Calif. Lawmakers Reach Budget Deal That Includes Health Cuts

On Monday evening, Gov. Arnold Schwarzenegger (R) and legislative leaders announced that they had reached a deal aimed at resolving the state's $26 billion budget deficit by cutting state health services and other programs, the New York Times reports.

Democrats largely rejected the governor's initial plans to eliminate social safety net programs such as Healthy Families, California's Children's Health Insurance Program. However, yesterday's budget plan still includes substantial funding cuts for health services.

Health Program Cuts

Under the agreement, the state would cut funding for Healthy Families by $144 million, which would place many eligible children on a waiting list, the Times reports (Steinhauer, New York Times, 7/21). Capitol Weekly reports that total funding for the program would drop by $226 million (York, Capitol Weekly, 7/20).

Legislators also agreed to cut $1.3 billion in spending from Medi-Cal, California's Medicaid program (Myers, "Capital Notes," KQED, 7/20).

In addition, the state's In-Home Supportive Services program stands to lose millions in state funding under the budget plan. Lawmakers also agreed to the governor's proposal to reduce fraud in the system by requiring IHSS workers and caregivers to undergo fingerprinting and background checks (New York Times, 7/21).

Under the budget plan, HIV/AIDS programs also would lose a significant portion of their funding (Yi, San Francisco Chronicle, 7/21).

State Compensation Insurance Fund

In addition, legislators agreed to a proposal to sell the State Compensation Insurance Fund, which provides workers' compensation insurance in California (Yamamura, Sacramento Bee, 7/21).

Although lawmakers said privatizing the fund would generate $1 billion, many observers are unsure whether such a sale is possible this year (Goldmacher/Halper, Los Angeles Times, 7/21).

Other Budget Details

In addition to the health program cuts, the budget proposal would extract $4.7 billion from local governments, including $2 billion in borrowing.

Lawmakers agreed to sustain the three state worker furlough days per month until June 2010, which would reduce state spending by $1.3 billion (Sacramento Bee, 7/21).

In addition, the budget agreement includes $2.7 billion in accounting maneuvers, such as shifting one month of state payroll to the next fiscal year (New York Times, 7/21).

Under the budget deal, about $875 million would remain in state reserves (Capitol Weekly, 7/20).

Coming Up

On Thursday, the budget proposal is expected to reach the Senate and Assembly floors for a vote.

Legislative leaders plan to brief their caucuses about the plan today (Sacramento Bee, 7/21).

However, observers say it is unclear whether the full Legislature will approve the proposal (Los Angeles Times, 7/21).

Budget legislation requires a two-thirds vote, meaning that the plan will require the approval of all Democrats and at least some Republicans to take effect (Inskeep, "Morning Edition," NPR, 7/21).

If the Legislature passes a budget, officials hope the state will be able to stop issuing IOUs (Scott, "Marketplace," American Public Media, 7/21).

The state controller's office began sending out IOUs this month when a cash shortage prevented the state from meeting its payment obligations.

Not Over Yet?

Some officials have expressed concern that the ongoing recession and declining tax revenue will lead to another budget deficit before the end of the year.