's $77.6 billion budget benefits from higher-than-expected tax receipts and banks on an improved economy to help California through its budget problems. He also relies on some borrowing and wants to exact steep concessions from the state prison guards union, which is scheduled for an 11 percent raise in July.
"Even with this good news, we have to be honest about our budget crisis," Schwarzenegger said. "We still have a lot of work to do."
Lawmakers, while pleased with some of the governor's decisions to scale back spending cuts, said they still plan to fight for students who are being turned away from colleges and for the elderly on public assistance who are not getting cost-of-living increases.
"It's nice he didn't do what shouldn't have been done before, but he doesn't get a lot of props from me," said Senate President Pro Tem John Burton, D-San Francisco. "It's like thanking people for not robbing a bank."
For the past several months, the Schwarzenegger administration has been negotiating with key interest groups. It reached agreements with education lobbies and local governments that provide the state immediate savings in exchange for future spending in those areas.
All of these moves were designed to help Schwarzenegger close a $15 billion deficit and keep his campaign promise that the state would have a budget signed into law by July 1. The Legislature has met its June 15 constitutional deadline for passing the budget only four times in the past 27 years.
"The people are tired of the summer slamfest in the Capitol,'' he said. "I am proud, and I'm all pumped up, and I'm ready.''
But Burton said he will not let the governor's desire for an on-time budget faze him.
"On-time budgets are very helpful in the press, but they mean nothing in the outside world," he said. "I'd hope we have it on time, but the money markets would rather see a sound fiscal plan five days late than an unsound one 10 days early."
Although Schwarzenegger has bypassed lawmakers and made deals with many of the Democrats' core constituencies, the Legislature holds the power of delivering an on-time budget.
But analysts warned that the Democrat-controlled Legislature has to walk a fine line.
"Unless they have a noble cause -- and he took away a lot of their noble causes -- they risk looking like the problem rather than the solution, " said Bruce Cain, director of the Institute of Governmental Studies at UC Berkeley.
Democrats have to be careful not to "win the battle and then have lost the war," said Barbara O'Connor, a political communications professor at Sacramento State University.
"It could be an unpopular result if they look like they are dragging their heels while the governor is moving," she said.
Schwarzenegger said he is treating lawmakers as partners in the budget process, but a few minutes later, answering the last question of his press conference, he said ominously: "A part-time Legislature is something I am looking forward to.''
In his revised budget, Schwarzenegger used $1 billion in increases in revenue, plus an additional $1.2 billion in taxes taken in through an amnesty program, to help increase contributions to transportation and eliminate some of the health and human services cuts he had proposed in January. The budget also includes almost $1 billion from the state's reserve.
He eliminated proposals to cap enrollment in Healthy Families, an AIDS drug assistance program and a program that provides care for children who are critically ill with cancer or other life-threatening diseases.
Also erased was a plan for a 10 percent rate reduction for doctors and ambulance services treating Medi-Cal patients. A similar move approved last year was ruled illegal by a judge.
"It is very difficult to make cuts, because of course I want everyone to have the programs," Schwarzenegger said. "It happened to be we have an increase in money, so we immediately went to undo those cuts."
Republican lawmakers said they will continue to target the programs the governor restored.
"We're going to look at fraud and abuse and unnecessary expenditures in the health and welfare areas," said Senate Republican Leader Dick Ackerman of Fullerton (Orange County).
Both Ackerman and Democrat lawmakers said they wanted to study the governor's budget to see if it contains high future costs. Ackerman said that while the budget remains balanced in 2005-06, it then starts to grow again.
All of the deals the governor struck give the state savings in exchange for the promise of future revenue. For example, the state university systems accept cuts and tuition increases in exchange for the promise that they will have enough money to enroll all eligible students in the future.
In addition, Democrats said they are worried that the governor is counting on money he may not get. Schwarzenegger continues to rely on $500 million from negotiations with Indian tribes, plus $465 million from renegotiated state employee union contracts and nearly $1 billion in pension obligation bonds.
Schwarzenegger's prison budget is also based on a big assumption. He's hoping to renegotiate a deal with the state's prison guards union that would cut $300 million in salaries and benefits from the union, something that would wipe out a raise guards are expecting in July.
The governor also proposed a general tax amnesty to encourage those who owe back income tax to pay up.
Total: General fund spending of $77.6 billion ($102.8 billion including bonds, special funds).
Medical enrollment: Proposals to limit enrollment in medical programs such as Healthy Families, which serves low-income children, and an AIDS drug assistance program have been withdrawn.
Medi-Cal rates: A proposal to reduce Medi-Cal reimbursement rates for medical providers has been withdrawn.
Welfare cuts: Payments to 465,000 welfare recipients still would be cut by 5 percent.
Future savings: The budget counts on $465 million in savings through
renegotiating public employee contracts, $300 million of that coming from
the prison guards union. It also assumes $450 million in revenue from
tort reform, which would need approval by the Legislature, that would
siphon money from punitive damage awards.
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