Gov. Arnold Schwarzenegger and California's legislative leaders agreed Monday on a plan to close the state's $26 billion budget shortfall, potentially getting the state back on firm financial ground so it can stop issuing IOUs.
The governor and leaders from both parties announced the compromise after more than five hours of closed-door talks. If the agreement survives its run through both houses of the Legislature, it would provide temporary relief to an epic fiscal crisis that has captured national attention, sunk the state's credit rating and forced deep cuts in education and social services.
Most analysts and top lawmakers expect that California will face multibillion-dollar deficits into the foreseeable future as the economy struggles to recover and tax revenue lags far behind the level of the boom years.
On Monday, the focus was on balancing a state budget that had been thrown way out of whack by declining tax revenue since Schwarzenegger signed it in February during a rare emergency session of the Legislature.
Schwarzenegger and Republican lawmakers refused to raise taxes, limiting lawmakers' options. Democrats, meanwhile, had fought to preserve basic social services, including welfare, in-home support and health care for low-income children.
In the end, both sides said they had accomplished their goals under extraordinarily difficult circumstances.
As the saying goes: the devil is in the details and some of them emerged as the leaders prepared to brief their fellow lawmakers:
- $6 billion from K-12 schools and community colleges over a two-year span.
- Nearly $3 billion from the University of California and California State University systems.
- $1.3 billion from Medi-Cal, the state's health care program for the poor. Also includes a proposal to bill the federal government for more money.
- Saves $1.3 billion by retaining three unpaid furlough days per month for state workers.
- Includes $1.2 billion in unallocated cuts to the state Department of Corrections. Does not include Schwarzenegger's proposal to release some inmates early.
- Cuts $528 million from CalWORKS, the state's welfare-to-work program, partly by increasing sanctions for families that fail to meet work requirements. Schwarzenegger had proposed eliminating the program entirely.
- Cuts $124 million from Healthy Families, a program that provides health insurance for 930,000 low-income children. Lawmakers hope nonprofits, foundations and other groups can fill in some of the losses.
- Cuts $226 million from the state's in-home supportive services program for the frail and disabled. Also includes Schwarzenegger's plans to require fingerprinting of caregivers and recipients, and would require caregivers to undergo background checks.
- Cuts about $8 million from state parks, allowing the majority of state parks, beaches and attractions to stay open. Some parks are likely to close, however, based on popularity and use.
- Borrows about $2 billion from local governments' property tax revenue, money that would have to be repaid with interest in three years. As a concession to angry local officials, the deal would prioritize repayment of the so-called Proposition 1A money after schools and bond holders are paid.
- Takes $1 billion in redevelopment money from local governments.
- Takes $1 billion in transportation funding from local governments.
- Speeds up collection of 2010 personal income and corporate taxes to bring in revenue earlier than anticipated.
- Sells off part of the State Compensation Insurance Fund, which the administration values at $1 billion. The fund is a quasi-governmental agency that is the state's largest writer of workers' compensation insurance
- Allows limited expansion of oil drilling off the Santa Barbara coast, bringing in $100 million in the current fiscal year.
- Eliminates the Integrated Waste Management Board and the Board of Geologists and Geophysicists, which Schwarzenegger had targeted as wasteful and unnecessary.
- Gives school districts the option of cutting the school year by five days.
- Defers state employee paychecks by one day for a paper savings of $1.2 billion, which has been criticized by some as a gimmick. Instead of being issued on June 30, 2010, the paychecks would be issued on July 1, the start of the 2010-11 fiscal year.
- Gives the governor authority to pursue the sale of about 10 state-owned buildings as a potential revenue source in future years, including the Orange County Fairgrounds, the Public Utilities Commission Building in San Francisco and the Ronald Reagan State Office Building in Los Angeles.
- Rejects Schwarzenegger's proposal for a surcharge on homeowner insurance policies to boost funding for emergency services. The surcharge would have averaged about $48 a year per homeowner.
Source: Office of state Sen. Darrell Steinberg, other legislative sources.