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2004-01-01 -- Schwarzenegger to Swing Big Ax on Budget to be Released January 9th


"Topping the list will likely be public health and welfare programs _
especially Medi-Cal.  ...  Education is also expected to share the
burden, despite Schwarzenegger's campaign promise to protect school
funding.  ...  The new governor's finance director, Donna Arduin, is
known for cutting billions in social services in Florida as budget
director for Gov. Jeb Bush."

"As Davis proposed last year, (Health Access Director Anthony) Wright
believes Schwarzenegger will look to limit enrollment in (Medi-Cal) to
slow the growth. He is likely to try to trim the number of patients by
changing eligibility rules, cut reimbursements to doctors and
hospitals, and reduce the kinds of services for which the state will
pay."


Review of Budget Situation:

Original plan:

  *  Emergency midyear budget cutting, $3.8 billion including
suspending state obligation to care for developmentally disabled,
freezing Children's Health Insurance Program, deep cuts of IHSS for
long-term-care services at home..

  *  High-interest short-term bond to replace legally-challanged bond
to cover 02-03 budget deficits

  *  future budget caps based on present spending levels

  *  Rescind Vehicle License Fee increase

Since then:

12-12-03:  Governor and Legislature compromise

  *  Legislature approves budget initiative for March 04 ballot:

       (1) $15 billion 9-year bond to cover past and some future
deficits,

       (2) constitutional requirement for balanced budget, but not
imposing spending caps for the future.

  *  New powers letting the governor make mid-year budget adjustments
which could be overturned by a simple majority of the Legislature
within 45 days.  Budget caps in earlier proposal, capping expenditures
at current low levels, discarded.

  *  Legislature has stalled $2 billion in mid year cuts, especially
to people with developmental disabilities and freezing Children's
Health Insurance program enrollments.  This was part of a $3.8 billion
plan for cuts especially to health and welfare programs, particularly
IHSS cuts for long-term-care services at home..


12-18-03:  Schwarzenegger made major statements in the last day about
the budget.

  *  withdrawing his proposed repeal of the Lanterman Act and other
cuts to people with disabilities.

  *  declaring a fiscal emergency and unilaterally planning to
implement some of the proposed cuts, without legislative approval.

12-24-03  Judge's preliminary injunction blocks cuts to Medi-Cal
providers, both Davis' 5% cut and Schwarzenegger's proposed 10% cut.


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Associated Press, January 1 2004

By TOM CHORNEAU

SACRAMENTO, Calif. - Saddled with a shortfall of at least $14 billion
and a promise not to raise taxes, Gov. Arnold Schwarzenegger is likely
to release a budget next week with few surprises _ it will contain
cuts, cuts and more cuts.

While the administration has released no details of the 2004-2005
spending plan, lawmakers and lobbyists engaged in budget negotiations
with the governor say they expect to see a painful list of spending
reductions that reach every corner of the state bureaucracy.

Topping the list will likely be public health and welfare programs _
especially Medi-Cal, the state's health insurance for the poor and
disabled that costs more than $10 billion a year.

Education is also expected to share the burden, despite
Schwarzenegger's campaign promise to protect school funding.

He is likely to renew his pledge to get a bigger share of Indian
gambling profits, and his call for new concessions from labor unions.
And there are hints of reforms and reorganizations aimed at making the
state more efficient and cost conscious _ including changes in parole
and inmate supervision.

The new governor's finance director, Donna Arduin, is known for
cutting billions in social services in Florida as budget director for
Gov. Jeb Bush.

Tempering all the bad news, however, the governor is expected to paint
a rosy economic outlook where billions of dollars in unanticipated tax
revenue over the next year will let him sidestep some of the most
difficult funding choices.

And there are no expectations of any new taxes.

"I think the governor has been fairly clear about that," said H.D.
Palmer, spokesman for the governor's Finance Department, although
there have been no similar promises when it comes to raising fees.
"The plan is to control spending."

Still riding a wave of popularity since winning office in October's
historic recall election, Schwarzenegger takes over at a critical
time.

While former Gov. Gray Davis and the Legislature took some steps last
year to solve the state's financial problems, spending remains badly
out of balance with income.

Last summer's budget agreement used a long list of one-time savings,
accounting gimmicks and borrowing to make ends meet. The one-time
savings and many of the gimmicks expire at the end of this fiscal
year, and analysts say a new deficit will begin growing almost
immediately that will exceed $10 billion by June 2005.

One of Schwarzenegger's first moves as governor, repealing a tripling
of the car tax, has also added $4 billion to the deficit.

Looming on the horizon is another multibillion-dollar problem. Last
summer's budget agreement included $12.6 billion in loans that have
been held up by legal challenge because the debt was not approved by
voters.

Schwarzenegger and the Legislature agreed last month to put a $15
billion bond measure on the March ballot. If voters do not agree to
the borrowing, the state could quickly find itself in an unprecedented
fiscal crisis, forcing force the governor to drastically revise his
budget priorities and promises.

But the governor's upcoming budget is expected to assume that voters
approve the big bond measure, which means the problem is $14 billion _
still big enough to require cuts in all areas of the budget.

His most significant move is expected to be a proposal to trim several
billion dollars from schools.

Under the complex formulas that define education funding, public
schools could command a $4 billion increase in funding next year, said
Kevin Gordon, executive director of the California Association of
School Business Officials.

But Schwarzenegger is likely to offer only a portion of that increase,
said Gordon, who met with the governor and other education officials
behind closed doors last week.

If the move is made, but schools still get enough to deal with growing
enrollments and inflation, Gordon suspects teachers and education
officials might go along.

"The dilemma facing the education community is, how do you not sit
down and cooperate, given the magnitude of the problem," Gordon said.
"Their objective is not to inflict any further cuts to schools and if
so, I think we can walk away satisfied."

Anthony Wright, executive director of Health Access, a coalition of
health care advocates, said he has had not direct contact with the
administration on the budget, but through his network of sources has
concluded that public health programs are on the chopping block.

"If you are going to make serious cuts and you are not going to raise
taxes, you don't have many options," he said.

The biggest target, he said, will likely be Medi-Cal. As Davis
proposed last year, Wright believes Schwarzenegger will look to limit
enrollment in the program to slow the growth. He is likely to try to
trim the number of patients by changing eligibility rules, cut
reimbursements to doctors and hospitals, and reduce the kinds of
services for which the state will pay.

To get his agenda approved, Schwarzenegger will need to walk a thin
line between Democrats who control both houses and Republicans who
have enough votes to block any proposed agreement.

The acrimony that has marked budget negotiations over the past three
years is not expected to disappear, although key party leaders say
they believe voters' decision to replace Davis with Schwarzenegger
this fall sent them a message to end political gridlock.

Still, Democrats say there will be a limit to how much they will cut.

"We know there will be cuts, we know there will be pain," said
incoming Assembly Speaker Fabian Nunez, a Democrat from Los Angeles.
"What we want to make sure is that those cuts don't turn pain into
shame."

___

On the Net:

Governor's site: http://www.governor.ca.gov.