FALSE POPULISM, legalized cruelty, Libertarianism, privilege, power, croneyism, political cowardice. As revenues fall, Democrats agree with Republicans to punish the vulnerable, the unorganized, the unrepresented, the uninvolved and the uninformed.
On July 28, July 28, Gov. Arnold Schwarzenegger used his veto power to impose nearly $500 million in additional cuts to the already hideous budget deal announced with Republican and Democrat negotiators and passed by the legislature the week before as lawmakers left the capital for a summer break.
The new reductions will affect child welfare and children's healthcare, the elderly, state parks, and AIDS treatment and prevention beyond the dramatic cuts already approved.
The Assembly on Friday capped a 20-hour session by rejecting cuts worth $1.1 billion that had been agreed to by the governor and legislative leaders. They turned down a plan to seize $1 billion in gas tax money that belongs to local governments and another to collect $100 million in royalties from a new offshore oil drilling project offsore Santa Barbara. The Senate had earlier that day approved the entire budget deal, including those measures.
By killing the two proposals, lawmakers wiped out a reserve fund to cushion future shortfalls. The $500 million in line item vetoes signed on the 28th would provide that reserve, according to the governor's spokespeople.
As he signed the plan, Schwarzenegger warned he was ready to make even further cuts. Democrat leaders challenged that he did not have the authority to modify the budget bills implementing the deal of July 20.
Overall, the new budget is expected to fundamentally alter life for many Californians, with reductions to K-12 education, state colleges and universities, healthcare and public assistance for the elderly and the poor. It appropriates billions of dollars from local governments, which could force cities and counties to further reduce their own spending on roads, law enforcement and other services.
The plan's service cuts, accounting maneuvers and other measures should enable California to resume paying all of its bills again; since July 2, the state has issued 201,783 IOUs worth $1.07 billion.
California finance officials now must sell the proposal to Wall Street to begin the flow of routine borrowing and stop issuing IOUs. That process will take at least a week, the controller's office estimates.
The state's credit rating has declined to nearly junk status after two months during which elected officials could not agree on how to resolve the crisis. Finance experts say the cuts are not enough to restore the state's credit rating.
Bondholders who purchased state paper in the past have a priority on current tax revenues.
Behind Closed Doors:
Schwarzenegger and legislative leaders from both parties announced a tentative deal late Monday, July 20 to address California's $26.3 billion budget deficit through the 2010 fiscal year,
About $15 billion in social program cuts are not enough, and interest on the IOUs will swell the shortfall even more. Unless education is cut, said Republicans and Democrats, drastic reduction in prisons and police would be contemplated. And that's just not acceptable.
In a panic atmosphere as on again off again negotiations between the governor and Democrat leaders in the Assembly yield little hope, individual legislators steeled themselves to downsize California government, probably at the expense of their future careers in politics.
While the Legislature pushed back on Gov. Arnold Schwarzenegger’s proposal to eliminate health care programs for children and the state’s meager welfare program, both took large cuts. So did public education, universities and local governments.
All told, the deal contained another $15.5 billion in cuts, about $2 billion in borrowing, $4 billion in new revenues and about $3 billion in accounting maneuvers.
Last February, lawmakers signed off on an initial budget deal with $14.8 billion in spending cuts, $12.5 billion in tax increases and $5.4 billion in new borrowing, along with the creation of a $1 billion reserve fund. But that budget depended voters approving revenue boosting ballot measures on May 29. All failed.
The February cuts included adult psychiatric, vision and dental care under Medi-Cal, and health insurance for children in the Healthy Families program.
The state recently lost a lawsuit and was ordered to increase payments to MediCal health care providers, including retroactively.
While Healthy Families, the state’s health insurance program for children of poor and working families was cut by $144 million, putting thousands of children on a waiting list.
In-home services for the elderly and infirm were reduced by several million dollars, and Mr. Schwarzenegger, a Republican, achieved his goal of having caregivers and the recipients fingerprinted in the future with the goal of preventing fraud. While the governor wanted certain welfare benefits to be reduced from a five-year period to two, the program was instead cut by $500 million.
Under the new budget, localities will basically serve as unwilling lending agents to the state. It will raid their coffers and repay them over time as the state’s fiscal situation improves.
Local governments will lose millions of dollars that are used to build housing, among other purposes, and the state plans to borrow roughly $2 billion in property taxes from localities, which would have to be repaid within three years. Lawmakers believe that cities and counties could in turn borrow against that borrowing; localities bankrupt or nearly so would be exempt.
Cities Threaten Suit
More than 180 California cities passed resolutions threatening to sue the state if lawmakers approved the state budget plan to seize $4.7 billion in local funds to help close the state’s massive deficit, according to the League of California Cities.
The deal announced July 20 by Gov. Arnold Schwarzenegger and legislative leadersshifts part of the state’s $26.3-billion budget deficit to city and county governments. The prospect of losing $313 million in redevelopment funds prompted the lawsuit threat from Los Angeles County supervisors the next day. The cities and league would join the L.A. County lawsuit.
Most cities and counties are legally and fiscally part of state government. They are mandated by law to provide services such as police, fire, water, sewer, health and education.
Education on the Chopping Block
One of the biggest sticking points was over the $11 billion already cut from public schools. The July 20 budget deal called for roughly $650 million more in cuts.
Under California law, though, the state is on the hook to pay that money back, something it has not done in the past. So lawmakers have written legislation guaranteeing that the money goes back to schools. The governor has resisted this, over strong criticism from the state’s teachers’ union.
Schwarzennegar jolted Sacramento by calling for a suspension of the state constitution's guaranteed funding levels for education. Proposition 98 of year 1988 allowed the state general fund to borrow money from education funds to be repaid at a guaranteed level of at least 40% of annual general fund revenues. To suspend that provision requires a 2/3 vote of the legislature and that is anticipated in the current agreement negotiated in a panic atmosphere as the treasurer issued millions in "registered warrants" to pay bills in July.
Anticipated general fund revenue was $3.4 billion less than obligations in July, $3.7 billion in August, and $6.5 billion in September. Without an approved state budget, the shortfall would have freefallen after that.
The IOUs will supposedly be repaid in October, but only if there is sufficient money in the general fund. They are being sent to aged, blind and disabled, welfare recipients, social service providers, students, small business vendors, bureaucrats, judges and corporate taxpayers.
Class War on the Poor:
The present "crisis" was forseeable in the wake of 1987's Prop 13 which not only slashed property taxes by 2/3 but required a 2/3 majority to pass new taxes in Sacramento. This measure passed on a wave of pseudo populism which today has resulted not only in the virtual elimination of the social safety net but a direct attack on public education.
It is a libertarian ideology powered by those who can afford private schools and don't want to pay for others children's education, those who can afford health insurance and don't want to pay so others can have it as well.
Democrats have failed to confront Republicans or mobilize low income and working families to vote, leading to an ever shrinking range of possibilities to retain the social safety net and therefore undermining the social contract.
The No New Taxes movement is class war against the poor. And it has resulted in this bipartisan assault on the vulnerable in the wake of voters rejecting the May 19 ballot propositions.
AT A GLANCE:
• Cuts $6 billion from K-12 schools;
• Cuts $3 billion from the University of California and Cal State University systems leading to enrollment cuts, higher fees and furloughs for employees;
• "Borrows" $2 billion from local governments, supposedly to be repaid with interest in three years;
• Cuts $1.3 billion from Medi-Cal and bill the federal government for more money to fill the gap. In February, the legislature agreed with the govenor to eliminate Medi-Cal funding for "optional" programs like dental, podiatry eye care and chiropractic care for adults.
• Requires three furlough days a month for state employees, the equivalent of a 14% pay cut saving the state $1.3 billion.
• Includes $1.2 billion in unspecified cuts in the state prison budget;
• Sells off part of the State Compensation Insurance Fund, which the administration values at $1 billion. The fund is a quasi-governmental agency that is the state's largest writer of workers' compensation insurance
• Cuts $528 million from CALWORKS the welfare to work program by imposing sanctions on clients who fail to find work.
• Cuts $124 million from Healthy Families which provides low cost health insurance to children of poor and working parents paying premiums ($4 to $45 per month). Puts new applicants on a waiting list. Cuts funds for enrollment services. A line item veto cut an additional another $50 million from Healthy Families which means all children now enrolled will be put on the waiting list when they come up for annual review, effectively ending the program.
To provide health insurance for all uninsured children in Mendocino County would cost $7.2 million annually.
• Cuts $80 million from workers who help abused and neglected children;
• Cuts $50 million from services for developmentally delayed children under age 3;
• Cuts $16 million from domestic-violence programs;
• Cuts $6.3 million from services for the elderly;
• Effectively guts a program that provides local governments with funding to encourage landowners to preserve open space and agricultural land use.
• Originall cut only $8 million from state parks, but the line item veto cut another $6.2 million, resulting in the closure of 100, rather than 50, state parks.
• Eliminates the Integrated Waste Management Board and the Board of Geologists and Geophysicists, which Schwarzenegger had targeted as wasteful and unnecessary.
• Gives the governor authority to pursue the sale of about 10 state-owned buildings as a potential revenue source in future years, including the Orange County Fairgrounds, the Public Utilities Commission Building in San Francisco and the Ronald Reagan State Office Building in Los Angeles.