Calif. Lawmakers Still Grappling Over Budget, Health Services Cuts

California lawmakers are continuing negotiations on various proposals to close a mounting budget deficit as the state draws nearer to running out of cash, the San Francisco Chronicle reports (Yi, San Francisco Chronicle, 7/6).

Last week, Controller John Chiang (D) began issuing IOUs to cover more than $53 million in state payments to health clinics, businesses and others.

A panel of state financial officials set an annual interest rate for the IOUs at 3.75%.

Some banks have agreed to honor the IOUs until July 10. Residents who cannot cash the IOUs at banks will be able to redeem them from the state Oct. 2 if a budget agreement is not reached before then.

The IOUs became necessary after legislators failed to reach a budget agreement before the start of the new fiscal year on July 1.

California's Constitution requires that the state issue cash payments first to education and debt service, then to state workers, pension funds, In-Home Supportive Services and Medi-Cal, California's Medicaid program (Bailey/McGreevy, Los Angeles Times, 7/3).

Health Programs Remain Source of Contention

Lawmakers are continuing to spar over budget plans that target education and health and human services, which together account for roughly 70% of the state's general fund budget (San Francisco Chronicle, 7/6).

Gov. Arnold Schwarzenegger (R) has proposed various changes to state health and welfare programs in an effort to curb fraud and reduce costs.

However, Democratic legislators have pushed back against the governor's suggestions and are working to preserve In-Home Supportive Services and Healthy Families, California's Children's Health Insurance Program (Los Angeles Times, 7/3).

Thus far, lawmakers have been unable to come to an agreement on how much to cut spending for such programs.