Posted on 05/14/2004 8:22:36 AM PDT by NormsRevenge
SACRAMENTO (AP) - Gov. Arnold Schwarzenegger released a $102.8 billion plan for restoring California's financial health that calls for cutting spending in all departments and services but backs away from some of the most painful reductions he proposed in January.
As promised, the budget plan contained no new taxes, but failed to deliver on a much-anticipated overhaul of the public health system.
Schwarzenegger said higher than expected tax income allowed him to withdraw severe cuts he had proposed to health care for the poor.
Many questions surrounding the proposal remained unanswered, but the governor has urged lawmakers to act before June 15 - the constitutional deadline for adopting a budget that has not been met since 1986.
"The people are tired of the summer slamfest in the Capitol," Schwarzenegger said. "I am proud, and I'm all pumped up and I'm ready."
Democrats, who control both houses of the Legislature, may not be as ready.
They said that the governor has pushed many tough decisions into the future through a mix of borrowing and accounting gimmicks. But Schwarzenegger said he was proud of the proposal.
The Legislative Analyst's office estimated in January that the budget shortfall next year would be $17 billion.
The governor was helped greatly in reducing the shortfall by passage of Proposition 57 in March, which not only gave him money to pay off the state's existing bills but also provided about $4 billion to spend on next year's shortfall.
His plan proposes to erase the rest of next year's problems through a variety of one-time savings, program cuts, increased federal support and a windfall of unexpected tax money generated by an amnesty program and an improving economy.
But some key components of the budget do little to address the state's fundamental spending imbalance.
The plan includes an agreement with cities and counties that saves the state $1.3 billion this year and next, but requires the state to begin making the payment in three years. There's an accounting change in how taxes will be counted that saves the state about $1 billion in one-time money. There's also a $1 billion loan from transportation taxes that will have to be repaid.
Also, there are elements that some say may only be partially realized, such as $500 million in expected income from tribal gambling interests under an agreement that has yet to be finalized. Schwarzenegger also expects to save about $300 million from renegotiating the state's labor agreement with prison guards.
"There's a lot of uncertainty here," said Assemblyman Darrell Steinberg, D-Sacramento. "There's a lot of things we must look closer at."
The governor chose to use a lot of the additional tax revenue to spare $900 million in public health services that he put on the chopping block in January. He wanted to cut payments to doctors and home health care providers.
Noting that public health services has become one of the fastest-growing segments of the budget, Schwarzenegger originally proposed a massive overhaul that would have asked patients to pay a greater share for care.
Last week, administration officials said they would be ready to unveil a reform package the same day as the revised budget. But Thursday, Schwarzenegger said the Medi-Cal overhaul probably won't be ready for the Legislature until August.
Still, most Democrats said they were relieved that health care was spared. "I'm very pleased with all the restorations that the governor has put back into the budget," said Assembly Speaker Fabian Nunez, D-Los Angeles.
The budget has only been signed on time eight of the last 25 years and the former actor and muscleman called for a bipartisan effort to meet the deadline.
Senate President Pro Tem John Burton, D-San Francisco, scoffed at the notion that the Legislature would move quickly.
"On time budgets are very helpful in the press, they mean nothing in the outside world," he said. "The money markets and bond markets are going to look at whether it is a sound budget, not whether it was on time."
Hearings are scheduled to begin Monday.
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On the Net:
http://www.governor.ca.gov/state/govsite/gov-homepage.jsp
Gov.'s Home Page
http://www.dof.ca.gov/
Gov.'s Department of Finance
$102.8 billion in state and federal funds for fiscal year beginning July 1, 2004, ending June 30, 2005. The state general fund portion is $77.6 billion.
It's $3.7 billion higher than January's $99.1 billion proposal.
No new taxes.
Increases reserve fund to $998 million.
Aims to end state's deficit by June 30, 2006.
Major general fund spending:
$33.9 billion, kindergarten to grade 12 education - 43.7 percent of $77.6 billion.
$25.2 billion, health and human services - 32.5 percent
$9.3 billion, state universities - 11.9 percent
$6.2 billion, youth and adult prisons - 8 percent
$1.7 billion, courts - 2.1 percent
Major revenue sources:
$38.6 billion, personal income taxes
$24.6 billion, sales taxes
$7.9 billion, corporation taxes
$2.1 billion, insurance taxes
$303 million, liquor taxes
$135 million, estate taxes
Significant cuts:
$2 billion less for elementary, middle and high schools
$1.3 billion less for city and county governments
$660 million less for state colleges, universities
$476 million less for state prisons
Positive indicators:
Estimated income taxes for next budget year are $559 million higher than January estimate.
Taxable sales up sixth quarters in a row.
Exports of California.m.ade computers, electronics up 10 percent in fourth quarter 2003 over same time in 2002.
Residential construction is strong.
Personal income in fourth quarter 2003 went up 4.5 percent over same time in 2002.
Personal income is rising faster in California than the nation.
Negative indicators:
1.6 percent fewer jobs in first quarter 2004 than at the same time in 2003.
Estimated sales taxes for new budget $417 million less than January estimate.
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Source: California Department of Finance
$3.7 billion higher than January's $99.1 billion proposal.
That would be January 2004, of course.
No mention of the increase in state fees...
I'll wait 'til the budget is signed before I say
"I told you so"
Looks like my campaign slogan is coming to fruition.
"Vote 4 McClintock or pay$ the con$equence$"
Just like the majority of politiicians, the governor has left his convictions at the door of his elected office like an umbrella.
jus' proves that it's very difficult to reverse big government.
I see that they listed liquor taxes, but what happened to cigarette/tobacco taxes? Have they given up on collecting them or something?
They also don't mention state gasoline tax and car tax, most of which goes into the general fund. But at least this is better than the previous joke of a governor.
That ain't saying much. It's pathetic that there are [too many] times when that's the best thing we can say about an elected official.
I'm off now to brush up on ways of avoiding paying any taxes to California.
A little reminder:
The 13% Solution
Have you ever had to make serious cuts – 15 percent or more – in your family budget because of an unexpected job-loss or unforeseen expense? It’s not pleasant, but it's not impossible. And it's also not permanent. As long as you’re willing to face your financial problems squarely, you can be sure that the hard times won't last forever and things will improve.
But if you're not willing to face those problems – if you paper over your debt by borrowing and continue to spend as if that debt didn’t exist -- those hard times will follow you far into the future.
State government is no different. And as the new administration decides which road it will take, it is important to understand the simple math of the state’s finances.
California’s current budget deficit is caused by two actions Davis took last year to paper over his mismanagement: he illegally tripled the car tax and he attempted to borrow $12.6 billion unconstitutionally.
Governor Schwarzenegger rescinded the illegal tax increase on his first day in office. It’s important to note the word "illegal." Not one of the conditions required to raise the car tax had been met, and it was only a matter of time before the courts ordered the money to be returned to taxpayers with interest. By acting now, he saved California from having a multi-billion dollar hole blown in a future budget by court order.
But repairing this problem requires that local governments be reimbursed for their losses. In addition, the courts have already invalidated $1.9 billion of Davis’ borrowing plan, further deepening the deficit.
According to the Legislative Analyst’s Office, these developments mean that the state will end up spending $76.9 billion this year, with only $74.2 billion in revenue.
It gets worse. The courts are also poised to strike down the additional $10.7 billion of borrowing in Davis' last budget. It is not a pleasant financial situation. But it is also not impossible.
If the current rate of state spending were reduced 13.4 percent on January 1st and frozen through Gov. Schwarzenegger's first budget, the state would be back in the black, free and clear of external debt, and able to start the Governor's second year in 2005 with a clean slate.
A 13.4 percent reduction would mean cutting $5.2 billion from this year’s budget before January 1 and setting next year's budget at $66.6 billion. That’s a big cut – and it means giving up billions of dollars of programmed spending increases next year. But it's still 15.2 percent more than California was spending when Gray Davis took office. And after 18 months of austerity, the Governor would be able to plan his second budget with $12 billion of breathing room in 2005 when revenues are projected to reach $78.6 billion.
Like a family that has faced its finances squarely and tightened its belt, California would be solidly back on its feet and looking toward a sunny future.
The alternative is to borrow the difference at heavy rates of interest over the next generation. Like a family that can’t bear to change its ways, it would end up dragging its financial difficulties into future years as it struggles to meet its current expenses and pay down a crushing credit card debt as well.
These are the two roads diverging in the budget woods and the choice that is made in coming weeks may well determine whether California has the fresh financial start it deserves, or whether the ghost of Davis' excesses stalks a generation to come.
Tom McClintock
Thanks for the ping. I hope the Governor has the "balls" to follow through and do what is necessary to actually help the State instead of covering the sinkhole with a black tarp and hoping no one drives over it.
A great start would be to deny services to all the ILLEGALS!
I'd love to see the republicans come up with a slogan like:
"Embrace Immigrants, Deport Illegals"
Short and sweet.... keep the distinction right in front of everyone's nose.
This guy said the same thing when Arnold was elected. Why do they (media) keep going to him? Is his jewishness indicative of his rising political star status in this new socialist utopia called California?
Watch this guy, he's been 'chosen' by the lefty-ist of the left to achieve great things for them. Look up mealy mouthed to see a picture of this dude. This is California's answer to New York's Schumner. Uber-understudy-boy.
Every time Arnold mentions "the people", I feel like breaking out a hammer and sickle.
Gov. AS is satisfied working on the margins. He isn't a fiscal conservative ready to engage in hardcore political battles that would dramatically alter the direction of California's budget. Borrowing is another form of long term taxation. As we said during the recall campaign, Arnie isn't going to make serious spending cuts, nor cut income taxes. He's a status quo kinda guy. A liberal at heart.
The good news is Arnold has agreed to stump for Tom in our upcoming State Senate election. Tickets start at $1K.
Arnold "For The Children" Schwarzenegger calculated that most of the voters would be willing to get out from under by dumping their indebtedness on their children. He was right and they are scum. I expect that this is only the first round and that there will be more borrowing.
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