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May 16, 2008
Governor's Revised Budget: More borrowing, more gambling and deeper cuts to health and human services
Dear Friend of FCL,
On Wednesday, Governor Schwarzenegger held a press conference to announce revisions to his January budget proposal. The May Revision proposes new spending cuts to health and human services programs in addition to the ten percent across-the-board cuts he proposed in January. The governor has restored some funding for K-14 public education and has proposed enhancements to the state's "underperforming" lottery, which he believes will double lottery proceeds. The revised budget proposes to borrow against the new lottery proceeds in order to finance current state expenditures and to put money in a "rainy day fund" to help the state weather fiscal shortfalls in future years.
The California Budget Project (CBP) has released its preliminary analysis of the May Revision. What follows are some of the budget lowlights from the CBP's preliminary analysis.
As anticipated, the state's fiscal position has worsened as state tax collections have deteriorated by $5.4 billion below the January estimate. As a result, the budget deficit now estimated at $22 billion combined for this fiscal year and for the new fiscal year beginning July 1. In January, the Legislature reduced spending by $7 billion, leaving a deficit of $15 billion.
The governor's budget proposes $12.6 billion in spending cuts, $5.1 billion from the sale of bonds backed by lottery proceeds, $3.3 billion from the sale of deficit financing bonds, $1.9 billion in accounting shifts, and $1.4 billion from "other initiatives."
Spending Cuts
Health and Human Services: In addition to the ten percent cuts proposed in January, the governor now proposes an additional $627 million in new cuts to health and human services, for a total cut of $2.9 billion.
Medi-Cal: Retains the elimination of dental, podiatry and other benefits, the ten percent rate reduction to Medi-Cal providers and the requirement that enrollees submit quarterly applications to continue receiving benefits. The revised budget also proposes to limit eligibility to 61 percent of the federal poverty level ($13,542 for a family of four).
CalWORKS (Cash Assistance): Retains the governor's January budget proposal to eliminate benefits for 200,000 children whose parents are not meeting work requirements, cuts grants by five percent (the maximum grant for a family of three in a high-cost county would be reduced from $723 to $687) and suspends the October 2008 cost-of-living adjustment.
Supplemental Security Income/State Supplementary Payment: Suspends cost-of-living-adjustments for 2008 and 2009 to 1.3 million low-income seniors and people with disabilities.
In-Home Supportive Services (IHSS): Eliminates domestic and related services for IHSS recipients with less severe impairments and requires them to begin paying their "share of cost" for Medi-Cal (7,100 low income recipients would have to pay an average of $427 per month) and caps the state's contribution for wages and benefits to $8.60 per hour.
Other Human Services: Maintains across-the-board cuts to the Child Welfare Services Program, Foster Care, Adoption Assistance and the California Food Assistance Program.
Public Education: Restores $1.8 billion of the governor's proposed $4.8 billion reduction to K-14 education programs, restores $98.5 million in funding for the University of California (UC) and $97.6 million for the California State University (CSU), resulting in cuts of $233.4 million to UC and $215.3 million to CSU.
Corrections: Eliminates the governor's January proposal for the early release of 22,000 prisoners serving sentences for nonviolent offenses on summary parole.
Increased Borrowing
Borrowing against future lottery revenues: Governor Schwarzenegger proposes to "modernize" the state lottery in order to increase lottery revenues from about $3 billion per year to "$6 billion or $7 billion" per year. The state would borrow $15 billion against future lottery revenues. $5.1 billion would be used to help close the 2008-2009 budget gap. The remainder would go into a "rainy day fund" to help the state meet budget shortfalls in future years. Changing the lottery requires an amendment to the State Constitution, which would have to be approved by the voters. The governor plans for a November 2008 initiative. If voters reject the initiative, a sales tax hike of one percent would be triggered for three years.
Deficit financing bonds: The governor proposes the sale of $3.3 billion in new deficit financing bonds to finance current expenditures.
Budget "Reform"
Give governors sweeping new powers: The May Revision reiterates the governor's support for a constitutional amendment that would give him and future governors unilateral authority to make mid-year spending cuts when the state is running deficits. The Legislative Analyst's Office said that the proposed constitutional amendment represents a "serious diminution of the Legislature's authority."
TAKE ACTION NOW:
FCL believes that society, including government at every level, has a responsibility to provide those in need with appropriate services. It makes no sense to reduce government services when the economy is worsening and more people require services. While the governor has recognized the need for additional revenues, FCL opposes the state operation and sponsorship of gambling. Gambling preys on the poor and should never be used as a means for producing state revenue. Moreover, borrowing against future revenues that may or may not materialize is economically unsound.
Become an advocate for those with no voice in Sacramento. Contact your state representatives and Governor Schwarzenegger and tell them to restore cuts in services to the poor and to look for better means for raising revenues.
To find your state representatives and Governor Schwarzenegger's contact information, please click here.
Sincerely yours,
Jim Lindburg
Legislative Advocate
Friends Committee on Legislation
717 K St., Suite 500-B
Sacramento, CA 95814
(916) 443-3734
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