California’s bleak budget options

Gov. Arnold Schwarzenegger on Thursday proposed two sets of budget revisions to deal with the state’s financial troubles. They contain an array of grim options:

Education

The governor’s cuts would start at $3 billion and rise to $5.3 billion if voters fail to pass the package of ballot propositions in Tuesday’s special election. More than $1 billion would come from the current school year, which is nearly over.

Requiring districts to cut in these waning days would lower the governor’s future funding obligations. That’s because, under state law, education spending is based largely on past funding.

“This is a cynical manipulation” to reduce base funding for schools, said Jack O’Connell, state superintendent of public instruction. “It would be extraordinarily difficult, if not impossible, to realize these savings with 45 days left.”

Deputy Finance Department director H.D. Palmer said he expected school districts to balance their books by taking advantage of reserves, eased restrictions on state money and federal economic stimulus dollars.

Many districts, including Los Angeles Unified, had penciled in the federal money for the school year that begins July 1. The added deficit in Los Angeles could be about $250 million, said Chief Financial Officer Megan Reilly. The district already was expecting to lay off as many as 2,500 teachers and 2,600 other employees.

The state also plans to defer more payments to school districts, which could create a cash-flow crisis, said Ken Shelton, an assistant superintendent with the Los Angeles County Office of Education, which oversees the finances of the county’s 80 kindergarten-through-12th-grade school districts.

Higher education leaders around the state warned of course-schedule reductions, overcrowded classrooms and staff layoffs in the fall.

California Community Colleges Chancellor Jack Scott predicted that hundreds of classes taught by part-time instructors would be canceled even as enrollment surges.

If the ballot propositions are approved, the 10-campus University of California system will face a net reduction of $240 million for next year out of $3 billion in general funds. If the ballot measures fail Tuesday, the net reduction will rise to $322 million, according to the University of California.

For the California State University system, the worst-case budget would be equivalent to reducing enrollment by 50,000 students and laying off 4,000 to 5,000 employees. “There are no good options,” Chancellor Charles B. Reed said.

Among the possible cuts are about $50 million in UC and Cal State outreach programs, which mainly get high school students ready for higher education. And fewer students would qualify for financial aid, while eligible students would receive less.

Healthcare

No matter how Tuesday’s vote turns out, Schwarzenegger’s proposals would hit hard at Medi-Cal, which provides medical care for the poor. The plan calls for saving $750 million, likely by restricting patient eligibility and cutting payments and benefits.

The governor wants to save on pharmacy costs as well. He would require that the state review prescriptions for antipsychotic drugs before they could be dispensed. He also wants to create a force of investigators to police for fraud by physicians in the program, as well as in adult healthcare centers and pharmacies, for a potential savings of nearly $50 million.

Medi-Cal payments to private hospitals would be reduced by 10%, and the reimbursement rate for family-planning services would be rolled back to pre-2008 levels, saving nearly $37 million. Schwarzenegger also would cut services for newly qualified legal immigrants ages 21 and older.

If the ballot measures are defeated, the state would cut more deeply into Medi-Cal programs. It would limit an adult day healthcare program to three days a week and cut by 10% the money the state pays to providers of substance abuse treatment.

Tobacco tax money that now goes to county health programs would be shifted to Medi-Cal. Eligibility for the state’s Healthy Families program, which serves the working poor, would be tightened. That would make health coverage unavailable to about 225,000 children.

In addition, the state would halt a dental disease prevention program that serves about 300,000 preschool and elementary school children in 31 counties.

Funding would be cut off from local healthcare organizations that provide HIV education and prevention programs. The governor also would halt funds to a program operated by local jurisdictions to improve the health of mothers, children and families.

Social services

The governor proposes deep cuts in a number of programs that provide assistance to the poor, regardless of Tuesday’s outcome.

The state contribution to the wages of home care workers for elderly and disabled Californians would be slashed from a maximum of $10.10 per hour to the state minimum wage of $8 per hour. Another cut would limit certain services provided by the program to “individuals with the highest levels of need.” And the state would put more resources into rooting out fraud in that program, called In Home Supportive Services, in hopes of saving $15.8 million.

Cash grants available to low-income elderly and disabled Californians would be cut in an effort to save $249 million. That reduction, which would take effect Sept. 1, would lower the monthly grant for an individual from $907 to $830, the federal minimum allowed under the program.

The state also would cut CalWorks welfare grants for poor children by $157 million. Emergency assistance intended for the children of parents who have been in the program more than five years would be ended if the parents do not meet federal work participation requirements.

If the ballot measures are defeated Tuesday, the state would cut an additional $300 million from In Home Supportive Services. Funding for Child Welfare Services, which exists to protect the health and safety of children and their families, would be cut by 10%.

And a $20.4-million domestic-violence program, which funds 94 shelters that provide emergency services to victims and their children, would be eliminated.

Law enforcement

No matter what voters decide, the biggest share of the 5,000 proposed state worker layoffs would affect the prison system, the governor’s aides say, though it remains unclear how big that hit would be.

If the propositions are rejected, Schwarzenegger would save money by reducing the state’s prison population. A prime target would be the 19,000 illegal immigrants currently serving time in California lockups.

The governor said the federal government is not providing enough money to offset the incarceration costs for those inmates. He wants to begin shifting nonviolent prisoners who are illegal immigrants to federal custody unless the U.S. government boosts its funding.

The governor also wants to save $100 million by altering sentencing options for an estimated 23,000 low-level offenders so more would be put in county jails rather than in state prisons. But shifting that burden to local governments -- which could have their state funding cut by $2 billion -- doesn’t sit well with law enforcement officers.

“You cannot balance the state budget woes on the back of the county jail system,” said Steve Whitmore, a spokesman for the Los Angeles County Sheriff’s Department, which has already had its budget cut by $72 million this year. “This isn’t a good scenario.”

Schwarzenegger proposes eliminating $108 million for programs that provide substance abuse and crime-prevention treatment to offenders. An additional $20 million would be cut for 94 domestic violence shelters around the state.

Local government

If voters reject the ballot measures, the state would borrow nearly $2 billion from local governments under the governor’s plan. The money would come from local general funds that pay for police, fire, library and other basic services.

That could mean the loss of $120 million for the city of Los Angeles and $290 million for the county, according to an analysis by the League of California Cities. The money would have to be paid back to the cities in three years.

“I absolutely despise taking money from local government, but this is only in the worst-case scenario,” Schwarzenegger said.

The impact of such cuts would be significant, said Los Angeles County Chief Executive Officer William T Fujioka.

“All of us are experiencing significant economic effects,” he said, “and this just adds to it.”

--

Times staff writers Eric Bailey, Howard Blume, Larry Gordon, Evan Halper, Patrick McGreevy and Michael Rothfeld contributed to this report.