Davis Outlines Deep Midyear Cuts in Education, Health

Gov. Gray Davis proposed slashing spending from hundreds of state programs Friday, outlining deep cuts in public education, health care and other areas as part of a $10.2-billion package of midyear budget reductions and other savings.

The announcement unleashed a fierce debate over California’s priorities in the face of a projected deficit of more than $21 billion.

“These budget reductions are severe by any measure,” Davis said. “Enacting these cuts in midyear will be an extraordinarily difficult task, but we face an extraordinary challenge. No program will be held harmless, and it will not be possible for us to meet this fiscal challenge if decisions are driven by politics, fear or rigid ideology.”

The Legislature is set to convene Monday in a special session to discuss the governor’s proposals and other possible solutions to the looming budget crisis.

The deliberations promise to be intense: Majority Democrats say they will fight to preserve services to needy Californians, while Republicans say they will oppose any tax increases.

Davis, who has described education as his top priority as governor, delivered the biggest blow to public schools. He recommended cutting spending on kindergarten through community college by $3.1 billion this year and in the 2003-04 budget year, which begins July 1.

The governor also proposed cuts and savings of $2 billion in health and human services, $1.9 billion in government operations and $1.7 billion in transportation and housing.

If all those cuts were adopted, more than 200,000 Californians would lose health benefits, and some school districts would have to lay off employees -- just two snapshots of the human suffering the cuts would inflict, state officials conceded.

State employees, a favorite target of Republicans demanding cuts in the size of state government, face an uncertain year. Davis said the state could save $470 million in employment costs through pay cuts, furloughs, layoffs and other means.

As promised, the governor didn’t propose a tax increase. But he did recommend an increase in state park user fees to raise an estimated $4.5 million.

Davis’ proposed cuts provoked swift and sharp reaction from potential targets, offering a preview of the extraordinary pressure legislators will face as powerful interests try to protect their share of the budget.

“A cut of this magnitude in the current fiscal year will absolutely undermine our core mission to educate kids,” said Kevin Gordon, executive director of the California Assn. of School Business Officials. “There will almost certainly be an increase in class size and massive layoffs of support staff if we are forced to implement these kinds of cuts.”

Many school district leaders were scrambling Friday for information about Davis’ proposed cuts. Los Angeles schools Supt. Roy Romer learned details when a reporter called and recited the list of reductions.

Romer was not happy with what he heard. He openly fretted about making additional cuts in a district that already has slashed more than $400 million from its budget this year -- in part by raising class sizes in most grades. “It’s going to be very painful and tough,” he said.

The second-largest chunk of the state general fund budget -- health care -- faces about $1.2 billion in cuts, most of which were recommended by Davis this summer but rejected by legislative Democrats.

The governor proposed $167.4 million in reductions to Medi-Cal, the health-care program for low-income Californians. That includes a 10% cut in payments to doctors, nursing homes and other providers of Medi-Cal services, which would save about $90.4 million. Hospitals and federally qualified health centers are exempted from the reductions.

Davis spared Medi-Cal services for children and Healthy Families, the health insurance program for the working poor.

Still, the cuts will be devastating, said Beth Capell, a Sacramento lobbyist whose clients include health-care consumers and workers. Up to 1 million people, five times more than state officials earlier estimated, could lose health coverage, she said.

“The poorest people will have the most difficulty in getting health care,” said Capell. “The optional [Medi-Cal] benefits sound abstract, but these are people making $1,000 or $1,500 a month, and we’re asking them to pay out of pocket for diabetes supplies. These are people like diabetics in danger of losing their toes for not being able to go to a podiatrist.”

Davis also proposed eliminating child care for former clients of the CalWORKS program to save about $98 million.

State Finance Director Tim Gage said the state was prepared to renegotiate labor contracts with state employees in an effort to achieve needed savings.

“We’re going to ask [state employees] to recognize the fact that the state is in a dire economic circumstance,” said Gage, who fielded questions from reporters in Sacramento after Davis announced the cuts by telephone in Los Angeles.

The governor hopes the Legislature will act on the package by the end of January, Gage said.

As the size of the budget dilemma has come into grim focus in recent weeks, legislators on both sides of the aisle have waited for Davis to take the lead in proposing painful cuts. Friday, some were quick to criticize the package he presented.

“I told the governor prior to the press conference that I thought Senate Republicans would be supportive of many if not most of his proposals,” Senate Republican Leader Jim Brulte said from Hawaii. “I said for three years if we didn’t get spending under control, we would have nothing but a series of very, very bad options. We now have a series of very, very bad options.”

Three of the state’s four legislative leaders are in Hawaii: Assembly Speaker Herb Wesson (D-Culver City); Brulte of Rancho Cucamonga and Assembly Republican Leader Dave Cox of Fair Oaks. They and several other legislators are attending a gathering sponsored by one of the state’s most powerful lobbies, the prison guards union.

In Sacramento, some Democratic legislators criticized Davis for failing to put tax increases on the table for discussion, even though many independent experts say those will have to be part of the solution.

Davis, for example, did not propose raising vehicle license fees, an increase widely supported by legislative Democrats and expected to be presented in next week’s special session. Restoring the fees to 1998 levels could raise about $3.8 billion a year. Many Democrats also support an increase in the upper-end personal income tax brackets, but any general tax increase will require two-thirds approval in the Legislature -- and thus the support of some Republicans.

Davis must win the votes of at least two Republicans in the Senate and six in the Assembly for final passage of the 2003-04 budget next summer.

In addition to elementary- school cuts, Davis’ proposals would slash nearly $350 million from the state’s community college and four-year college systems. Those mid-school-year reductions are expected to translate into the first fee increases in eight years, along with class cutbacks and other reductions.

The boards of the 23-campus California State University system and the nine-campus University of California system will hold special meetings Dec. 16 to consider cuts and fee increases. The fee boosts would take effect in time for the January term.

CSU undergraduates who are California residents currently pay an average of $1,926 in annual fees, including systemwide and individual campus charges.

The UC Board of Regents will be asked to approve a $135 fee increase for the spring term. Currently, in-state undergraduates pay an average of $4,408 in fees, including health insurance.

That boost, is expected to yield $19 million. Still, the governor proposed an additional $74-million in midyear cuts to such areas as UC’s libraries, student services, outreach, cooperative extension and administrative operations, and some research.

*

Times staff writers Carl Ingram, Evan Halper, Duke Helfand, Stuart Silverstein and Charles Ornstein contributed to this report.