Schwarzenegger ends budget saga with more cuts

As he sat down cheerlessly to sign California’s $24 billion budget solution – including $16.1 billion in spending cuts – Gov. Arnold Schwarzenegger said Tuesday morning that the solution included “the good, the bad, and the ugly.”

“Good,” he said, “because we did not raise taxes, we made government live within its means, we made the necessary cuts to be fiscally responsible…. Bad, because we had to make severe cuts to education and health care and vulnerable citizens.… Ugly because the legislators gave me $156 negative reserve and I had to spend the past weekend finding more cuts.”

A Senate version of the budget handed to him last week was in balance, but the Assembly version was still nearly $156 million in the red, so Governor Schwarzenegger made the final cuts with his line-item veto pen. He got there by trimming spending on child welfare, the state Healthy Families Program, the office of AIDS prevention and treatment, and some parks.

“He’s done enough for now to say, at least, this balances on paper,” says Professor Barbara O’Connor, who runs Sacramento State University’s Institute for the Study of Politics and Media.

California’s budget cuts – $43.2 billion in February alongside the current $24 billion – amount to the “biggest rollback in social services in California history.”

“This has come at a very bad time,” Ms. O’Connor says. “A lot of deadlines for stimulus funds are late August … so the public entities are hard pressed to come up with the matching funds they need.”

The cuts were so deep that a lot of constituencies are pushing back vociferously.

“Like the ‘Terminator’, the Governor has bullied his way through the legislative process to get what he wants and shown no regard to health, human life and safety,” said Janice Taylor, communications director for Community Health Councils in a statement. She added, “As money is pulled out of the healthcare industry, cities, schools, local economies, and workers in California are pushed to the unemployment line.”

But others say the circumstances are beyond Schwarzenegger’s control. After the implementation of Proposition 13 in 1978 – which capped property tax rates – the state has relied too heavily on a volatile tax structure built on personal income and capital gains taxes, they say. A tax commission is now looking into reforming that.

And despite the end of the budget saga, the state’s economic woes may not be over.

“It is possible that California could amass an additional deficit of $10 billion this fiscal year due to overly optimistic budget projects,” says Jessica Levinson, director of political reform at the Center for Governmental Studies (CGS).

“California’s budget fight is not over,” says Robert Stern, president of CGS. “Unless there is a miraculous turnaround in the economy, it is likely that the legislature and the governor will be back at the negotiating table early next year debating more cuts, accounting gimmicks or increased taxes.”

Schwarzenegger says he is ready for such eventualities.

“We are ready, if revenues drop further, to go and make necessary cuts, to again live within our means,” he said before signing the budget. “Most important for us now is to get people’s jobs back, get the economy back as quickly as possible and get the revenues up so we can rebuild California.”

-----

Follow us on Twitter.