California meltdown

A biweekly flyover of the state budget crisis

Gov. Schwarzenegger releases his 2010-11 budget proposal, and it drops like a lead balloon. Read on:

Weds., Jan. 6: In his final State of the State address, Gov. Schwarzenegger promises not to cut further into education funding and to propose a constitutional amendment that would mandate that higher-education funding be kept at 10 percent of the budget or more and reduce spending on prisons to 7.5 percent. Currently, the percentages are approximately reversed.

Thurs., Jan. 7: The Sacramento Bee reports that the health-care advocacy group Health Access California estimates that Medi-Cal budget cuts have forced more than 450,000 Californians, including severely disabled people, to either pay for or go without dental care since July. A spokesman for the state Department of Health Services put the figure lower, at 327,000.

Fri., Jan 8: The governor presents his 2010-11 budget. To bridge an 18-month budget gap he estimates at $19.9 billion but others say is around $20.7 billion, he proposes to cut prison spending by $1.2 billion (mostly by slashing health-care programs), cut $2.9 billion from health and human-services programs, and cut $1.4 billion from state workers’ compensation by reducing their pay and benefits by 5 percent and laying off 5 percent of workers. He also would seek $6.9 billion in increased federal funding, arguing that the state gets back only 78 cents of every dollar its citizens pay in federal taxes.

If the federal money doesn’t come through, a trigger mechanism would impose up to $4.6 billion in program cuts and $2.4 billion in tax adjustments. The state’s In-Home Supportive Services, CalWORKS and Healthy Families programs would be eliminated altogether, and further state employee compensation cuts would be implemented.

The governor also proposes to roll back yet-to-be-implemented corporate tax breaks and to use revenues from the sale of oil leases off the Santa Barbara coast—something the Legislature earlier rejected—to fund the state parks. He also calls for an emergency legislative session to deal with an $8.9 billion shortfall in what’s left of fiscal year 2009-10.

The 2010-11 budget proposal is greeted with almost universal derision. Veteran Sacramento Bee columnist Dan Walters says it is “riddled” with “fanciful and politically unrealistic notions.” Other commentators and Democratic legislators are similarly critical.

Tues., Jan. 12: Legislative analyst Mac Taylor predicts that the state will get no more than $3 billion of the $6.9 billion in federal aid it’s seeking. He cautions against eliminating safety-net programs altogether and warns that cutting IHSS could drive more low-income people into more-expensive nursing homes. He also questions whether the governor would be able to realize $1.4 billion in savings from employee compensation.

Weds., Jan. 13: Standard & Poor’s lowers California’s credit rating from “A” to “A-,” the lowest state rating in the nation. The reduced ratings could raise the cost to taxpayers of borrowing money.

Thurs., Jan. 14: Speaking at the Tri-Counties Economic Forecast in Chico, state Controller John Chiang warns that, if the governor and Legislature don’t act strongly “in the next couple of months” to balance the state budget, it will run out of cash to pay its bills and again have to resort to IOUs. There are four options, he says: cut health care, education and prisons or raise taxes.