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Schwarzenegger plans $2.8 billion more in state cuts

School, healthcare and welfare programs face deep cuts. The latest proposal would affect nearly all quarters of state operations.

May 30, 2009|Michael Rothfeld and Eric Bailey

SACRAMENTO — A broad array of Californians would be touched in fundamental ways by Gov. Arnold Schwarzenegger's latest proposal to balance the state budget: senior citizens who attend day-care centers, voters seeking absentee ballots, children who ride the bus to school, parents seeking enforcement of custody orders.

These services could go by the wayside in a plan the governor unveiled Friday to slice $2.8 billion more from state spending. The announcement was the closing act of a two-week drama during which Schwarzenegger proposed dismantling many of government's functions.

His new proposal would expand on cuts he put forward in earlier plans to close $21 billion of the budget shortfall as he and lawmakers begin negotiations to keep the state from running out of money by the end of July. That deficit projection has since swollen to more than $24 billion.

Schools would be hit by $680 million in new cuts to classrooms and by $315 million in cuts for transportation. The state's social safety net would lose $1 billion more in funding for the poor, disabled and aged. Cities and counties would lose an additional $242 million in transportation funding.

"These are no longer cuts," said Anthony Wright, executive director of Health Access California, a nonprofit advocacy group. "These are amputations, and the question is, which limb are we cutting off today?"

Several of the governor's proposals, including cuts to schools, would be contingent on whether the state's tax revenues dip as deeply as projected. All would require legislative approval.

It is unclear what tone the budget negotiations will take. The governor and legislators have said they understand the gravity of the situation and the need to act quickly, and they have expressed optimism that they can do so. But in recent years, despite similar declarations, state leaders have engaged in weeks -- even months -- of acrimonious fights over less serious problems than they face now.

Schwarzenegger would save $100 million by suspending laws requiring the state to pay for a variety of local government services, including offering absentee ballots before elections, resolving child custody problems, investigating deaths at mental hospitals, posting safety signs on beaches, collecting DNA samples from bodies, caring for abandoned pets and many more.

Local governments would have to pay for the services or stop providing them.

"We've really scraped the bottom of the barrel here," said Mike Genest, Schwarzenegger's finance director. "We've cut everything we could think of, and we are really just out of additional options."

State workers, already under orders to take two unpaid days off each month, would also receive a 5% wage cut, saving the state an additional $470 million, as part of Schwarzenegger's new plan.

Mirroring that proposal, the University of California, long besieged by controversy over its high executive salaries, announced 5% pay cuts for about 30 top administrators in the wake of the governor's plans to slash higher education funding. Many of them earn more than $300,000 a year.

In a letter to staff, UC President Mark G. Yudof said the $500,000 savings would barely dent the system's deficit but was "only right" when lower-ranking employees face pay cuts.

California Controller John Chiang urged the governor and legislative leaders in a letter Friday to come up with a plan to fix the budget by June 15. If they do not, he said, it will be difficult to arrange loans before the state runs short of cash two weeks later.

Underscoring his point, Fitch Ratings, a Wall Street agency that evaluates the state's creditworthiness, changed its outlook on California's debt Friday from stable to negative.

But Assembly Speaker Karen Bass (D-Los Angeles) said Friday that she is unsure the Legislature can meet Chiang's deadline, and she does not support the governor's ideas about shutting down entire programs.

"Some of these cuts could result in people losing their lives," Bass said.

Schwarzenegger, speaking to reporters at Lawrence Livermore National Laboratory after dedicating what was touted as the world's largest laser system, said he realizes that people would get hurt.

"Believe me, my vision of my next two years was quite different than having to make all of those cuts," he said. "I feel terrible about it."

The governor's proposal would bring spending in the state's general fund, which provides the bulk of its services, from $103 billion last fall to $83.5 billion for the coming fiscal year, a drop of nearly 20%.

Kevin Gordon, a lobbyist for school districts, said, "They're beyond considering any kind of policy implications. . . . It's, 'What can we cut under the law and get away with?' "

Administration officials said that for the most part, they did not have the luxury of considering the consequences -- financial or human -- of the plans they were making.

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