Governor Releases Revised Budget

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Governor Schwarzenegger took the wraps off his revised state budget Wednesday. KPCC's Shirley Jahad spoke with state capitol reporter Julie Small about the proposal.

Shirley Jahad: Good afternoon, I'm Shirley Jahad. This is All Things Considered on 89.3, KPCC. Today, California Governor Arnold Schwarzenegger announced his revised budget plan. He's abandoned some of his more unpopular cost cutting plans, and he added in an already controversial new proposal he says will bring in more revenue for the state. KPCC's Julie Small is covering the story of the state's complicated budget situation. She joins us now from Sacramento. Hi, Julie.

Julie Small: Hi, Shirley.

Jahad: First, tell us about the governor's new plan. He says it's going to squeeze more money out of the state lottery system.

Small: Yes, that's right. He's hoping to sell the future proceeds from California lottery to Wall Street investors. Then he would borrow against that money, and he's hoping to bring in an extra $15 billion to the state's coffers over the next three years. He wants to put that money into a rainy day fund that would be used in years like this when we have a drop in revenue.

Jahad: Now, some lawmakers are already reacting, saying using gambling money to help balance the budget is a precarious option.

Small: Yes. Senator Don Perata, he's the leader of the senate, called the budget a subprime budget. He said it's risky borrowing for what we can't afford, and it's the worst kind of market speculation, and he was very disturbed that it sends the message to Californians, you can have it all, but all of it will be paid for gaming interests.

Jahad: Educators, teachers, school officials, doctors, health care officials were all upset about his initial proposals. Where do public schools and health care stand in the governor's revised budget?

Small: The worst cuts to education, he is not going to follow through on those. He will honor the state's constitutional guarantee to fund K through 12 education, but he is postponing a cost of living increase.

So the governor is saying that's going to save the state $4 billion. Educators are saying that it will affect the quality of teaching 'cause it will force them to increase class sizes. The cuts are not nearly as bad as the original cut that was proposed, but they'd still like to avoid any cuts to education.

Jahad: What about health care cuts?

Small: Well this is really the worst part of this year's budget, and the governor did acknowledge that. He said these cuts are going to be painful, I realize that. We're making cuts to the most vulnerable part of the population, but, you know, we also don't want to raise taxes and hurt the economy, 'cause that will hurt Californians as well.

But these cuts are really tough. Medi-Cal reimbursement rates, they were already cut back in January when legislators were trying to bring down the budget deficit, and now they're going to cut them even further. And health care advocates say these kind of cuts actually are counterproductive, because what it forces them to do is, they shut down facilities.

Like I was at a subacute care unit in San Diego. If they have to shut the doors because they don't get enough money reimbursed from the state to pay for those patients, those patients will have to go to hospitals, to more expensive beds, to beds that are three times as expensive for the state to run. These cuts are that way throughout.

There's another cut to in-the-home supportive services, services that help people who have injuries stay in their homes instead of having to be in nursing homes, and this may force some people to have to go into nursing homes, and that will ultimately be more expensive. This is going to be probably where the battleground of the budget is fought.

Jahad: The governor already getting this from both sides of the aisle for his budget plan. Tell us more about the reaction from lawmakers in Sacramento.

Small: The senate Republican minority leader Dave Cogdill didn't like the governor's plan at all. I mean, he didn't mind so much the idea of making more out of the state lottery and improving the revenues there, but what he doesn't like is that the governor added this threat, as he called it.

That if, for some reason, that measure fails, if it doesn't pass or if it doesn't generate the revenues it's supposed to, the governor would ask the legislature to increase the sales tax by 1%. And Republicans say that is just the wrong direction to be heading, and they don't think that should be attached to his proposal at all.

Jahad: Well, state lawmakers and the governor are going to be doing budget battle for the next several weeks now, and you're up there in Sacramento. I'm sure we'll be hearing more from you every step along the way. Thank you very much. KPCC's Julie Small.

Small: Thank you, Shirley.