Governor Calling for Federal Aid To Help Close State Budget Gap

Gov. Arnold Schwarzenegger (R) and other California officials are expected to lobby for more federal funding to help California dig itself out of a growing budget hole, the AP/San Francisco Chronicle reports.

Recent budget projections suggest that the state will face a $21 billion deficit during the next 18 months.

Some of the factors contributing to the emerging budget gap are:

• Lawsuits that have blocked recent cuts to state programs;
• The expiration of temporary taxes; and
• The termination of funds from the federal economic stimulus package.

Appeal for Federal Assistance

Last month, Schwarzenegger sent a letter to House Speaker Nancy Pelosi (D-Calif.) arguing that California receives insufficient federal reimbursements for Medi-Cal, the state's Medicaid program (Lin, AP/San Francisco Chronicle, 1/2).

Officials said a change in reimbursement rates and a continuation of federal stimulus funds could help California reduce state spending by up to $8 billion during the next 18 months (Woo, Wall Street Journal, 12/31/09).

If the federal government refuses to provide such assistance, Schwarzenegger has threatened to slash or eliminate the state's In-Home Supportive Services program and other services (Goldmacher/Halper, Los Angeles Times, 12/23/09).

Schwarzenegger's letter also challenged a federal court decision that prevented the state from reducing IHSS worker wages (Yamamura, Sacramento Bee, 12/28/09).

Next Budget Proposal on Tap

On Jan. 8, the Schwarzenegger administration is expected to release a budget proposal for the upcoming fiscal year.

Officials briefed on the plan said the governor's proposal likely will:

• Contain no new taxes;
• Continue furloughs for state workers;
• Repeal recent corporate tax breaks;
• Revive a plan for offshore oil drilling; and
• Tap funds from local transit agencies.

The proposal also might include severe cuts to health and welfare programs if California fails to secure new federal funds (Wall Street Journal, 12/31/09).

Judge Declares Some Furloughs Illegal

In related news, Alameda County Superior Court Judge Frank Roesch last week ruled that Schwarzenegger acted illegally by requiring some state workers to submit to three furlough days per month.

In a series of three rulings, Roesch sided in favor of:

• California Attorneys, Administrative Law Judges and Hearing Officers in State Employment;
• The Service Employees International Union, Local 1000; and
• The Union of American Physicians and Dentists (McIntosh, Sacramento Bee, 1/1).

Roesch said the furloughs had hindered the operations of agencies that receive funding from the federal government or other specially designated revenue streams. He also said the cutbacks have caused delays in processing Social Security disability applications and other services.

The governor's office said it would appeal Roesch's decision (Egelko, San Francisco Chronicle, 1/1).

Sale of State Compensation Insurance Fund Falling Through

In another blow to previous budget proposals, California appears unlikely to fulfill its goal of selling part of the State Compensation Insurance Fund, the Los Angeles Times reports.

Last summer, Schwarzenegger helped secure a budget proposal that aimed to raise $1 billion by selling the compensation fund.

However, California Insurance Commissioner Steve Poizner (R), who is seeking the Republican gubernatorial nomination, filed a lawsuit arguing that the proposed sale could weaken insurance companies and drive up health insurance premiums.

Officials say California will be unable to sell the fund while the issue remains tied up in courts (Lifsher, Los Angeles Times, 12/30/09).