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Schwarzenegger to seek federal help for California budget

Facing another huge deficit, the governor wants $8 billion or threatens massive cuts in social services. He also plans to renew push for offshore oil drilling.

December 23, 2009|By Shane Goldmacher and Evan Halper

Reporting from Sacramento — Facing a budget deficit of more than $20 billion, Gov. Arnold Schwarzenegger is expected to call for deep reductions in already suffering local mass transit programs, renew his push to expand oil drilling off the Santa Barbara coast and appeal to Washington for billions of dollars in federal help, according to state officials and lobbyists familiar with the plan.

If Washington does not provide roughly $8 billion in new aid for the state, the governor threatens to severely cut back -- if not eliminate -- CalWORKS, the state's main welfare program; the In-Home Health Care Services program for the disabled and elderly poor, and two tax breaks for large corporations recently approved by the Legislature, the officials said.

Schwarzenegger also will propose extending a cut in the state payroll that is scheduled to expire this summer. That cut has translated into 200,000 state workers being furloughed three days a month, the equivalent of a 14% pay cut. Lawmakers would have the option of extending the furloughs, imposing layoffs or some combination of the two.

The governor is scheduled to unveil his plan publicly early next month. Administration spokesman Matt David declined to comment on the details.

The governor and lawmakers have already had to close shortfalls this year totaling $60 billion, as tax revenues plummeted at rates not seen in California since the Great Depression. Amid the continuing budget crisis, the state ran short of cash needed to cover its bills and was forced to issue IOUs over the summer.

Activists were particularly alarmed by the potential cuts to social service programs, which have taken big hits recently.

"Families are struggling, we have an incredibly high unemployment rate, and we can't afford to cut these programs any more," said Nancy Berlin, director of California Partnership, a statewide coalition of advocates for the poor based in Los Angeles. "Sacramento has got to pull it together and find another way out of this. They can't take more from low-income families. If they do, we will find more people on the streets."

Jean Ross, executive director of the California Budget Project, a think tank focused on how budget policies affect low-income Californians, was similarly critical of the proposals for CalWORKS and in-home healthcare. But she said the administration was justified in pushing for more federal dollars.

"There is a strong case not only here in California but across the country for continued federal aid to the states," she said. "Absent additional assistance we could see state governments prolonging the national economic downturn by continuing to cut their budgets."

Schwarzenegger's pitch for federal assistance will hit on familiar themes: Californians pay substantially more in federal taxes than make it back to the state, the crushing burden of unfunded federal mandates, the way funding formulas have made it impossible for the state to trim certain programs.

The governor sent a letter to the state's congressional delegation Tuesday night in which he demanded more money for federal healthcare programs for which the state is paying part of the tab. He warned that the historic healthcare reforms poised for passage in Congress may add to the burden, costing the state as much as $4 billion annually.

Senate President Pro Tem Darrell Steinberg (D-Sacramento), in an interview last week, said: "I'm planning to spend a lot of time in Washington. I have to. . . . The national economic recovery is tied to California's economic recovery."

California's budget deficit has grown so large -- roughly 20% of the general fund -- that some measure of cuts to social service programs may be inevitable regardless of how Washington responds.

Big business may also take a hit. The governor is prepared to support rolling back two large corporate tax breaks that GOP lawmakers inserted into recent state spending plans.

The $1 billion in mass transit and other transportation money the governor will propose raiding is supposed to be off limits to the state for plugging budget gaps. Court rulings have declared previous attempts to get at it illegal.

The administration will seek to get around those rulings through a complex gas tax swap. As part of the scheme, an existing sales tax on gasoline would be eliminated and, at the same time, a new per-gallon excise tax would be imposed. The price at the pump would drop about 5 cents per gallon

The shift would gut a voter-approved measure, Proposition 42, that protects how current gas taxes are spent. Public transit -- buses, rail and other forms of mass transportation -- now receives 20% of all gas sales tax. After the tax swap, that requirement would disappear. The tax swap could also cost schools -- as it would result in the share of tax revenues they are entitled to under state law dropping by more than $800 million.

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