Wilson Goal: Long-Term Cuts in Aid to Ill, Needy : Budget: Governor’s plan reduces funding for many health and welfare services by $2.2 billion.

Proposing a historic reversal of the state’s policy toward the sick and the needy, the Wilson Administration detailed $2.2 billion in health and welfare cuts Friday that would wipe out homeless assistance, hospice care for the dying and shelter for pregnant teen-agers and dramatically reduce payments to poor mothers, children, the elderly, blind and disabled.

Struggling to balance the state budget and avoid a tax increase, Gov. Pete Wilson proposed a major retrenchment of the social service system that calls for long-term reductions in virtually every program for the disadvantaged.

Health and Welfare Secretary Russell S. Gould said the cuts represent an 11% decrease from last year’s spending--and could become deeper--even as caseloads for almost every state program are growing dramatically.

“We cannot rely on economic recovery to bring us out of this (financial) situation,” Gould said, noting that unemployment in California surged to 9.5% in June. “We need to make substantial . . . reforms in existing health and welfare programs in order to bring these programs under control.”

Gould’s briefing for reporters--three days into the fiscal year and 18 days after the Legislature’s deadline for enacting a budget--was the Administration’s first detailed explanation of how it proposes to make the cuts in health and welfare services it says are necessary to balance the state budget.

Wilson withheld his list of proposed health and welfare cuts as he tried to get the Legislature to first cut $2 billion from state spending on public education. But the Assembly, which supported a $605-million reduction, blocked Wilson’s proposal, and the state began the fiscal year Wednesday without a budget and out of cash.

Since then, Controller Gray Davis has reported sending out 25,789 IOUs worth $17.1 million to cover income tax refunds, hourly state worker salaries, county welfare administration costs and various goods and services. The use of IOUs, known as registered warrants, has proceeded more slowly than originally predicted but will climb dramatically next week if there is no budget.

A Senate-Assembly conference committee began considering Wilson’s budget Friday and was scheduled to return Sunday afternoon in hopes of drafting a compromise spending plan that can win the support of two-thirds of the members of each house and the governor. At that session it will consider the health and welfare cuts proposed by the Administration.

Gould said the cuts in health and welfare would go even deeper if the governor does not get the full $2-billion cut in education spending he is seeking. By the Administration’s accounting, every dollar not taken from education must be cut from health, welfare and other programs.

But Democrats say that even if there is no tax increase, Wilson’s proposed education cuts can be softened without forcing reductions as deep as the governor suggests in health and welfare. Although Democrats have accepted unprecedented reductions in state programs, they propose a number of one-time measures, including accounting shifts, to soften the blow.

So deep were Wilson’s proposed reductions that the governor even abandoned his early reluctance to slash major programs for the elderly--asking for a 4.5% reduction in aid to the aged and disabled.

Additionally, he proposes a 20% cut in in-home health services, a program to help primarily elderly people who might otherwise be institutionalized remain at home, and elimination of an emergency assistance program that helps the aged, blind and disabled with basic needs when they face sudden catastrophes.

State Health Director Molly Coye said officials made the proposed cuts selectively, trying to save preventive programs from a massive loss in funding and directing the bulk of the reductions at the least essential programs. But when asked what could be more essential, for example, than hospice care, a program primarily for dying AIDS patients, she could only shrug and say, “We had to make a lot of choices we didn’t want to make.”

Her comments did little to mollify advocates for the sick and needy, who accused the Republican governor of “class bias”--contending he is attempting to shelter the rich from higher taxes by destroying the safety net that government provides for the least fortunate.

“It is in keeping with his whole approach that says it is more harmful to ask business people who go to lunch to deduct less from their taxes than it is to deny essential health care and aid to the poor,” said Casey McKeever, directing attorney for the Western Center on Law & Poverty. McKeever and others have proposed removing the business lunch deduction on state income taxes as one means of raising revenue.

But Democrats appear to have abandoned hope of raising taxes, and Administration officials insisted Friday that an economic recession was no time to slap financially fragile businesses with new taxes. Administration officials acknowledged, however, that many of their cuts would shift the burden of caring for those no longer covered by state programs to California’s financially strapped counties, which in turn may have to raise local taxes if the programs are to be continued.

“In many cases when we cut Medi-Cal, we recognize these costs may fall on others,” said Coye. Medi-Cal is the federal-state program that provides medical care for the poor.

Advocates for the sick and the needy said the governor was doing nothing more then trying to dump the state’s fiscal problems and its political liabilities on local governments. Robert Fellmeth, director of the Children’s Advocacy Institute, predicted that many of those abandoned by state programs would “end up on the streets” because county officials, like Wilson, will refuse to raise taxes.

“What he is doing basically is setting someone else up to do his dirty work by transferring responsibilities,” Fellmeth said.

Sue North, governmental affairs director for the California Psychiatric Assn., said she was concerned that many of the cuts could have more than financial consequences for local communities. She said that under the governor’s proposed mental health cuts, for example, the state would save $7.6 million by giving counties responsibility for the mentally ill who have committed crimes but completed their sentences.

North said these people are now retained in state custody in mental facilities if they are considered dangerous. Under Wilson’s plan they would be released to the streets or the counties. “There is significant risk to community safety, from our viewpoint,” she said.

Times staff writers Carl Ingram and Paul Jacobs contributed to this story.

The Wilson Plan

Here are some major parts of Gov. Pete Wilson’s plan to cut $2.2 billion, or 11%, from the state’s budget for health and welfare services. The estimated savings are at the end of each category:

Department of Social Services

Reduce welfare grants 10% immediately and another 15% in six months for families with an able-bodied adult. Eliminate aid to children born to women already on welfare. $493 million

Reduce state grants to the aged, blind and disabled by 4.5%. $243 million

Reduce by 20% in-home services to the aged and eliminate a program that provides home repairs to isolated elderly people to help them avoid institutionalization. $104 million

Eliminate the Homeless Assistance Program, which provides the up-front money homeless people need to rent an apartment. $26.4 million

Eliminate routine inspections of family day-care centers for health and safety problems. Respond only to complaints. $5.7 million

Eliminate a program that provides housing for pregnant teen-age girls who either are homeless or are fleeing abusive families. $2.6 million

Department of Health Services

Eliminate from Medi-Cal the following services for adults: dental care, hospice care, psychology, chiropractic, podiatry, occupational therapy, acupuncture, medical supplies, non-emergency medical transportation, speech/audiology, heroin detoxification, physical therapy, rehabilitation. $84 million

Reduce Medi-Cal prescription drug costs by limiting prescriptions to 10 per month and paying drug companies less for their products. $78 million

Reduce by 10% Medi-Cal payments for surgery, psychiatry and anesthesia services. $11.3 million

Eliminate state licensing standards for nursing homes and rely instead on federal licensing process. $4 million

Reduce payments to nursing homes that care for poor invalids. $7 million

Eliminate long-term care, renal dialysis and follow-up to emergency care for illegal immigrants. $40 million

Shift cigarette tax money approved by voters for anti-tobacco education to prenatal care and other health services for the poor. $123 million

Mental Health

Reduce state payments to counties for mental health services to children. $2.1 million

Return to counties responsibility for treatment of gravely disabled convicted criminals whose sentences are completed. $8 million

Developmental Services

Reduce regional centers’ purchase of transportation, diapers and other services for the developmentally disabled. $22 million

Reduce services and extend allowable waiting list from 60 days to 120 days. $38 million

Rehabilitation

Reduce by 15% programs to rehabilitate and find employment for people with physical and mental disabilities. $5 million

Suspend cost-of-living increase and reduce by 10% the number of people served by rehabilitation programs. $12 million

Aging

Reduce nutrition programs for the elderly by 14.5%. $1.5 million

Alcohol and Drug Programs

Reduce support to counties by 6%, except for programs for drug-abusing pregnant women. $5 million

Administration

Reorganize departments within Health and Welfare Agency and cut up to 15% in operation of each of the departments. $17 million