Governor’s Budget Targets Cities, Counties

Gov. Arnold Schwarzenegger is expected to unveil a budget plan today that would take $1.3 billion from local governments, significantly cut back money for transportation and reduce the health benefits for low-income Californians, according to officials familiar with the details.

Although some of the cuts had been anticipated, local officials reacted with disbelief, saying they were blindsided by news that the administration planned to shift more of their property tax money to other programs.

Only weeks ago the governor -- flanked by an assortment of beaming mayors and county officials -- called a televised news conference to announce that he was restoring $4 billion that local governments lost when he reduced the vehicle license fee in November. The governor said at the time that he was keeping his campaign pledge not to harm cities and counties as a result of his tax cut.

Chris McKenzie, executive director of the League of California Cities, said Thursday that the property tax diversion would be crippling if the Legislature approved the governor’s budget. Two-thirds votes in each house are required for a budget to pass.

“This is going to have the same effect on local services that not paying the [car tax money] would have -- the same effect on public safety, library services, parks, public health, the general lineup of local government services,” McKenzie said. “It’s going to be devastating for some cities.”

Officials in Los Angeles County warned that the move would cost them about $280 million that paid for public safety, libraries, parks and other services.

“They would have a revolution if they tried to take more property tax,” said David Janssen, the county’s chief administrative officer.

A spokesman for Schwarzenegger said there would be no comment on the details of the budget until today.

The proposed cuts come as the governor attempts to close what he says is a $15-billion deficit for the fiscal year that begins in July. The budget would include no new taxes. But the governor will propose that some of the deficit be erased by obtaining new revenues from Indian gambling and by significantly raising the fees for graduate and community college students.

Schwarzenegger’s proposal would involve taking property tax money from local governments and using it to pay some of the state’s obligation to schools. City and county officials say they are still suffering from the last time the state made such a shift, during a budget crisis in the early 1990s. That move was supposed to be temporary, but the money was never restored.

The budget also includes at least $1 billion of the kind of borrowing that Schwarzenegger criticized when he was elected and that a Sacramento judge declared illegal last year. It would involve selling bonds to cover the state’s annual payment to the pension fund for government employees, freeing up other money to pay down the state’s deficit.

The borrowing would be on top of Schwarzenegger’s $15-billion bond proposal that will come before voters in March. The governor had earlier characterized the $15 billion in bonds as the last the state would sell to balance the budget.

The governor’s staff had briefed Assembly and Senate Republicans on the plan by midday Thursday, but left most Democrats in the dark.

Democrats were told they would be briefed this morning, shortly before the Republican governor publicly unveils the plan at an 11 a.m. news conference.

Officials familiar with the spending plan say it includes about $11 billion in cuts, borrowing, and accounting maneuvers that delay the payment of various state expenses.

Many of the cuts are one-time only, and thus would do nothing to solve the structural imbalance between what the state spends and what it receives in revenue.

The governor’s budget calls for saving money by not paying more than $2 billion owed to K-12 schools and community colleges. Leaders of several major education groups struck a deal with the governor -- formally announced Thursday -- to support his plan to postpone paying that money in exchange for a pledge not to push for deeper cuts.

As a result, payments to schools would be the same as they are this year, plus a modest increase to cover enrollment growth and cost-of-living adjustments.

For in-state undergraduate students in the Cal State and UC systems at least, the governor’s budget keeps a promise he made in his Tuesday State of the State address to limit their tuition increase to 10%.

Also in the budget will be an initiative to shift some of the freshman classes at state universities over to community colleges, where the cost to taxpayers is less than half as much for each student. Those students would then have the opportunity to transfer into the universities after two years.

Community college students and graduate students at UC and Cal State, meanwhile, are in for major fee hikes. At community colleges, fees would go up from $18 per credit to $26 under the proposed budget. Graduate students would see fee increases of as much as 40%. Schwarzenegger’s finance director, Donna Arduin, signaled the move weeks ago when she noted in testimony to legislative committees that the state’s graduate and professional schools were “heavily subsidized.”

Students are already mobilizing to fight the proposed fee increases, complaining that their tuition has risen about 40% since December 2002.

J.D. Henderson, 37, a third-year law student and president of the UCLA Student Bar Assn., said graduate and professional fee hikes would hurt the quality of California’s top-flight schools. “It seems Gov. Schwarzenegger wants our graduate schools to be as mediocre as his movies,” he said.

Government assistance to low-income Californians would also be reduced under the plan, which proposes capping enrollment in major health-care programs.

Officials in the governor’s office say the caps should not be characterized as cuts because no one currently receiving care would be thrown off the rolls. But health-care advocates disagree.

“There is no way to mince words about it,” said Anthony Wright, executive director of Health Access, which advocates for the low-income. “It will result in thousands and thousands of folks not getting care.”

The governor is also expected to try to save at least a few hundred million dollars by moving the elderly, blind and disabled who are now receiving state assistance into more structured managed-care programs. And despite a recent court decision blocking a 5% cut in the rates that the state pays doctors in the Medi-Cal program -- now averaging about $23 per office visit -- Schwarzenegger is seeking to further cut those rates by 10%.

Also targeted for major cuts are transportation projects. The governor will propose taking roughly $1 billion in gasoline tax money that is supposed to be earmarked for transportation under voter-approved Proposition 42. That money will instead go to balancing the budget.

Transportation officials say that will lead them to put off significant road building and repair projects, as well as alternative transportation initiatives.

The governor also will ask the federal government for at least $40 million to defray the $65-million cost of fighting this fall’s Southern California wildfires. And he will seek to impose new fees on timber interests seeking approval of logging plans. The California Conservation Corps. would suffer a cut of nearly $13 million, about 14% of its budget.

Just as former Gov. Gray Davis did, Schwarzenegger will seek help from Indian casinos in balancing the budget. He is proposing renegotiating gambling compacts to generate $500 million for the state. Tribes have expressed little interest in doing that.

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Times staff writers Sue Fox, Jessica Garrison, Peter Y. Hong, Gregg Jones and Rebecca Trounson contributed to this report.