Schwarzenegger Budget: No New Taxes, Deeper Cuts
May 14, 2010 - 11:07 AMGov. Arnold Schwarzenegger releases his revised budget plan for the coming fiscal year Friday, one that is expected to propose deep cuts across most state agencies and call for eliminating many health and social programs for the poor.
With unemployment remaining high and tax revenue low, California will face a deficit of more than $20 billion - a quarter of all general fund spending - in the fiscal year that begins July 1.
"We're not going to get through the deficit we have without some really tough decisions and some really terrible cuts," Schwarzenegger's spokesman, Aaron McLear, said earlier this week.
A severe national recession has left California with a 12.6 percent unemployment rate, causing a severe drop in tax revenue that shows no sign of abating. Personal income tax revenue in April was down about $3 billion, or 30 percent, from the administration's projections.
The governor and Republican lawmakers have vowed not to raise taxes, as the Legislature did last year, ensuring that spending cuts will be the main solution. That could leave single mothers, foster youth, children from low-income families, the disabled and seniors who rely on state services feeling most of the pain.
Democrats, the Legislature's majority party, say California already has cut too much from state programs in recent years and will violate the spirit of the recently enacted federal health care overhaul if Schwarzenegger's proposals are enacted.
Schwarzenegger and lawmakers have made cuts, borrowing and adjustments of about $60 billion over the past two years. Earlier this year, the governor threatened to eliminate the state's welfare-to-work program and health insurance for children from low-income families unless the federal government gave California an additional $6.9 million, which Schwarzenegger maintains is its fair share. So far, the state has received nearly $3 billion.
Democratic leaders said they won't let the program be cut and have traveled to Washington to lobby California's congressional delegation. They said they will not dismantle core health and social programs, such as in-home care for seniors, welfare assistance for single mothers and health care for children.
Schwarzenegger has vowed to protect public education and universities, although it's not clear how. He also proposed ending state worker furloughs and replacing them with a 5 percent pay cut, and has asked state workers to contribute more to their pensions.
Democrats want to close tax credits and loopholes, noting that the state allows $50 billion worth of tax deductions. In recent years, Schwarzenegger and Republicans won a series of corporate tax credits and giveaways, costing the state treasury an estimated $2 billion a year.
GOP lawmakers accuse Democrats of trying to raise taxes on working families with legislation that would impose levies on sugary sodas and grocery bags. They noted that California voters already rejected extensions to the temporary tax increases last year during a special election.
"The bottom line is last May, the public spoke, almost 2-to-1. They said, 'You know what? We're tired of bailouts. We bailed out the auto industry, we bailed out the banks, we're not bailing out California,'" said Assemblyman Dan Logue, R-Chico.
Republicans said they expect every part of state government to take a hit. They said new revenue should come from taxes generated by job growth, which they believe is best fostered by lowering business taxes and reducing regulation.
Health and welfare advocates fear that kind of approach will harm more families and hurt California's economy.
"Families have needs. Those needs are not going to go away," said Mike Herald, a lobbyist for the Western Center on Law and Poverty. "All the governor is doing is shifting his problem to another level of government. Those families will go right down to the county, and they are going to demand their assistance as required by state law."
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