Nearly $1 Billion in Budget Cuts Won’t Be Rescinded

Nearly $1 billion in spending cuts that fall hardest on the poor, disabled and home care workers will take effect next year after state officials concluded March 27 there will not be at least $10 billion in federal economic stimulus funds that can be used to staunch the red ink in the state’s general fund.

Although California is expected to receive more than $31 billion in federal money over the next three years not all of it can be used to replace costs incurred by the state’s general fund.

Under the budget signed in February, state Treasurer Bill Lockyer and Mike Genest, director of the state Department of Finance, were required to certify by April 1 that there would be $10 billion in federal funds to swap out state general fund dollars or else the cuts remain in place.

Lockyer, in a letter posted on his website, said he agreed with Governor Arnold Schwarzenegger’s estimate that only $8.2 billion in federal offsets is available for general fund use between now and June 30, 2010.

 “I find no basis on which to dispute the (governor’s) estimate, given what is known at the time of this determination,” Lockyer wrote.

Had there been $10 billion a .25 percent surcharge on personal income taxes would have also been halved to .125 percent, costing the state $1.8 billion in additional revenue.

Assembly Speaker Karen Bass, a Los Angeles Democrat who agreed to the cuts and trigger mechanism during closed-door budget negotiations, issued a statement saying she was “disappointed” by the decision.

In his letter, Lockyer urged lawmakers and the governor to rescind two of the cuts before they take effect July 1. One is a $200 million elimination of benefits, such as dentistry, given to patients of Medi-Cal, the state’s health care program for the poor.  The other, a reduction in the state’s wage contribution level to In-Home Support Services workers from $12.10 per hour to $9.50 an hour to save $78 million.

 “I consider the suffering that would be caused by these particular cuts to be both severe and compelling. Further, the effect of these reductions would be greatly amplified by the fact the State would forego additional Federal matching and overmatching funds,” Lockyer said in his letter.

On March 17, Lockyer and Genest heard more than three hours of testimony, nearly all of which was devoted to the harsh impact the cuts will have on those who care for the elderly in their homes, the aged, blind and disabled and persons receiving dental care from Medi-Cal.

Lockyer said he received an additional 2,700 e-mails and letters after the hearing, echoing the public testimony.

Among the other cuts are 4 percent reductions in the grants paid to welfare recipients and lowering support checks to the state’s poorest aged, blind and disabled by $20 a month for individuals and $35 for couples. A complete list of the spending reductions follows.

Foreshadowing the decision he announced March 27, Lockyer at the public hearing, more than once made the point that triggering off the cuts and revenues only makes the state’s economic situation worse.

“We pull the trigger, the taxes go away. The bad news comes in May and then we make all the cuts,” he said.

Some of the bad news has come already. Within weeks of the budget’s enactment, the Legislative Analyst said the spending plan was already $8 billion out of balance, eating up a  $2 billion reserve and leaving the state at least $6 billion in the hole by the end of the next fiscal year, a point noted by Lockyer in his letter. 

 “The decisions the Director of Finance and I make today do not obviate the need for more corrective fiscal actions in May,” Lockyer wrote.

“The choices before the Legislature and Governor become bleaker with each morning’s headlines. The municipal credit markets only slowly recover. Employment worsens. The State’s short- and long-term fiscal outlook erodes. As a result, only a month following the budget’s enactment, the State faces the prospect of ending 2009-10 with a deficit of $6 billion or more.”

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THE CUTS:

*A grant reduction of $20 per month for poor aged, blind and disabled individuals and $35 per month for couples.  

* Elimination of the following Medi-Cal benefits– adult dental, acupuncture, audiology and speech therapy, chiropractic services, glasses and eye care, podiatry, psychology and incontinence creams and washes.  

* A 10 percent reduction in public hospital rates.

* A lowering of the state participation in In-Home Supportive Services wages to $9.50 per hour for wages plus $0.60 an hour for benefits.

*A prohibition on any new In-Home supportive Services clients to receive a Medi-Cal Share-of-Cost Buy-Out.

*A 4 percent reduction in monthly checks to welfare recipients.

*A $100 million reduction for the University of California and the California State University system.

*A $100 million reduction in court funding.

*$71.4 million for new judgeships. 

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