Schwarzenegger signs overdue spending plan, cuts $703 million |

Schwarzenegger signs overdue spending plan, cuts $703 million

SACRAMENTO (AP) ” Gov. Arnold Schwarzenegger on Friday signed California’s overdue spending plan after using his veto power to trim $703 million and temporarily eliminate the state’s operating deficit, with most of his cuts coming from health and social service programs.

Schwarzenegger’s signature on the $145.5 billion budget means the state can immediately begin releasing payments to schools, hospitals, state contractors and a variety of social service agencies that have had payments cut off since the fiscal year began July 1.

With his vetoes, however, less money than expected will go to mental health programs for the homeless, prescription drug discounts and clinics for the poor, and Medi-Cal, the state-federal medical program for the poor.

State parks, anti-gang initiatives, part-time college teachers, and cities and counties also will feel the pain of Schwarzenegger’s line-item vetoes. Even a little political payback appeared to round out the governor’s list.

He sliced millions from Attorney General Jerry Brown’s budget, including $1 million to pursue climate change litigation on behalf of the state. Brown, a Democrat, enraged Republicans for challenging city and county land-use plans if they did not adequately address the effects of local growth on global warming.

Republican demands to limit Brown’s authority became one of the main obstacles to passing a budget, dragging the process nearly two months beyond the start of the fiscal year.

Friday’s signing ceremony followed a bitter 51-day stalemate led by Republicans in the Senate, who sought greater cuts to eliminate the state’s operating deficit and a variety of other policy concessions.

Schwarzenegger acknowledged the holdout, but said it made the final spending plan better.

“Some things are worth fighting for, and a good budget is one of those things,” Schwarzenegger said.

He repeated his oft-used refrain that the state’s deficit was projected to peak at $16 billion when he took office in 2003. Billions of that debt never materialized, however.

On paper at least, Schwarzenegger’s vetoes temporarily eliminated the state’s deficit. In all, he cut $703 million in general-fund spending.

The Department of Health and Human Services took the brunt of the governor’s cost-cutting efforts, losing $527 million ” less than 2 percent of the agency’s overall budget.

The largest chunk was a $331 million reduction to the state’s Medi-Cal budget. Mike Genest, the governor’s finance director, said the cut was not expected to affect service because the health care program has cost less than expected in recent years. He said additional funding could be authorized if the administration’s calculations are off.

Schwarzenegger also eliminated about $15 million from outreach programs designed to find and enroll children who need health care coverage. He cut about the same amount from major new anti-gang initiatives. Agency budgets saw an across-the-board cut of $72 million.

His decision to strike $55 million from a program to help mentally ill homeless people drew an immediate rebuke from the Democratic lawmaker who wrote the 2000 bill authorizing the funding.

The program helps some of the state’s estimated 4,500 mentally ill homeless obtain permanent housing. It has increased participation in work programs and decreased arrests, said Sen. Darrell Steinberg, D-Sacramento.

“This is a program that works … I’m extremely disappointed that the governor used his veto power in a way that punishes the least among us,” Steinberg said, noting that Schwarzenegger axed the program while retaining $45 million in tax breaks for owners of yachts, private planes and recreational vehicles.

Genest defended the move, saying counties that want to maintain services for the homeless can draft new programs and apply for funding through Proposition 63. The initiative was approved by voters in 2004 and taxes the wealthy to raise money for mental health services. Advocates say it was designed to supplement, not replace, state program funding.

With Schwarzenegger’s cuts, California’s total budget ” including money for special distribution funds and bond repayments ” is $145.5 billion, an 11 percent increase over the $131.4 billion budget for the 2006-07 fiscal year.

General fund spending for day-to-day operations increased less than 1 percent, from $101.7 last year to $102.3 billion.

Schwarzenegger’s office said the vetoes fulfilled a promise to Senate Republicans to help end one of the longest budget stalemates in 30 years.

The Republicans ended their standoff Tuesday by accepting largely symbolic concessions from Democrats to limit environmental lawsuits against transportation and flood-control projects.

Republicans touted Schwarzenegger’s promised line-item vetoes to eliminate the operating deficit as a victory. But the most conservative lawmakers warned that the governor’s cuts would at best provide only temporary relief.

Schwarzenegger left intact $20.7 million to fund the agency overseeing plans for a 700-mile high-speed rail line throughout the state, erasing concerns of some Democratic lawmakers who feared he would veto the money.

“Most Californians want to see a viable high-speed rail system,” said Sen. Dean Florez, D-Shafter. “I think he made the right decision.”

A bond measure providing about one-fourth of the project’s estimated $40 billion cost is scheduled to be on the November 2008 ballot.

The spending plan also relied on $1.3 billion in one-time, unanticipated tax revenue from higher gasoline prices to pay for ongoing general fund expenses. Democrats had wanted the money spent on public transit.

Despite efforts to balance the budget this year, the state faces multibillion-dollar deficits through 2011. Depressed housing and credit markets threaten to make the situation even worse.

With three weeks left in the legislative session, the signing moves the state’s debate over health care reform onto center stage. Hearings on hundreds of other bills, as well as proposals to upgrade California’s massive water-delivery system and change the way legislative districts are drawn also will shift into overdrive.


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