Most Are Spared Deep, Painful Cuts in Compromise Budget Plan

Despite apocalyptic predictions, the $100-billion budget awaiting Gov. Gray Davis’ signature ensures that few Californians will feel deep pain. Rather, most will notice moderate cuts -- at least in the short term.

Taxes were supposed to rise $8 billion under early budget proposals. They’ll go up half that amount instead.

Thousands of poor people could have lost health-care coverage, and had monthly assistance checks cut. As it turned out, they’ll keep their coverage, although it won’t improve.

A proposal to force some parents to hold their children out of kindergarten failed, as did plans to make major shifts of transportation money and severe cuts in local government funds. Still, there were losers.

In the budget lawmakers passed this week, they pared about $7 billion from the state general fund, the $70 billion portion of the budget that pays for public schools, prisons and general government operations.

“On the whole, legislators on a bipartisan basis don’t like to cut major popular programs,” said former budget writer Fred Silva, a senior advisor at the Public Policy Institute of California. “They don’t like to cut education. Down deep, they don’t like to cut major health programs.”

The budget ensures higher fees at public colleges and new limits on enrollment. In public schools, there could be some teacher layoffs. Highway projects could be delayed, and there will be trims to spending on local government and the environment.

Lawmakers avoided having to slash spending by agreeing to borrow $17.2 billion. That ensures that some of the biggest winners in this year’s budget will be denizens of Wall Street, whose cut of California bonds probably will exceed $70 million.

Davis plans to sign the budget Saturday, and is expected to invoke his line-item veto authority to reduce spending further.

State workers could be among the losers. The budget assumes a cut of 16,000 positions from the state work force, and that workers will forgo pay raises of 5% to 7%.

On Wednesday, the union representing California Highway Patrol officers agreed to ask its 6,100 members to defer 5% of their raise until next July. In exchange, the state would begin paying 80% of the cost of their health-care premiums.

But Marty Morgenstern, Davis’ main labor negotiator, said he doubts he can achieve the full salary reductions of $850 million to $1.1 billion that Davis and legislators had sought. Rather, if other state employee unions agree to the same concessions as the CHP officers, the state would save $470 million, he said.

“I don’t think we can hope to negotiate much better than that,” he said, adding that many state employees have gone without pay raises for two years.

Davis administration officials also hold out some hope that they can persuade Indian tribes to pay $680 million in exchange for expanded gambling. An agreement does not seem near.

For most taxpayers, the budget is a mixed blessing.

Motorists will pay annual vehicle license fees three times higher than they paid last year. The fee, also known as the car tax, will rise from the current average of $70 a year to $210.

Also facing higher costs are college students and parents who pay their bills. Fees for California residents attending the state university system will rise from $1,572 last year to $2,026 a year.

University of California fees for undergraduates who are residents will jump from last year’s $3,834 to $4,984. Graduate students at both university systems also will pay an extra 30%. At Cal State campuses, that will be an extra $522 annually, while at UC, the increases will range from an extra $1,935 for nursing students to $3,533 more for law students.

“If that isn’t a tax, I don’t know what is,” said Assemblyman Darrell Steinberg (D-Sacramento).

The state’s two university systems will be forced to curb enrollment growth, university officials said Wednesday. Additionally, Cal State Chancellor Charles B. Reed said the budget will force the university to cut nearly in half its planned 7% enrollment expansion for the coming year, denying admission to as many as 30,000 students for the spring term.

“This is an extremely difficult budget for the university,” said UC President Richard C. Atkinson. Other taxpayers were spared. At the start of the year, Davis proposed raising income taxes on individuals earning more than $150,000 a year, to generate $2.5 billion. Davis also wanted a 1% hike in sales taxes, to generate $4.5 billion, and a $1.10 per pack rise in cigarette taxes. All three proposals died.

Here are some major areas affected by state spending:

* Public schools: K-12 will be cut by about $2 billion. Per-pupil funding will drop by $180 -- from $7,067 last school year to $6,887 this year. Still, education will continue to consume by far the largest share of the state’s general fund -- $28 billion of $71 billion this year.

Most cuts will come in funding for summer school, textbooks, maintenance and other programs. Schools will not receive a cost-of-living increase this year, which would have been $600 million.

Districts may have to lay off as many as 3,000 teachers statewide, although the number is far smaller than administrators had feared.

In Los Angeles, officials say they expect to lose $5 million to $10 million for teacher and principal training, educational technology and maintenance.

District officials already have cut $360 million from this year’s budget. Those trims include proposed work furloughs of 2 1/2 to five days this year for all district employees; the plan must still be negotiated with the teachers union.

“It’s not a disaster ... but quality is affected,” said Joe Zeronian, Los Angeles Unified’s chief financial officer.

* Transportation: Hundreds of projects aimed at reducing traffic congestion will be delayed. In Los Angeles County, 125 projects will be deferred, said David Yale, director of regional programming for the Metropolitan Transportation Authority.

There will be a three-year delay in construction of the Exposition light rail line, which is meant to shore up the regional rail system by connecting Exposition Park with Santa Monica. Carpool lanes also will be delayed on the Santa Ana Freeway from the Orange County line to the San Gabriel River Freeway, and on the Antelope Valley Freeway in north Los Angeles County.

Many other projects will go forward. Among them: the Eastside light rail extension, the San Fernando Valley Metro Rapidway and the Wilshire Bus Rapid Transit Project. In Northern California, reconstruction of the San Francisco Bay Bridge will continue, as will other major bridge projects.

* Prisons: California’s sprawling prison system avoided sweeping cuts sought by some lawmakers who had hoped to use the crisis to change sentencing policy, including the early release of thousands of nonviolent offenders. Although such actions had been embraced by some other strapped states, it was anathema to Davis and others.

The Department of Corrections will have to swallow about $223 million in spending reductions. The cuts will force it to adopt new approaches aimed at slowing the tide of parolees who end up back in prison.

Most notably, some ex-convicts who commit minor violations of parole -- a positive drug test, for example -- no longer will be tossed back behind bars automatically but instead will qualify for home detention or a stay in a halfway house.

Other cuts in corrections will be realized by expanding education programs that allow inmates to earn credit toward early release and furloughing some prisoners to drug treatment programs four months before they are scheduled to go free.

* Health and welfare: Lawmakers cut by 5% payments to physicians, pharmacies and many others who provide health care to 6.4 million poor people whose health care is covered by the state Medi-Cal program. Davis had sought a 15% cut.

Among the cuts will be a 5% reduction in a program that pays for doctors to treat children from low-income families who have cancer, spina bifida, cerebral palsy and other life-threatening problems.

Medi-Cal recipients will be required to fill out eligibility paperwork twice a year instead of annually. As a result, many are expected to stop seeking benefits, or find themselves eliminated from the rolls.

Lawmakers rejected Davis’ proposal to eliminate some medical services for the poor, ranging from chiropractic services and acupuncture to certain medical supplies. But payments to providers will be cut.

Jerry Shapiro, 60, a pharmacist, said the cuts will erode what little profit he still makes selling prescription drugs to Medi-Cal patients. At his Uptown Drug & Gift Shoppe on Wilshire Boulevard near downtown Los Angeles, about 90% of his customers are on Medi-Cal, he said.

“The average age of my patients is 75,” Shapiro said. “This is my livelihood. But we’re getting precariously closer to the destruction of my safety net.”

Child-care advocates, after fearing the worst, said they were satisfied with a budget that, while reducing some reimbursements to providers, continued to fund subsidized care for most poor families. However, among those hurt by cuts will be children older than 12, who will no longer be eligible for state-subsidized care unless they have special needs. The spending plan also restricts access to publicly funded care for higher income families.

* Environment: California parks officials raised numerous fees last winter in anticipation of the tough year. Fees, which Davis had slashed in half in 2000, were raised back up at that time. However, Davis administration officials note that fees remain 10% lower than they were when Davis took office.

Republicans pressed for significant cuts to environmental programs, including elimination of the California Coastal Commission.

The Coastal Commission was spared, like most other conservation and resources programs. And the budget includes $120 million in new fees to fund environmental programs.

* Local government: The budget contains some pain for cities and counties.

In some early proposals, local officials faced the prospect of losing $4 billion. Cities and counties may take an $825-million hit this year, although the state would reimburse local jurisdictions by 2006.

“We’ve gone from potential cuts in the hundreds of millions to about $50 million,” said Deputy Los Angeles Mayor Matt Middlebrook. “It’s not good, but it’s much better than where we started.”

State budget cuts would drain $45 million from Los Angeles’ general fund, hindering street paving, sidewalk repair and tree trimming. They also may impede plans to hire an additional 320 police officers.

The state budget approved Tuesday will divert $135 million from local redevelopment agencies to education programs. In Los Angeles, that means about $4 million, which is expected to slow plans to invigorate neighborhoods from North Hollywood to downtown’s skid row.

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Budget Concessions to the GOP

The final budget compromise gave Republicans about $270 million in additional spending. Included in the concessions, granted by the ruling Democrats in exchange for Republican votes needed to pass the budget:

Restored $115 million to local redevelopment agencies.

* Reinstated $39 million in reimbursement to local governments for fees to sheriffs to compensate for the cost of booking certain offenders.

* Restored funding for an $18.5-million program that gives $500,000 grants to the 37 smallest counties for their sheriffs’ departments.

* Agreed to give $5 million more of property tax revenues to counties under a formula that allocates $4 million to heavily Republican Orange County.

* Restored $16.1 million to a program that reimburses sheriffs’ and probation departments for certain training costs.

* Allocated $50 million for school districts whose per-pupil spending is below the state average. (Funding comes from cuts to other education programs)

* Agreed not to impose a timber harvest fee on lumber companies and reduced a pesticide mill tax on farmers. Loss of $15-million revenue to environmental programs would be made up by the general fund.

* Agreed to $5 million for improvement of rural airport security.

Source: The California Assembly

Los Angeles Times

Contributing to this report were Times staff writers Sharon Bernstein, Miguel Bustillo, Sue Fox, Peter Hong, Steve Hymon, Jean O. Pasco, Tim Reiterman, Carla Rivera, Stu Silverstein and Rebecca Trounson.