Politics

Calif. Legislators OK Cuts To Education, Health

SACRAMENTO (AP) ― California lawmakers Friday approved a $2 billion package of spending cuts and agreed to defer billions of dollars in other spending as they took the first steps to deal with a $14.5 billion deficit they say will demand tougher cuts this summer.

Among the hardest hit are California's public schools, which will lose about $500 million they expected to receive, and doctors who provide services to the poor, whose Medi-Cal program payments will be cut by 10 percent.

While Democrats and Republicans joined together on the first round of budget trimming, the parties have very different ideas about how to make up the rest of the shortfall through mid-2009.

"This is our first effort in what is going to be a very long journey for the rest of this year," said Sen. Denise Ducheny, D-San Diego.

Lawmakers approved the cuts under the state's first fiscal emergency declaration, issued by Gov. Arnold Schwarzenegger last month when he disclosed that falling state tax revenue had left California facing an estimated $14.5 billion budget hole.

The declaration required lawmakers to begin addressing the budget problem within 45 days, rather than waiting until the new budget year that begins in July.

Lawmakers agreed to freeze funding for schools, reduce payments to doctors caring for the poor, bank hundreds of millions in unspent funds for the rest of the year and delay billions of dollars in payments to schools and local governments so that state doesn't run out of cash.

Schwarzenegger was expected to sign the bills Saturday.

"There's no pretty way to describe the horrible budget gap that
California faces. We've got to do the best we can," said Assembly Speaker Fabian Nunez, D-Los Angeles.

Assembly Republicans blocked an attempt to ease the state's revenue woes by forcing the wealthy to pay sales tax on yachts, private planes and recreational vehicles, a move that would have boosted state coffers by about $21 million a year.

Assembly Republican Leader Mike Villines, R-Clovis, said his caucus would block any tax increase—underscoring how difficult it could be to solve the remaining budget problems before July.

Some Republicans complained about cuts to Medi-Cal provider rates, totaling about $544 million a year, saying doctors would leave the program that serves millions of poor Californians. They said it would be better to cut services to Medi-Cal patients.

"We're going to see thousands of doctors drop out of the program," said Sen. Sam Aanestad, R-Grass Valley, an oral surgeon. "I'm concerned about the long-term consequences of even a one- or two-year reduction in provider rates."

Sen. Sheila Kuehl, D-Santa Monica, said she didn't like cutting provider rates either, but lawmakers had little choice when Republicans refused to consider tax increases to help balance the budget.

Schools also will lose about $500 million in payments that the state has not yet made. Democrats who crafted the plan said it would not hurt districts because they wouldn't have to return money they'd already received and doesn't cut classroom dollars.

The Association of California School Administrators and other education groups disputed that, saying districts had already budgeted the funds and would have to make cuts to compensate.

The package also delays $1.1 billion that schools had expected to get in July. Local governments also must wait a few more months for $500 million in gas tax reimbursements from the state.

Schwarzenegger was also given largely symbolic support to borrow the remaining $3.3 billion in bond money voters approved to cover shortfalls in 2004, and to reduce payments to cover other past debts.

The bipartisan support for the spending cuts effectively leave Schwarzenegger's fiscal emergency declaration active, allowing lawmakers to revisit the budget and make further cuts at any time if the state's fiscal picture deteriorates.

In all, Friday's budget maneuvering leaves the state with a $7.4 billion budget hole through mid-2009, according to a Democratic analysis of the bill.

But that number may go up as soon as next week, when the state's nonpartisan fiscal watchdog issues a report that is expected to show California's economy has worsened since the governor made his deficit projection.

Schwarzenegger said last month that California faces a $3.3 billion deficit for the remainder of the current fiscal year, which ends in June, and an $11.2 billion shortfall for the budget year that begins in July.

Schwarzenegger has proposed 10 percent, across-the-board cuts, including more than $4 billion for education or hundreds of dollars in classroom spending for every California student. The cuts also would require releasing 22,000 state prison inmates before the end of their sentences, and closing nearly one in five state parks.

(© 2008 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)