Lawmakers, Gov. Reach Budget Deal

With four days to go before the end of the fiscal year, legislative leaders and the governor reached agreement Monday on a state spending plan that they predicted would be in place by the July 1 deadline for the first time in six years.

The roughly $131-billion deal would pay back billions the state borrowed from schools in recent years to close budget shortfalls, as well as accelerate repayment of billions of dollars in bonds the state sold to fund transportation and other projects.

The deal includes a reduction in community college fees, new arts and physical education initiatives in public schools, a modest expansion of child care and other programs for the poor and a substantial boost for law enforcement.

Left out of the deal are the funds the governor and Democrats were hoping would be used to expand healthcare programs for low-income children. GOP lawmakers refused to support such an expansion because it would make health insurance available to children who are here illegally.

Democrats received a commitment from the governor to work with them on expanding health insurance for low-income children later in the summer.

“It’s a good budget for all Californians, and it is also a very good budget for both parties,” Gov. Arnold Schwarzenegger told reporters during a break in a meeting with legislative leaders and senior staff members.

“For the Democrats and the Republicans it is a great compromise. And I am very happy that we are able to be successful in that, especially in an election year when normally nothing is ever done,” he said.

Legislative leaders said they were optimistic the spending plan would be approved by both the Assembly and Senate tonight. It would then be sent to the governor for his signature.

An on-time budget could aid the reelection bid of Schwarzenegger, who first ran for office promising to clean up the state’s finances.

It could also help lawmakers, whose approval ratings have sagged since the state plunged into fiscal crisis several years ago, following the precipitous drop in tax receipts that paralleled the dot-com bust.

Now, tax receipts are up again. State coffers have taken in about $7.5 billion more in revenue than had been expected. The extra cash is enough to wipe out a projected deficit, making the job of balancing the budget considerably easier.

Even so, the budget remains chronically out of balance. By July 1 of next year, California is expected to be facing a shortfall of $3.3 billion, so the governor and lawmakers have called for restraint.

The deal they reached does not include any new multibillion-dollar spending other than the education repayment and debt reduction, both one-time expenses.

The reduction in community college fees, expansion of law enforcement efforts and other new programs add up to a tiny fraction of the state’s overall spending. The budget includes no tax cuts.

“Democrats are expressing our newly found fiscal conservatism,” said Senate Leader Don Perata (D-Oakland).

State Treasurer Phil Angelides, the Democratic gubernatorial nominee, said he was not impressed.

“We’re still left with a dramatic budget deficit next year,” he told reporters, “and if Gov. Schwarzenegger is reelected ... the bloom will be off the rose: He will cut schools; he will raise tuition and fees.

“It’s what he did the last time he was in a pinch,” Angelides said.

Administration officials and legislative leaders from both parties respond that the state’s chronic deficit, once more than $20 billion, has shrunk dramatically in recent years, and would continue to do so under the deal worked out Monday.

The new programs in the budget, while a relatively small portion of the spending, provide some tangible accomplishments for the governor and lawmakers to take to voters as they gear up for the fall campaign.

Democrats were able to secure a $100-million increase in job training and child care for low-income Californians. Cost-of-living increases for the low-income elderly and disabled that were suspended last year will be reinstated. And there would be a slight increase in funding for drug treatment programs.

Community college fees will go down from $26 a unit to $20 a unit. There will be no fee hikes for University of California and Cal State University students, who have been hit with steadily rising tuition in recent years. And the UC Institute for Labor and Employment, a controversial organized-labor studies program that Republicans have demanded be shut down, will be funded for another year.

Both Democrats and Republicans, meanwhile, supported an expansion of foster care services that are part of the budget agreement. That includes reducing the number of foster youth cases handled by county social workers and increasing payments to relatives who take in the children.

The spending plan would also augment federal college scholarships for foster youth, help 16- to 24-year-olds pay for housing and expand intensive drug treatment programs for parents so they can be reunited with their children.

Finally, the budget includes a boost to law enforcement programs popular with the GOP. The money would be spent on new prosecutors, investigators and advocates for a special unit to prosecute “particularly heinous” crimes such as rape and child abuse.

More officers also would be added to community crime prevention programs that target at-risk youth. Some of the funds would be used in efforts to reduce recidivism among mentally ill offenders.

“I think the process this year was probably a good one,” Senate Republican Leader Dick Ackerman (R-Irvine) said of the uncharacteristically cordial budget negotiations in recent weeks. “I think everyone was reasonably happy with it.”