Democrats in Legislature wary of spending cuts for elderly,
A governor bent on budget reform is trying to sell plans to legislators, watchdog agencies and the public.

But Gov. Arnold Schwarzenegger’s first pass at an $85.7 billion budget for 2005-06 is meeting resistance from all three – and some support as well – and the $8.1 billion deficit has ballooned to $9.1 billion, making the job tougher.

Among obstacles causing trouble are state and federal mandates that protect hugely expensive budget items, such as state retirement accounts, making any across the board cuts target programs aiding the sick, the elderly and the poor. The governor refuses to consider raising taxes and even Democratic legislators were reluctant to propose increases.

Schwarzenegger is, however, in favor of finding ways to rein in spending on the state prison system and pensions, both the result of union negotiations.

Assemblyman John Laird, D-Santa Cruz, who represents Morgan Hill and San Martin and is chair of the Assembly’s budget committee, said there was only one overlap between the Jan. 5 speech and the budget proposal: an across-the-board spending cut if the budget is not adopted.

And the governor proposes a long term solution in a constitutional amendment that would trigger automatic across-the-board cuts if expenses rise past revenue.

“The (nonpartisan) Legislative Analyst (Elizabeth Hill) said it’s unworkable,” Laird said. “Especially since wherever there is a matching fund – medical assistance is one – there would be a double cut. This proposal has been met with fairly strong resistance from unusual quarters. I’m hoping this is an idea whose time will not come.”

New State Sen. Abel Maldonado, R-Santa Maria (in Santa Barbara County), who now represents Morgan Hill and San Martin, said he was encouraged. 

“This budget is not perfect but continues to improve on previous budgets and I hope that we can do what we have not done in five years and pass the budget on time,” Maldonado said. “By dealing with the reality of our situation now instead of postponing the inevitable we will better serve our constituents and avoid making hasty decisions.”

Laird said Democrats will press the governor to seek more federal money and to close corporate and other tax loopholes.

“For every $1 we send to Washington (D.C.), we only get 77 cents back,” Laird said, “and that’s $50 billion a year. If we had just $5 billion of that back for schools and transportation projects, we could solve our deficit.”

Schwarzenegger campaigned for President G.W. Bush in Ohio in the November 2004 presidential election, possibly tipping the balance to the Republicans.

“He has a debt he could collect. He would be ‘The Collectinator’,” Laird said.

Local governments, which made a deal with Schwarzenegger in 2004 that allowed the budget to be adopted and gave up $1.3 billion for each of two years to helping the state with its deficit and promising to keep state hands off local revenues after that time.

Santa Clara County Executive Pete Kutras, a Morgan Hill resident, was not pleased with the budget plans that call for cutting $50 million from welfare programs, shifting many to the counties.

“We thought we had an agreement with the governor, but that appears not to be true,” said Kutras.

“This budget will shift cost to local government and hurt those most in need – poor mothers and children, and those suffering from ill-health.”

Kutras said the budget contains many reductions in vitally needed programs and services. CalWORKS – a welfare to work program – would reduce the number of people qualifying for benefits. In-Home Support Services workers would have their pay cut from more than $10 per hour to $6.75/hour. Some Medi-Cal patients also would be required to pay a monthly fee of up to $27 per month.

Laird said he sees five big obstacles to budget agreement at the moment.

Hits to seniors in the amount of $1.2 billion, unfunded transportation projects, a $5 billion deficit heading into next year and a $6 billion cost in borrowing this year that will be rolled forward – way too high, he says.

The fifth is a proposal to resize Proposition 98 that will cost the schools $2.2 billion.

The budget doesn’t make hard decisions, he said.

“The problem is not the process,” Laird said. “It’s the problem.”

After the Legislature gets the budget, the wrangling begins. Once an agreement is reached, the budget returns to the governor’s desk for his signature; the official deadline is June 30, a date seldom met in recent years.

Schwarzenegger said during his Jan. 5 State of the State speech that he realized that what he starts out with will not be what he ends up with, after negotiation with both Legislative houses, unions, lobbyists and the general public.

“Last year the budget he proposed in January bore no resemblance to what we eventually passed,” Laird said.

Pension Reform

Under a pension reform, according to the governor’s State of the State speech, all new state employees would contribute to their own 401k-like retirement plans, with a state contribution, instead of having a retirement assured by the state, if the governor gets his way. State employees’ unions have already weighed in opposing the suggestion that the state retirement system resemble that of private industry.

Laird said that he didn’t see the need for such drastic reform.

“The average retired employee’s pension (in California) is under $20,000 after working for 18 and one-half years,” Laird said. “The problem is with abuses and that is what we ought to be looking at. I just don’t think junking the entire system is the way to go.”

Employees who work longer will have a higher income; the size of the last paycheck also contributes to the amount.

Prison reform

Adult and youth correctional facilities would get a $250 million increase, to $7 billion and add 1,500 more employees, emphasizing rehabilitation though the budget actually reduces rehab, substance abuse and education budgets by $90 million.


Another reform the governor set his sights on is how the boundaries of electoral districts are drawn. He said they are drawn by legislators to protect their districts and, indeed, in the Nov. 2 election, no incumbent lost his or her seat to an opponent, so careful is the distribution of Republican or Democratic voters.

The most accepted solution so far is that a panel of retired, independent judges draw up the district lines.

Laird said his primary concerns in negotiating the budget shoals were protecting education and the environment and making sure there is enough money for health care and roads.

“My priorities will be to try to bring people together to see if we can’t approach some of these issues in a bipartisan manner,” Laird said. “The governor has only been successful when he’s been bipartisan.”

Carol Holzgrafe covers City Hall for The Times. She can be reached by e-mail at [email protected] or phoning (408) 779-4106 Ext. 201.

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A staff member wrote, edited or posted this article, which may include information provided by one or more third parties.


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