Schwarzenegger's proposed budget cuts social service, higher education

Spending plan criticized for big borrowing, use of tactics he vowed to avoid

January 10, 2004|By Evan Halper, Peter Nicholas and Jeffrey L. Rabin | Evan Halper, Peter Nicholas and Jeffrey L. Rabin,LOS ANGELES TIMES

SACRAMENTO, Calif. - Gov. Arnold Schwarzenegger released his 2004-2005 budget yesterday, cutting deeply into social service and higher education programs but also attacking much of the state's $15 billion deficit with questionable assumptions and borrowing he had promised to avoid.

The budget includes more than $3 billion that hinge on events largely out of the control of the governor and Legislature, such as court appeals and economic trends.

It relies heavily on negotiations that have yet to begin with Indian casino tribes and state workers, from whom the governor wants to wrest salary and benefit concessions. And it assumes that major savings will occur by reducing the rate paid to doctors who treat Medi-Cal patients and borrowing to cover pension fund payments - both of which judges have signaled may be in violation of federal or state law.

Still, Schwarzenegger portrayed his budget as a financially sound and responsible contrast to those of his predecessor, Democrat Gray Davis.

"In the last two budgets the easy choices were made," Schwarzenegger said at a news conference held in a downtown auditorium because the Capitol press room could not accommodate the overflow of journalists. `'Those budgets were shell games, using tricks and gimmicks to put off the hard decisions until after the next election cycle."

The budget would result in tens of thousands of low-income Californians losing access to medical care through $2.7 billion in social service program reductions. An $866 million cut to higher education would raise tuition 40 percent for students enrolled in university graduate programs, and other cuts would lead to a bigger percentage increase in the cost of attending community college.

Local governments would lose $1.3 billion under Schwarzenegger's plan to divert property tax receipts to the state - a maneuver that stirred outrage among some of the same mayors and city council members who heaped praise on the governor last month for making good on a commitment to replace $4 billion in lost vehicle license fee revenue.

This budget will make reductions," he said, "and these are very difficult decisions that I do not take lightly. ... A bankrupt California will not be able to provide services for anyone."

The annual release of the budget is the first step in a lengthy negotiation with state lawmakers that promises to spill into the summer, as officials struggle to close what Schwarzenegger said is a projected $14 billion deficit.

Democratic lawmakers were measured in their reaction yesterday, saying they wanted to carefully review the cuts proposed in a broad swath of programs. Republicans, business groups, and conservative taxpayer organizations praised Schwarzenegger's approach.

But while he would rely on program cuts, borrowing and the deferral of some costs until next year, the budget does not come to terms with a fundamental imbalance between what the state spends and what it collects in revenues. And so the state could face a deficit of $3 billion to $7 billion in 2005-2006 without more enduring solutions.

The governor's plan also assumes that voters will approve a $15 billion bond that will appear on the March ballot. Schwarzenegger's internal public opinion polls show that the bond is a tough sell, though it could pass if the governor mounted a vigorous campaign.

Schwarzenegger's spending plan undermines his proposed balanced budget initiative, which he wants voters to approve along with the bond in March. Having promised to limit state spending, Schwarzenegger has portrayed the balanced budget measure as tantamount to tearing up the state "credit card," preventing California from borrowing to close budget shortfalls.

Yet his budget proposes to borrow $950 million to cover payments owed to the state's pension fund for government employees.

"He must have gotten another one [a credit card] in the mail and decided to start using it," state Treasurer Phil Angelides said in an interview.

The Los Angeles Times is a Tribune Publishing newspaper.

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