Gov. signs budget after cutting $510 million

Gov. Arnold Schwarzenegger signed the state’s tardiest budget on record Tuesday after eliminating $510 million in spending, including financial aid for elderly renters and homeowners and a program he championed to lower prescription drug prices for low-income Californians.

His signature allows more than 80,000 state vendors’ outstanding bills to be paid. Some providers have gone nearly three months without promised funding.

The final version of the budget spends $145 billion. It sets aside a $1.7-billion reserve fund -- nearly $1 billion more than the Legislature approved. Schwarzenegger said his desire for a bigger financial cushion was the motivation for most of his vetoes.

“It’s painful,” he told reporters at an unrelated event Tuesday. “I had to think about it, rethink about it, but we needed the money, and I just wanted people to understand that the Legislature gave me no choice but to make those cuts to be fiscally responsible.

“Our economy, not in this state alone but in the country and worldwide, is in a situation where we have to be very, very careful with our spending,” he said.

At a separate briefing, Schwarzenegger’s budget director, Mike Genest, told reporters that even the increased reserve fund was “not nearly adequate,” given the ailing economy.

State Controller John Chiang, a Democrat who has sparred with Schwarzenegger over efforts to control spending, said the budget “was out of balance the moment it was signed.”

In a statement, Chiang said: “This budget dooms those most harmed by the record-setting budget stalemate -- students on financial aid, nursing homes, child-care centers and other providers of critical public services -- to relive the same nightmare next year. “

Some of the budget pain will be felt more immediately. Schwarzenegger eliminated $191 million in grants for elderly renters and homeowners. People over 62 with incomes of $44,096 or less or who are blind or disabled would have been eligible this year for payments to help defray their housing costs.

Nearly 460,000 renters -- most below the federal poverty line -- received payments of up to $343 in 2006, the most recent year for which the Department of Finance has figures for the program. An additional 140,000 homeowners received payments averaging $269 that year.

“Many of the folks who are dependent on these programs for survival are going to be hurt,” said Bill Powers, vice president of the California Alliance for Retired Americans. “For a governor who came into office saying he was concerned about seniors and children and folks like that, it’s a strange way to behave.”

Genest said the program would return next year if lawmakers have money to pay for it.

Administration officials noted that the state will continue another program in which the state pays the entire property tax bill of an elderly homeowner until he or she dies, and then recoups the money from the sale of the home or the estate.

For the second year in a row, the governor stripped funding from a program he and Democratic legislators created in 2006 to negotiate lower prescription drug prices for Californians. Schwarzenegger’s campaign had trumpeted that law to help him win reelection, but the state has not announced any discounts negotiated with pharmaceutical manufacturers as a result of the law.

“The governor’s penny-wise and pound-foolish and mean-spirited cuts add insult to injury,” said Assembly Speaker Karen Bass (D-Los Angeles). The budget she and other lawmakers passed last week “already will hurt middle-class and low-income families struggling in a difficult economy,” she said.

Assemblyman Roger Niello (R-Fair Oaks), the senior Republican on the Assembly Budget Committee, praised Schwarzenegger for “signing a budget today that does not raise taxes on working families, which was an important priority for Republicans.”

County welfare directors assailed Schwarzenegger’s line-item vetoes of $88 million for CalWorks, the state’s welfare program, and $11.4 million for adult protective services for efforts to catch elder abuse.

“This is pretty basic math,” Frank Mecca, executive director of the County Welfare Directors Assn. of California, said in a statement. “Cuts to programs that help people get to work mean less work and higher welfare payments. Cutting programs that detect and prosecute welfare fraud equals more fraudulent payments out the door.”

Schwarzenegger also deleted an $8-million program intended to curb the use of methamphetamine, and $5.4 million for labor studies at University of California campuses. GOP lawmakers have long sought to eliminate the labor programs, headquartered at UCLA and UC Berkeley, which they view as too sympathetic to unions.

After Schwarzenegger’s vetoes, the budget spends $103.4 billion from the general fund, the main pool of taxpayer money -- essentially the same as last year.

The current fiscal year began July 1, but disputes between lawmakers about how to erase a $15.2-billion shortfall led to the longest budget stalemate in modern California history.

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jordan.rau@latimes.com

Times staff writer Nancy Vogel contributed to this report.