Regional News

Schwarzenegger Plans to Sign Budget Bill

SAN FRANCISCO – California Gov. Arnold Schwarzenegger late Friday said he plans to sign a budget proposal passed by the State Legislature Friday afternoon.

Lawmakers passed $23.1 billion of budget balancing measures Friday afternoon, but they rejected two revenue-raising measures that left the package $1.1 billion short of the $24.2 billion of fixes that the governor and legislative leaders had agreed to earlier in the week.

“This budget is an acceptable budget to me,” the Republican governor said. “With this budget, California has safely navigated the greatest economic crisis since the Great Depression. We have steered the California ship away from the iceberg. That is the important thing here. We have emerged battered and bruised, but we are intact.”

The State Legislature passed all $15.6 billion of spending cuts agreed to in the budget deal, but the Assembly rejected a $1 billion raid on local government gas tax revenues and a plan to raise $100 million a year by allowing more oil drilling off the coast of Santa Barbara, a major tourist destination and the site of an oil spill in 1969. The spill led to the creation of the California Coastal Commission and galvanized the environmental movement in the state.

Schwarzenegger said he will use his line-item veto power, his so-called “blue pencil,” to cut enough to make up for the lost revenue. He may also use some of the $900 million surplus that was built into the budget plan.

“This is not an easy budget,” he said at a press conference after the budget’s passage. “It is a tough budget, but it is a necessary budget.”

He said it puts the state on a more sustainable path without raising taxes. Some economists and analysts have faulted the budget deal for use of accounting gimmicks and one-time revenues that failed to address the state’s underlying structural budget deficit.

Among other gimmicks, the state plans to delay paying June 2010 payroll by a day in order to push the expense into July 2010, when it will be paid in new fiscal year. The package also pulls forward some 2010 revenues by making taxpayers pay early.

Schwarzenegger said he’d have preferred more permanent cuts, but he said the state had made important progress with the revisions to its fiscal 2009-10 budget plan.

“The majority of solutions come from deep spending cuts,” he said. “Combined with the $15 billion from February, we have cut almost $31 billion” this year.

The state’s general fund spending was $107 billion in 2007-08. It fell 10% last year and is set to fall another 17.5% this year, bringing spending down to about $88 billion. (Lawmakers gave conflicting numbers for 2010’s spending. Some said spending would fall to $84 billion. The Legislative Analyst’s Office and the Department of Finance will produce more precise figures in the coming days.)

Whatever the number, California has cut a significant amount of spending in the past year. The state closed a $42 billion budget deficit in February with a mixture of tax hikes, spending cuts and accounting maneuvers, but a continuing deterioration of the economy and voter’s rejection of $5.8 billion of revenue fixes forced lawmakers back to the negotiating table in May. Democrats argued for another plan that employed both spending cuts and tax hikes, but Schwarzenegger and Republicans ruled out new taxes.

Schwarzenegger in May proposed deep cuts to state government services that would have eliminated the state’s welfare program, closed most state parks and cut off healthcare for 900,000 low-income children. The governor’s proposal and a lack of Republican votes necessary to impose new taxes forced Democrats to negotiate the deep cuts they accepted Friday.

“It is important to know that I am not happy about the one-time solutions,” he?? said.

But like Democrats, who were forced to explain the deep cuts they approved to liberal constituents, Schwarzenegger said the budget agreement was the best deal he could get. 

“In exchange, we achieved major and lasting reforms,” the governor said. “We will save billions of dollars and benefit our state for years to come.”

He’s talking about cuts and changes made to some of the state’s biggest social programs, including its CalWorks welfare-to-work program and the state’s in-home supportive services for the disabled and the elderly. Schwarzenegger alleged that both programs have been beset by fraud.

The reform measures he extracted from Democratic supporters of the in-home care program included home visits, finger printing of providers and recipients, and no longer allowing checks to be sent to post office boxes. He said that will save the state $268 million a year going forward.

CalWorks will increase penalties for recipients who fail to seek work, while reducing the amount of time that adults can receive aid by 20%. He said the welfare program changes will save $510 million this year and $600 million a year going forward.

The state also ended automatic cost-of-living increases in many programs, which the administration claims will save the state $2.2 billion a year going forward. The budget plan also eliminates eight boards or commissions that the governor said were unnecessary.

That’s more than $5 billion in changes that lessen the state’s structural budget deficit.

“We have to do that,” Schwarzenegger said. “California has experienced an unprecedented drop in our revenues, and we have no choice but to live within our means.”

He said it’s unclear it the state revenues are done falling, but he said California lawmakers have shown that they will balance the budget no matter what the circumstances.

“I think the financial community is going to look at this budget in a positive way because we were fiscally responsible,” Schwarzenegger said, when asked if the new budget would allow the state to return to the municipal bond market.



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