Budget Woes

One year ago, Gov. Gray Davis was calling for across-the-board cuts in every state department except the prisons, mass layoffs of workers and huge bites out of most programs for the disadvantaged.

Davis’ budget-slashing plan of January 2003 was ignored by the legislature and pilloried by the media. In the end, Davis failed to meet the fiscal crisis and lost his job because of it. Now, a year later, some critics are saying Gov. Arnold Schwarzenegger’s budget is little more than Davis redux.

In fact, the Schwarzenegger plan represents a significant departure from business as usual, and offers a template for fundamental change in the capitol.

This is not to say that Schwarzenegger’s proposal is free of the familiar. Just as with the Davis plan, it would hurt local service agencies that rely on Medi-Cal. Although the idea is being challenged in court, such service groups face a proposed 10-percent rate cut.

Paul Castro, executive director/CEO of Jewish Family Service of Los Angeles, which serves 60,000 people a year, said $600,000 would be cut to providers of services like the Multipurpose Senior Services Program.

"Seniors stay at home for about half the cost of putting them in a nursing home, so cutting money to this saves on one side of the ledger but costs more on the other side," Castro said.

Molly Forrest, chief executive for the Los Angeles Jewish Home for the Aging, said she coped with last year’s cuts by trimming expenses and increasing private fundraising for the home that serves 800 residents.

"The governments are not prepared to deal with the fact that people are living much longer," said Forrest, whose fundraising is up 7.8 percent.

But for every idea borrowed directly from Davis, Schwarzenegger and his team came up with fresh principles for saving money that have some Sacramento observers buzzing with hope.

Assemblyman Joe Canciamilla, Democrat leader of the Moderate Caucus, a group enjoying new respect, told me, "This budget is a worthy attempt to correct the craziness that has unfolded here. I would cut even more."

Kim Belshe, new secretary of Health and Human Services, says that of the $13 billion explosion in spending since 1999, half came from programs in her department on which there were no cost controls. Unlike Davis, Schwarzenegger "is not proposing wholesale rolling back of programs, but controlling costs while maintaining services to those most in need."

Schwarzenegger intends to wean California’s legislature away from its taste for Cadillac programs that most other states offer as mere Fords. Think of the governor as repo man.

For example, unlike the basic Medicaid programs created by other state legislatures, Sacramento’s legislators decided Medi-Cal should be better than most private health plans. On the taxpayer’s dime, they created a program that even includes free acupuncture, and they offered the plan to many non-poor. One in five Californians qualified. The result was skyrocketing costs that are unsustainable.

State Finance Director Donna Arduin told me all 6.8 million people will still be eligible, to avoid Davis-style slashing. But costs will be controlled. The non-poor "may be asked to contribute toward their care, or the package of benefits they are offered may be modified." The changes will take two years, while California seeks federal approval. Other states already have these controls.

It’s just sensible stuff. But while Schwarzengger pushes for cost reforms, it’s extremely unlikely he will approve new taxes.

A strong anti-tax mood has settled across the nation. A recent poll in California shows voters willing to accept new taxes only on smokers and the rich — two populations that have dwindled so drastically that Chief Legislative Analyst Elizabeth Hill says taxing them would produce only a fraction of the several billion dollars needed to plug the deficit.

Democratic and Republican consultants and strategists tell me that Schwarzenegger and the Republicans won’t bend on taxes unless the governor suffers a big defeat in March.

In March, the governor wants voters to approve a $15 billion bond that refinances $12 billion in legally questionable bonds approved by the Davis-era legislature to finance its overspending last year. That $12 billion is milk that’s already been spilled. However, Schwarzenegger’s package ensures that those bonds are legal, avoiding potential fiscal chaos.

It’s going to be a tough year. Yet the governor has said that everything is on the table, and if alternatives to his cuts can be found, he wants to hear them. Unlike Davis, he has targeted the prisons for massive cutbacks. Worthy programs like the Multipurpose Senior Services Program still have a real chance to make their case, and people like Castro say they intend to do so.

In the end, however, everyone should hope Schwarzenegger gets much of what he is seeking from the Democratic-controlled legislature. It’s true fiscal restraint, but it’s done with decency.

Jill Stewart is a syndicated
political columnist and can be reached at