Gov.’s Budget Cuts Welfare, Boosts Schools

California welfare recipients were the only group targeted for major cuts Tuesday when Gov. Arnold Schwarzenegger presented a $125.6-billion budget that would increase payments to education and transportation by billions of dollars.

The election-year proposal was a marked departure from past Schwarzenegger spending plans that called for reductions across the board. The small savings the state could achieve from suspending cost-of-living increases and cutting other programs for the poor would do little to address the multibillion-dollar deficits that California still faces for the next several years.

Schwarzenegger’s plan would have the state spend $6.4 billion more than it expects to receive in revenue for fiscal 2006-07, but the difference would be covered by carrying over a surplus from the current budget year, due to the improved economy. But the chronic imbalance will leave lawmakers to confront another budget shortfall of roughly that amount the next year. The Republican governor’s announcement comes a week after he proposed $68 billion in new borrowing for public works projects, which also will add to future deficits.

Schwarzenegger made no apologies for the new spending. He said at a news conference that the state’s budget shortfall -- once $16.5 billion -- has shrunk significantly since he took office, and the lingering deficit is a small price to pay for holding the line against new taxes while providing valuable services to Californians. And unlike past budgets, the plan does not rely on accounting gimmicks and loans to give the appearance of being balanced.

“This budget I am proposing will make people’s lives better,” Schwarzenegger said.

The governor said he had attempted several times to place significant curbs on state spending, but such proposals had been rejected by lawmakers and voters -- most recently in the November special election.

“There is nothing that will solve the problem other than to get rid of these automatic spending formulas,” he said. “When I ran [for office], I thought it was easier to balance the budget.... But it is very, very difficult.”

The governor said he would once again ask the Legislature for the authority to cut programs in midyear if the state budget were to fall out of balance -- a request that lawmakers have rejected in the past.

But he also is proposing to put more money into programs driven by the spending formulas he says need to be stopped.

Schwarzenegger’s plan would give schools $1.7 billion more than constitutional funding formulas require. It would cancel fee increases scheduled at state colleges and universities. And it would expand healthcare programs for low-income children. It includes an early payback of $920 million the state borrowed from its transportation spending account in recent years to help close budget shortfalls.

Lawmakers of both parties expressed only limited support for the governor’s budget.

GOP lawmakers voiced concern about the projected deficits in years to come and said they might want to see more cuts.

“It’s a good start,” said Senate Republican leader Dick Ackerman (R-Irvine). “We’ll look for other areas where we can possibly make cuts. It’s the start of the process.”

Senate Budget Committee Vice Chairman Dennis Hollingsworth (R-Murrieta) expressed concern that the budget “increases spending too much and it contains a large operating deficit. We want to see the plan on just exactly how our increasing revenues grow our way out of that hole and when.”

Democrats were no more enthusiastic.

“I’ve seen much worse,” said Assemblywoman Jenny Oropeza (D-Long Beach).

Some Democrats said they were concerned that the state’s core social programs were slowly being eroded by budget cuts over a series of years.

Assembly Speaker Fabian Nunez (D-Los Angeles) said that although he was confident lawmakers and the governor would be able to approve a budget by their July 1 deadline this year -- a deadline missed most years amid partisan bickering -- the latest rounds of cuts to the poor were unacceptable.

“Assembly Democrats this time around are not going to stand idly by” while programs to aid the poor are cut, Nunez said. “There is no question that the rich get richer and the poor, poorer” in the budget plan.

Nunez proposed that the state instead suspend one of the governor’s pet education programs -- $428 million in new state spending on after-school activities thanks to the Schwarzenegger-sponsored Proposition 49, an initiative approved by voters in 2002.

The governor’s proposed cuts to welfare programs would total almost $200 million over the next two years.

Welfare recipients would receive no cost-of-living increase, and county welfare agencies would get no new funds to cover pay raises, higher energy bills and inflationary costs. Under the governor’s plan, a mother of two living in urban California would receive $723 a month through June 2007. A child-care program for welfare recipients in work programs also would be cut.

The reductions came as a shock to some activists and program administrators, who had hoped that the poor would be spared at a time when the governor was adding so much new spending to the budget.

Los Angeles County welfare programs -- the state’s largest -- face cuts of about $38 million under the governor’s proposal, said Phil Ansell, director of programs and policy for the county Department of Public Social Services. The county has about 396,000 men, women and children who receive welfare payments through CalWORKs and about 50,000 parents are engaged in welfare-to-work programs.

Ansell said Schwarzenegger’s proposal “would dramatically undermine the county’s ability to continue assisting parents to make the transition from welfare to work and jeopardize the continued success of the county’s extremely effective welfare reform program.”

Schwarzenegger said the state has only a limited amount of money, and not everything can get funded. “You will never be able to have a budget that is perfect for everybody,” he said.

Administration officials said that despite the cuts the budget would increase social service spending overall. That includes a new $72-million program to expand enrollment in the Healthy Families medical insurance program for low-income children.

But some groups found that unsatisfactory. Doctors complained that Schwarzenegger’s budget would implement a scheduled 5% rate reduction for physicians who provide services to the poor.

“While the budget has many things to like ... it fails overall to sufficiently invest in healthcare for all Californians,” said California Medical Assn. Chief Executive Jack Lewin.

School groups, which appeared to fare relatively well under the governor’s budget plan, showed limited enthusiasm. They said the $1.7 billion in extra money the governor was proposing for education represented only a down payment in returning the money he had borrowed from schools to balance the budget in recent years.

“We would say it’s a better start than last year, it’s a better tone than last year, but it doesn’t keep the commitments the governor made and that is still a problem,” said Barbara Kerr, president of the California Teachers Assn.

One group that was pleased by the governor’s plan was nursing-home watchdogs.

The budget includes an extra $19 million to hire 147 people to help restore California’s ability to enforce state laws in inspecting nursing homes, hospitals and other healthcare facilities.

In recent years, the state had sharply reduced its use of state law when investigating complaints of mistreatment of frail and elderly people living in nursing homes.

That move became the focus of press reports, lawsuits and a legislative hearing.

“This is great news,” said Pat McGinnis, director of California Advocates for Nursing Home Reform, which sued the administration to force it to meet state requirements. The governor’s proposal hinted that Schwarzenegger may try to ratchet down state employee pay. With the contracts of several state employee unions set to expire, the budget includes no money for pay hikes.

Finance Director Mike Genest said the administration was preparing a study, to be finished in April, analyzing the pay and benefits of state employees.

Other items in the governor’s budget include:

* $47 million in new disaster response programs geared toward helping state and local governments prepare for disease outbreaks, terrorist attacks and natural disasters.

* $42.6 million for new anti-crime programs aimed at such things as gangs and methamphetamine use.

Times staff writers Peter Nicholas and Robert Salladay in Sacramento and Michael Finnegan and Carla Rivera in Los Angeles contributed to this report.

*

(BEGIN TEXT OF INFOBOX)

Major changes

Highlights of the governor’s 2006 general fund budget:

Winners

* K-12 schools get $1.7 billion more than funding formulas require.

* Cal State and UC students avoid planned fee increases.

* Healthcare programs are expanded for low-income children.

Losers

* CalWORKs, the state’s welfare-to-work program, would be cut by $198.9 million in child care and other areas.

* Supplementary Security Income payments for the disabled would be curtailed by $48.1 million because of the suspension of cost-of-living payments.

Fiscal outlook

* No new taxes

* Budget spends $97.9 billion against $91.5 billion in revenue, but is balanced due to unanticipated tax revenue.

* $6.6 billion shortfall forecast in 2007.

Source: www.ebudget.ca.gov

Los Angeles Times

*

Revenue and spending plan

Here is how the governor’s budget breaks down general fund revenues and expenditures in his 2006-07 fiscal plan:

*--* Revenue Dollars Percent sources (in billions) of total Personal income tax $48.7 53.2% Sales tax 28.3 30.9 Corporation tax 10.0 10.9 Insurance tax 2.3 2.6 Liquor tax 0.3 0.3 Tobacco taxes 0.1 0.1 Other 1.7 1.7

*--*

--

*--* Expenditures Dollars Percent (in billions) of total K-12 education $39.9 40.7% Health and human svcs 28.5 29.1 Higher education 11.2 11.5 Corrections and rehabilitation 8.1 8.2 Legislative, judicial and executive 3.4 3.4 Business, transportation and housing 2.7 2.8 General government 1.9 2.0 Resources 1.5 1.6 State and consumer services 0.5 0.5 Labor and workforce development 0.1 0.1 Environmental protection 0.1 0.1

*--*

--

For more information: ebudget.ca.gov

Source: Governor’s budget