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Guest Contributor
Joe Armendariz

Joe Armendariz is Executive Director of the Santa Barbara Industrial Association and the Santa Barbara County Taxpayers Association.

The Proposed State Budget
Democrats make sure it's DOA...
[Joe Armendariz] 1/16/04

Rather than nickel and dime Arnold’s first budget to death, let’s consider the bigger picture and then focus on a few specifics. The governor's budget, which still needs approval from the Democrat-controlled Legislature, is effectively dead-on- arrival. Predictably, Democrats are busy readying their favorite hyperbolic argument(s):a Republican Governor is balancing the budget on the backs of the poor, the elderly, the disabled...blah, blah, blah...

Arnold’s budget does achieve some program savings in Health and Social Services (HSS), particularly CalWORKS (*- 3.1%). But funding on Health and Social Services Programs also increases, particularly in Medi-Cal (*+18.6%). *The Medi-Cal budget proposal for 2004-05 reflects a significant increase in the overall level of General Fund support for the program. Moreover, this budget takes another slice out of local government's ability to deliver various programs and services. One step forward, two steps back.

Arnold proposes HHS spend, in fiscal year 2004/05, **$34.3 billion dollars. This represents a **$991.9 million dollar increase, in general-fund support, compared to the 2003 Budget Act. ** Arnold’s budget actually increases the amount the state's general fund spends - in FY 2004/05 - for Health and Human Services, i.e. welfare.

Still, critics argue that because the administration caps and/or reduces provider reimbursements and because they are proposing new eligibility requirements that accurately reflect federal guidelines, it represents a cut. That is disingenuous.

With respect to K-14 spending, here are the numbers:

Between FY 1999/00 and FY 2003/04, in addition to what Prop-98 requires we spend on K-12, California taxpayers spent **$2.7 billion over and above that amount. And under Prop. 98, such increases become part of the Constitutional minimum for all following years. However, since we still need at least $14 billion in program savings in order to balance the budget, the savings from the state's K-14 education budget must be significant, right? Wrong! In fact, Arnold does NOT reduce state funding on K- 14 education one iota.

**These are the primary cuts/program savings in the state’s major program areas:

  • $1.2 billion in Debt Service Savings (ERAF)
  • $143 million from Business, Transportation and Housing
  • $46 million from Resources
  • $21 million from Environmental Protection
  • $294 million from Higher Education
  • $27 million from Labor and Workforce Development
  • $107 million from General Government

Contrary to what the sky-is-falling crowd might say about Arnold's budget, the reality is Arnold addresses the current fiscal crisis by continuing some of the shenanigans made famous by previous administrations (like suspending Prop-42 and robbing counties and cities of their revenues).

However, he bets the ranch on the assumption that voters will approve a $15 billion "Deficit-Reduction/Recovery-Bond" that he and the legislature placed on the March ballot (Prop-57). In fact, Arnold is so desperate for voters to approve Prop-57, he is warning us of something called “economic chaos” if we refuse.

But let's be perfectly clear about something; California has and will continue to have a huge structural deficit, not because we borrow too little, but because we spent and continue to spend way too much. And unfortunately, if the Governor's first budget is an indication of things to come, some things will never change.

* Legislative Analyst's Office
** California Department of Finance

copyright 2004 Joe Armendariz



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