This story was reported for San Diego News Network on July 21, 2009.
Part of California’s golden plan to close the state’s $25.3 billion budget deficit includes dipping into the reserve, taking money from three sectors of local government, cuts to education and health care, an oil drilling plan and shoving debt off until next year. And that’s just the tip of the iceberg.
Gov. Arnold Schwarzenegger and party leaders — Sen. President Pro Tem Darrell Steinberg (D-Sacramento), Assembly Speaker Karen Bass (D-Los Angeles), Senate Republican Leader Dennis Hollingsworth (Temecula) and Assembly Minority Leader Sam Blakeslee (R-San Luis Obispo), aka the Big 5 — reached a complex budget agreement Monday night, the 19th day of the budget impasse.
Although the leaders seemed pleased with the budget deal, the cuts and changes up for a vote are not garnering popularity points for the Big 5.
“When will the state put together cuts and create an efficient government?” asked Chula Vista Mayor Cheryl Cox. “They must take the same actions local governments have taken: They must rebuild from the inside.”
Cox said more than 500 leaders from cities, counties and school districts met in Sacramento Friday to determine how to deal with the anticipated cuts. A first-time summit including leaders from all three sectors, the group met for nine hours without legislative support.
“More than 500 local leaders went to Sacramento on Friday and their state legislators were not there,” Cox said. “They took off on Thursday.”
Both houses of the state (with the exception of the Big 5) reconvened Thursday during their usual hours well aware they may be needed back at the Capitol for the budget.
Because of current state law, there’s only so much the California government can do legally to balance its budget said Assemblymember Lori Saldaña (D-San Diego). Saldaña said although going to local governments for money may be unpopular it’s a necessary move by the state.
“Three quarters of our budget is on autopilot,” Saldaña said. “We cannot really govern from Sacramento because the voters have told us not to.”
One thing is clear though: the Big 5’s proposal to close the unprecedented $25.3 billion deficit is as complex as the negotiations.
Taking from local governments
Local leaders are not happy with the state’s decision to take revenue from three sources of cities and counties.
First, the Big 5 is proposing to suspend Proposition 1A from 2004, which would allow the state government to borrow property tax revenue. This move, if approved by the Legislature, would give the state $2 billion. However, the state would be required to repay the $2 billion with interest within three years. In addition, the Big 5 has proposed to take $1.3 billion in property taxes from redevelopment agencies.
But, the most controversial component of the proposal is to take $1 billion in gas taxes — a source of income for transportation and roads. This move, according to the League of California Cities, could be unlawful and Cox of Chula Vista said a lawsuit is ready should the state Legislature affirm this move.
Cox said Chula Vista has already had to take its budget back to the size of 1997 when the city’s population was 80,000 less. She said changes leaders have had to make in the South Bay include closing swimming pools, cutting back on library hours and reducing the police department by 19 positions.
She said her frustration isn’t just that the state government is considering borrowing again but that it isn’t making the cuts local governments have had to make.
“Each one of our cities and counties have done what they needed to do,” Cox said. “They’re reaching at the very bottom of the till and scooping.”
San Diego Mayor Jerry Sanders expressed the same frustration on Tuesday (see video).
“We have strongly objected to any plan to take local funds to balance the budget, because of the disastrous impacts this would have on our balanced local budgets,” Sanders said. “I’m extremely disappointed that this is exactly what Sacramento plans to do.”
Sanders also said the hit to the city of San Diego would be about $104 million. This could be considered an unprecedented number considering the city just closed a $60 million budget gap through cuts and fee increases.
But, Saldaña said the deficit is so severe that any move the state takes would affect Californians at any rate. For example, she said, if the state were to cut certain services for low-income residents, the county government would have to provide them.
“Unless you feel it’s OK to tell people to live on the streets then I’d suggest you find different ways,” Saldaña said. “I get very sad when people say ‘Cut, cut, cut’ or say ‘There is waste fraud and abuse,’ and I urge them to really look through programs and see where there is waste, fraud and abuse.”
“I look around and I see a population in need of services. I see more people needing help.”
It’s all on the table
The entire proposal offered by the Big 5 is still unclear as they have not released all the details yet. However, SDNN was able to learn the following proposals and how the state intends to generate revenue or save:
– A $6 billion cut to schools
–$3 billion cut to the CSU/UC school system
– $1.3 billion cut to Medi-Cal
-$1 billion cut to the State’s Workers Compensation Fund
– $1.2 billion cut to the prison system
– $875 million takeaway from reserves
– Closure of 20 percent of state parks
-$1.8 billion in revenue from a new oil drilling plan off of Santa Barbara
– $1.3 billon saved from the 3-days-a-month furlough
– $2.7 billion saved by paying state bills one day late, into the next fiscal year
Because the entire proposal is still unknown, different public sectors or sectors that rely on public money are still unaware of the cuts they’ll have to take. For example, Gary Rotto from the Council of Community Clinics said his organization may not know the amount of health care cuts until Thursday morning when the Legislature votes.
However, he said, the council is aware that the health care of about 250,000 children statewide is on the table. In addition, if health cuts are made – the state may lose federal funds as the
Obama Administration guarantee is contingent on the state. He added that the Traditional Clinic Program intends on taking a 30 percent cut as well.
“The health care of thousands of children is on hold right now … at a time when more and more people are becoming unemployed and more employers can no longer provide adequate health care coverage,” Rotto said.
The UC and CSU school systems have also anticipated cuts, however the $3 billion cut as released by Legislators is still unclear. As of Tuesday, UC took an $813 million cut while CSU’s board of trustees is voting to address its $584 million shortfall.
What could’ve been …
Although the entire budget proposal hasn’t been made public yet, Saldaña made it clear that the budget is “95 percent” as what the Assembly originally voted on at the end of June.
She said many of the cuts on the table now would have never been on the table had the governor signed the budget before the start of this fiscal year.
“The Assembly had enough votes to pass the budget and when the governor saw this he called the Republican Senate leader down to his smoking tent,” Saldaña said. “And with the help of very few people, he [the governor] put us back into the problem.”
She also said his notion to delaying the budget was because he wanted to stop borrowing and reform the government. However, the new proposal includes borrowing and actual reforms have not been made.
“If the governor feels he won something then it was a very expensive victory,” Saldaña said. “It was from the pockets of Californians.”
But looking forward now, Saldaña said the state’s tax commission will look into ways to broadening the state’s tax bases and will look further into programs. She also said leaders will be meeting with the Obama Administration to garner stimulus dollars and hope that the federal government may offer more funds.
“It’s certainly a multi-year process,” Saldaña said.
Both houses of the legislature are expected to vote on the budget package, which comprises of 31 bills, on Thursday.
Editor’s Note: This is the first in a two-part story as legislators have not released all the details of cuts that will suffice for the $25.3 billion (see the SDNN calculator). The full proposal will be available 24 hours before legislators of both houses vote on the bills as according to state law. Also, it is important to highlight because of the rush of the budget proposal, passage and signage by the Governor — agencies receiving public aid are still learning what cuts they will have to make.