Schwarzenegger Unveils Budget Plan

Gov. Arnold Schwarzenegger (searchunveiled a $99.1 billion budget plan Friday and proposed cutting billions of dollars from public health and welfare programs to help pay for it.

Without cuts or higher taxes, California is expected to face a $14 billion deficit (search) by June 30, 2005, the end of the upcoming fiscal year.

Schwarzenegger did not include any new taxes in his budget plan Friday, but in addition to the cuts, he requested higher state park fees and tuition increases of as much as 40 percent for college students.

"For the past five years, the politicians have made a mess of California's budget," Schwarzenegger said. "Now it's time to clean it up."

The biggest hits are aimed at the state's Medi-Cal program (search), which would lose close to $900 million next year under the governor's proposal. The state's program to bring welfare recipients into the work force is also targeted in his plan with a $800 million cut.

City and county governments, already upset by the loss of about $4 billion they were expecting from a car tax increase that Schwarzenegger repealed, also would lose out.

The governor proposed taking an additional $1.3 billion that the local governments are counting on and instead use it to pay state expenses. The move is a shift from Schwarzenegger's previous pledge to protect the local governments, though he said Friday that he would still find a way to replace the lost car tax revenue.

"We need to know what else is piled on top of it," said Pat Leary of the California State Association of Counties (search).

Schwarzenegger's budget is built on a rosy economic picture next year, projecting $2.9 billion in additional tax revenue to be available in 2004-2005.

Getting support for the spending plan won't be easy. Democrats, who control both houses of the Legislature, have said the burden of the state's fiscal crisis shouldn't fall on the poor and disabled.

The hit to public health under Schwarzenegger's plan would include caps on enrollments for the state's health insurance program for the poor and elderly and the elimination of some medical benefits for the poor and disabled.

University students would see higher fees under the proposal, with undergraduates paying 10 percent more, graduate students paying 40 percent more, and middle-income students being offered less financial aid.

Community college students would be asked to pay $8 per unit more -- from $18 per unit to $26.

Some social service advocates say tax increases should be used instead of spending cuts to solve the state's problems.

"I expect that there will still be hard hits on health programs that will hurt children and working families very hard," said Catherine Teare, spokeswoman for the Oakland-based advocacy group, Children Now (search). "I just don't see how this all gets done."

According to estimates updated this week, the state will have a deficit of nearly $27 billion by June 2005 -- created by an existing deficit of $12.6 billion run up over the past three years and a projected shortfall of $14 billion by the June 30, 2005.

Schwarzenegger and the Legislature have put a $15 billion bond issue on the March that would pay off the existing deficit, but the $14 billion projected deficit for next year remains.

A key underpinning of his plan to balance the state's budget without raising taxes had been backed by educators, who agreed to accept $2 billion less next year than they are owed.

But even if legislators approve Schwarzenegger's budget plan, which will be revised in May, it will mean little if voters don't approve the $15 billion bond deal in March. So far, administration officials said, early polls indicate voters don't like the measure and may not pass it.