Budget Vote Fails, Lawmakers To Consider New Health Service Cuts

On Tuesday, California lawmakers failed to pass a budget plan before the end of the fiscal year, the Los Angeles Times reports.

A partial agreement could have temporarily staved off an impending cash crunch long enough to prevent the state from issuing IOUs.
State Controller John Chiang (D) said he will begin issuing IOUs on Thursday to cover about $3 billion in state payments for July. Chiang is scheduled to meet tomorrow with a state board to determine the interest rate California will pay on the IOUs (Goldmacher, Los Angeles Times, 7/1).

Without a budget plan, the state is on track to run out of money on July 28 (Zapler, San Jose Mercury News, 6/30).

Governor Urges Support for New Proposals

In May, Gov. Arnold Schwarzenegger (R) proposed eliminating certain state programs, such as Healthy Families, California's Children's Health Insurance Program.

However, Schwarzenegger has backed off from the suggestion and now says he will preserve the programs if Democrats agree to greater funding cuts (Yamamura et al, Sacramento Bee, 7/1).

The governor called for lawmakers to reduce funding for Healthy Families by $95 million more than the cut included in the Democrats' plan. He also suggested limiting the program's eligibility to families whose annual incomes do not exceed 200% of the federal poverty level (California Healthline, 6/30).

In addition, Schwarzenegger proposed establishing a mandatory managed care plan for beneficiaries of Medi-Cal, California's Medicaid program. He also called for modifications to the state's In-Home Supportive Services program to help curb fraud (Herdt, Ventura County Star, 6/30).

Schwarzenegger's aides said the governor plans to call an emergency session today to propose new spending reductions (Los Angeles Times, 7/1).

Democrats Respond

Senate President Pro Tempore Darrell Steinberg (D-Sacramento) said his party is willing to consider Schwarzenegger's proposals but is wary of approving deeper spending cuts (Ventura County Star, 6/30).

Steinberg said the governor's suggestions would eliminate health insurance for 250,000 children and cut in-home support services for 231,000 California residents (San Jose Mercury News, 6/30).

Steinberg said, "The price is too high, especially when there are other options." He added, "The debate is coming down to whether we cut the safety net to the bone."

Steinberg and Assembly Speaker Karen Bass (D-Los Angeles) also said they had presented Schwarzenegger with a budget proposal that addresses the estimated $24 billion deficit without imposing tax increases (Ventura County Star, 6/30).

The new budget draft abandons the Democrats' earlier plan to raise $2 billion in revenue through taxes on tobacco and oil extraction.