SACRAMENTO — With deficit forecasts growing darker by the day, Gov. Arnold Schwarzenegger is considering a plan to slash California's safety net for the poor by eliminating the state's main welfare program, health insurance for low-income families and cash grants to college students.
The stark proposal surfaced in testimony by the administration at a joint legislative hearing Thursday that followed the governor's decision to withdraw a week-old plan to borrow $5.5 billion to help balance the budget.
Officials in Sacramento began to bore in on the crisis Thursday, with the nonpartisan legislative analyst saying the deficit may already have ballooned to $24 billion and offering skepticism about some of the administration's plans for closing the gap.
At the same time, lawmakers and the governor had to contend with negative signals from Washington, where officials offered little hope they would agree to guarantee billions in emergency short-term loans, even if massive spending cuts can be quickly enacted.
It added up to a sense of anxiety as lawmakers rushed to cobble together a spending plan before the state runs short of the cash it needs to pay bills in July.
To balance the books, Schwarzenegger is eyeing the dismantling of the state's CalWorks program, which serves more than 500,000 poor families with children, as well as the elimination of Healthy Families, which provides medical coverage to 928,000 children and teens. Mothballing the two programs would save the state about $1.4 billion in the coming fiscal year, officials said.
If the proposals to slash the safety net come to pass, they would completely reshape the state's social service network, transforming California from one of the country's most generous states to one of the most tightfisted in aiding the poor.
Also potentially on the chopping block is CalGrants, a financial assistance program that offers cash grants to lower- and middle-income college students each year. The governor's proposal would eliminate the 77,000 new grants awarded each year at a cost of $180 million, but that saving would eventually grow to more than $900 million as students graduated and the program was phased out.
Schwarzenegger is considering big cuts to other programs and departments as he struggles to downsize state government after Tuesday's voter rejection of nearly $6 billion in funding measures.
