Budget Ax Would Fall Heavily on the Poor, Ill

Gov. Arnold Schwarzenegger’s proposed budget promises higher costs and hurdles for thousands of Californians, from some children with cancer who would no longer get state help paying for chemotherapy to high school graduates who would be shunted to community colleges instead of universities.

The roughly $7 billion in government service cuts -- many of which are not specified in the budget documents -- would stall highway repairs, ban 13-year-olds from subsidized child care, make state workers pay more for their pensions and reduce payments to doctors who take care of Medi-Cal patients.

In introducing his budget before a bank of television cameras, Schwarzenegger called the cuts “very difficult decisions that I do not take lightly.”

“It is difficult. It is painful,” the governor said. “There are no two ways about it, because we have to make savings in so many different areas and programs. But it is the only way we can do it, because we don’t have the money.”

The heaviest cuts include capping enrollments in several programs, including Healthy Families, which subsidizes health insurance for poor children, and a program that covers the medical expenses of children with cancer, heart conditions, cerebral palsy and other serious disorders.

Alan Lewis, a cardiac pediatrician who treats patients under the program at Childrens Hospital Los Angeles, predicted a fractious debate over Schwarzenegger’s proposals.

“It’s unconscionable to take the economic savings that we know the state has got to do and put that burden literally on the life of a young child,” Lewis said.

“This is looking a child in the eye and saying, ‘No, you’re going to have to wait to be treated.’ ”

But Health and Human Services Secretary Kim Belshe said the budget appears to hit children and the poor the hardest because California has historically been so generous.

“It strikes a responsible middle ground between two unacceptable alternatives -- the status quo and eliminating” the programs, she said.

Here is a look at the effect of Schwarzenegger’s proposed cuts:

Health

Health and welfare programs would be reduced by roughly $2.7 billion, the largest share of the cuts.

The Healthy Families Program, which supplies health coverage for children in low- and moderate-income families, has grown from $59.3 million in 1998-99 to a projected $839.1 million in 2004-05. The governor proposes to cap enrollment at this month’s level, an estimated 732,000 children, and ask higher-income families to pay more for benefits such as vision and dental coverage.

The enrollment cap would mean that no additional children would be covered until others dropped out. Until now, state policy has been to encourage children of the working poor to join.

Schwarzenegger proposed a similar enrollment cap in a program that treats 37,600 children and teenagers whose families earn too much to be eligible for Medi-Cal but who have severe medical needs. The cap, which would save $40.7 million, means that some children with cancer and other expensive medical problems would not receive state aid.

And he proposed to have patients in the Genetically Handicapped Persons Program pay for a portion of their coverage, saving the state $576,000.

Some of the deepest cuts are proposed in Medi-Cal, the $30-billion federal- and state-financed health-care system that serves 6.8 million needy people.

The governor proposed a variety of cost-saving measures, totaling $880.5 million, including a 10% reduction in what the state pays doctors, ambulance drivers and other health-care provides.

Whether the governor can impose that reduction remains unclear. Last year, the Davis administration proposed a 5% reduction in payments. A federal judge blocked the move last month.

California Medical Assn. spokesman Ron Lopp said he was discouraged that the governor had gone ahead and proposed the 10% cut in light of the judge’s order.

The CMA has argued that doctors would stop treating Medi-Cal patients because the state would pay too little. “Doctors already are saying they can’t make ends meet, and it’s not worth it,” Lopp said.

The California Healthcare Assn., representing hospitals throughout the state, praised the governor for not proposing cuts in reimbursement rates for nursing homes attached to hospitals or restrictions on Medi-Cal enrollment.

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Welfare

The budget would reduce benefits for 481,000 poor families on public assistance and redesign welfare programs to stiffen work requirements.

Effective April 1, benefits would drop 5% for poor families receiving aid under CalWORKS, California’s welfare-to-work program. The grant for a mother and two children in the Los Angeles area would fall from $704 a month to $669. The loss in income would make such a family eligible for a $16 monthly increase in federal food stamps.

The budget also would reduce the flexibility counties now have to design work plans to fit individual family needs. Adults on assistance would be required immediately to work at least 20 hours a week in jobs or community service. Counties currently can allow people on welfare to use those hours for vocational training, adult education, substance abuse treatment or mental health programs.

“This is a part of the proposal that clearly concerns us,” said Frank Mecca, executive director of the County Welfare Directors Assn. of California. “This proposal is a significant movement away from the flexibility that was allowed counties in the original CalWORKS program.”

Currently, when adults do not work their required hours, they lose their benefits, but their children are allowed to continue receiving aid. Under the proposed budget, if parents fail to meet work requirements for more than a month, the adult would lose benefits and the remaining cash grant for the children would be cut 25%.

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Kindergarten Through 12th-Grade Education

Overall, the state would spend $30.3 billion, or 40% of its general fund, on K-12 schools next year. Schools would get a 1.84% cost-of-living increase and additional money for enrollment growth.

But California’s public schools would lose $2 billion in additional funds they are owed by the state next year. Education groups, including the California Teachers Assn., agreed to give up the money as part of a compromise with Schwarzenegger to avoid losing what they feared could be twice as much.

Overall state and local spending for classroom instruction would rise $5 per student, from $6,940 this year to $6,945.

“It is not as bad as it could have been,” said Los Angeles Board of Education President Jose Huizar.

Schwarzenegger’s budget also calls for allowing school districts broad discretion in how to use $2 billion that is now specifically earmarked for programs such as bilingual teacher training, textbooks, dropout prevention and counseling.

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Higher Education

The governor’s proposals, if enacted, would cut deeply into the state’s vaunted system of higher education, cutting enrollment, raising student fees -- most sharply for graduate students and students in community colleges -- and reducing financial aid.

With the state’s college-age population continuing to grow, Schwarzenegger called on the University of California and California State University systems to cut freshman enrollment for the fall by 10%. That would mean about 3,200 fewer students at UC and 4,200 for Cal State.

The students would be shifted to community colleges. That would risk undermining the state’s 1960 master plan for higher education, Cal State Chancellor Charles B. Reed said Friday.

“What has made California economically strong is the access that’s laid out in the master plan,” he said. “And that’s what’s at risk here.”

At UC, Schwarzenegger would reduce the state-funded operating budget to $2.67 billion -- about 8% below current-year levels. CSU’s state funds would drop by $190 million.

The governor’s proposal also calls on the two university systems to raise student fees for California resident undergraduates by 10% and those for in-state graduate students by 40%.

Both UC and Cal State, in the past, have rolled one-third of new revenues from fee increases into financial aid, to ensure that the neediest students do not pay the increase. This time, however, the governor’s proposal calls on the two systems to reduce the proportion of that revenue turned back to financial aid -- from 33% to 20%.

California’s community college officials, meanwhile, said that under the Schwarzenegger plan they would fare better than they might have. The community colleges ended up with a level of funding about equal to the current budget year’s, said Scott Lay, director of state budget issues for the Community College League of California.

Student fees, however, would rise from $18 per unit to $26 per unit under the proposal. For a full-time student, that would mean an increase from about $540 a year to $780, which could cause some students to “throw up their hands and not consider” continuing in school, said Brice Harris, chancellor of the Los Rios Community College District.

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Corrections

Schwarzenegger plans to spend $5.7 billion on state prisons in 2004-05, which administration officials say is slightly less than will be spent in the current fiscal year.

Roderick Hickman, secretary of the Youth and Adult Correctional Agency, announced plans to create a prison-closing commission to study shutting prisons. Only a decade ago, California was in the middle of a prison building boom, spending $10 billion on construction and increasing the number of prisons to 33 from the 12 in the 1980s.

California has 160,000 prisoners, and, under the state budget released on Friday, that number would fall to 148,000 by 2005.

Hickman also is calling for $400 million in cost savings. He said prison officials hope to persuade the powerful California Correctional Peace Officers Assn. to agree to salary concessions. He also raised the possibility that inmates who are invalids could be sent to nursing homes, as long as they were secure.

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Transportation and Natural Resources

The governor would cut $1.12 billion from road, rail and bus projects around the state.

Environmental programs would largely be spared major cuts, but the Department of Forestry and Fire Protection would see significant reductions. The budget also calls for an increase in timber-harvest fees, which could substantially help offset the decline in forestry funding.

“I look at this and I go, ‘This isn’t your daddy’s Republican.’ This guy is at least trying to protect the environment,” said Dan Jacobson, legislative director of Environment California.

The budget also calls for eliminating the California Power Authority, an agency created by the Legislature during the energy crisis that was intended to develop new power plants and ensure that the state had sufficient energy. Schwarzenegger has said he intends to consolidate the 13 different agencies and boards with power over energy issues in the state.

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State Workers

The state workforce can expect neither pay raises nor wholesale layoffs from Schwarzenegger during the fiscal year that starts in July. But new hires can expect a scaled-back pension system.

The budget proposal asks current employees to pay an additional 1% of their gross pay toward their retirement benefits. It also gives newly hired state workers a less-rich retirement package than current employees, reinstating a two-tiered system tried in the 1990s.

Employee unions criticized the idea. “It simply provides an inadequate pension,” said J.J. Jelincic, president of the California State Employees Assn., the largest state employees union. He charged that under the previous system, some workers got only half as much in retirement benefits as did their co-workers with more seniority.

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Times staff writers Miguel Bustillo, Virginia Ellis, Sue Fox, Jessica Garrison, Duke Helfand, Peter Y. Hong, Carl Ingram, Caitlin Liu, Joe Mathews, Jean Merl, Dan Morain and Patrick McGreevy contributed to this report.