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California lawmakers weigh options for a potential fiscal 'doomsday'

Brainstorming begins on additional budget cuts that might be necessary if voters reject proposals designed to balance the state budget.

April 01, 2009|Eric Bailey

SACRAMENTO — Legislative leaders are weighing contingency plans for a potential fiscal "doomsday" if a slate of ballot measures designed to balance the state budget fails in the May 19 special election.

Gov. Arnold Schwarzenegger and the bipartisan team of lawmakers pushing the half-dozen propositions continue to insist that the campaign has just begun and can still be won despite a recent public opinion poll showing all but one measure trailing badly.

But, behind the scenes, elected leaders and staffers have begun brainstorming additional budget cuts that might be necessary. That effort comes little more than a month after Schwarzenegger signed a budget that slashed spending and raised taxes to fill a $42-billion deficit.

The six ballot measures include several that would combine to pump nearly $6 billion into the state's 2009-10 spending plan. Even with that revenue, the plunging economy has already dug a potential $8-billion hole in next year's budget. If the propositions fail, the state could face a $14-billion deficit that would grow by an additional $16 billion if Proposition 1A doesn't pass, according to the nonpartisan legislative analyst's office.

Likely targets for deeper budget cuts include higher education, public schools, transportation, the prisons and healthcare, Capitol insiders say. The state also could move to siphon some of the property tax revenue that normally flows to municipalities.

The real-world effects could be grim. In Los Angeles County, thousands of teachers could face layoffs and class sizes would almost certainly rise, said Assembly Speaker Karen Bass (D-Los Angeles).

"If these initiatives do not pass," she said, "we are looking at cutting $14 billion in programs."

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Selling voters

Bass and other officials who have thrown their weight behind the ballot measures contend that, with seven weeks until election day, their battle is just beginning. With more than $5 million in campaign cash and Schwarzenegger in election mode, they say they hope to sell voters on the need for the measures.

"Doomsday scenarios, that's one thing -- I think it's important to be honest with the people about what the consequences are," said Senate President Pro Tem Darrell Steinberg (D-Sacramento), a key backer of the propositions. "But I don't think it will be a campaign to scare people."

Meanwhile, lawmakers are considering their options in case voters stymie their budget plans. Public school financing is protected by voter-approved minimums, but that wouldn't stop further cuts if they were needed, lawmakers say. Colleges, with no guaranteed funding, would be an even more likely target.

Other areas partly protected by law could still face some cuts: the state's prisons, for example, which account for up to 12% of general fund spending.

Health and welfare programs, already severely reduced, could be whittled further, although the state must maintain certain funding levels to qualify for some of the more than $30 billion in federal stimulus money flowing to California, said Assemblywoman Noreen Evans (D-Santa Rosa), who chairs the lower house budget committee.

Budget officials have privately been discussing establishing a series of triggers that, if the ballot measures fail, would reduce funding to certain programs depending on the depths of fiscal fallout.

That idea is already facing some resistance.

"I'm not a fan of automatically triggered cuts," Evans said. "I would rather we take a look at what the circumstances are, and make cuts based on what services Californians need to finish out the year -- things like unemployment, food stamps, job retraining."

Evans also isn't warming to suggestions that the state could slash voter-mandated transportation programs and divert revenue that normally would go to cities and counties, which have already cut spending dramatically.

"That's just a double whammy," she said.

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Budgetary rancor

The prospect of further budgetary rancor in the Capitol also could loom if the ballot measures fail. Last summer and again during the winter, negotiations dragged on for weeks as Republicans and Democrats quarreled over how to fill the deficit.

If more tax increases were to end up on the table after May 19, Evans said, another stalemate could develop. Tax hikes require a two-thirds vote of the Legislature, and Republicans -- some of whose votes would be needed for that -- have indicated they have given enough.

Evans said she shares concerns about raising taxes "during a difficult economic environment," but added that "there are certain services that Californians need and have come to expect."

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eric.bailey@latimes.com

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