Emergency state budget cuts likely soon in California | TahoeDailyTribune.com

Emergency state budget cuts likely soon in California

Rich Pedroncelli / The Associated PressAssemblyman John Benoit, R-Riverside, looks over briefing papers on the state budget during an Assembly Budget Committee hearing Thursday at the Capitol in Sacramento.

SACRAMENTO – Budget negotiators have settled on a package of emergency spending cuts that would freeze a half-billion dollars planned for schools, cut payments to doctors caring for the poor and vacuum up hundreds of millions in unspent funds intended for projects over the remainder of the year.

The package of cuts comes under the state’s first fiscal emergency declaration, which Gov. Arnold Schwarzenegger issued last month when he announced falling state tax revenue had left California facing an estimated $14.5 billion shortfall.

The fiscal emergency declaration required the Legislature to begin addressing the budget problem within 45 days, rather than waiting until the new budget year that begins in July.

Democrats and Republicans on the Assembly budget committee on Thursday unanimously supported the proposed cuts. Their counterparts in the Senate approved an identical plan on a partisan vote Wednesday night. However, Senate Republicans said they intended to vote for it when it comes before the full Senate.

Votes on the package are scheduled in both houses on Friday morning.

If the package is approved with bipartisan support, as both Democrats and Republicans have predicted, it would pass with the two-thirds majority needed to take effect immediately. It also would give Gov. Arnold Schwarzenegger the power he’s sought to freeze thousands of payments to schools and local governments over the summer. If the state doesn’t delay those payments until September, Schwarzenegger’s budget director has said the state could face a cash shortage.

Bipartisan support for the spending cuts also would allow the Legislature to effectively leave Schwarzenegger’s fiscal emergency declaration active, allowing lawmakers to revisit the budget and make additional cuts on any given day if the state’s fiscal picture deteriorates.

That may be necessary as soon as next week. The state’s nonpartisan fiscal watchdog will issue a report Wednesday expected to show California’s economy has worsened since the governor issued his deficit projection.

Schwarzenegger said last month that California faces a $3.3 billion deficit for the remainder of the current fiscal year, which ends in June, and an $11.2 billion shortfall for the budget year that begins in July. The combined gap through June 2009 is $14.5 billion.

To close the gap, Schwarzenegger has proposed 10 percent, across-the-board cuts to most state programs. The cuts would mean slashing more than $4 billion for education, or hundreds of dollars in classroom spending for every California student. The cuts also require releasing 22,000 state prison inmates before the end of their sentences, and closing nearly one in five state parks.

The package the Legislature is scheduled to vote on Friday does not address those controversial measures.

Rather, it begins to tackle the deficit by endorsing billions in borrowing to cover the shortfall and making about $1 billion in other deficit-reducing maneuvers.

The largest move would freeze more than $500 million in payments intended for schools that the state has not yet made. Democrats who crafted the plan said it would not hurt districts because they wouldn’t have to return money they’d already received or possibly spent.

The Association of California School Administrators and other education groups disputed that, saying districts had already budgeted for the funds and would have to make cuts to compensate.

The package also would reduce Medi-Cal provider rates by 10 percent for a savings of $544 million, although those cuts wouldn’t begin until July.

In addition, the package gives largely symbolic support for Schwarzenegger to borrow the remaining $3.3 billion in bond money that voters approved to cover shortfalls in 2004, and to reduce payments to cover other past debts.

In all, the Legislature’s budget negotiators estimated, the package would leave the state with a remaining budget gap of less than $8 billion to solve before July.

“The state’s running out of cash,” said Assembly Speaker Fabian Nunez, D-Los Angeles. “This is an issue of cash flow … that’s why we’re doing this.”

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