December 7, 2002

ATTACHED is an UPDATED FACT SHEET AND TALKING POINTS on the yesterday’s proposed reductions by the Governor. It includes the salient bullet points on the health care cuts, which we estimate will prevent over a million Californians from accessing needed health care. Over a half-million low-income working California will de directly denied Medi-Cal health coverage. Health Access continues to urge legislators to not consider these severe cuts without also considering revenues.

BELOW are a few news articles that also explain the cuts, and indicate the response from legislators and advocates.


Davis Outlines Deep Midyear Cuts in Education, Health

The $10.2 billion in proposed reductions would hit schools hardest.

More than 200,000 residents could lose health benefits.

By Gregg Jones, Times Staff Writer

SACRAMENTO — Gov. Gray Davis proposed slashing spending from hundreds of state programs Friday, outlining deep cuts in public education, health care and other areas as part of a $10.2-billion package of midyear budget reductions and other savings.

The announcement unleashed a fierce debate over California’s priorities in the face of a projected deficit of more than $21 billion.

“These budget reductions are severe by any measure,” Davis said. “Enacting these cuts in midyear will be an extraordinarily difficult task, but we face an extraordinary challenge. No program will be held harmless, and it will not be possible for us to meet this fiscal challenge if decisions are driven by politics, fear or rigid ideology.”

The Legislature is set to convene Monday in a special session to discuss the governor’s proposals and other possible solutions to the looming budget crisis.

The deliberations promise to be intense: Majority Democrats say they will fight to preserve services to needy Californians, while Republicans say they will oppose any tax increases.

Davis, who has described education as his top priority as governor, delivered the biggest blow to public schools. He recommended cutting spending on kindergarten through community college by $3.1 billion this year and in the 2003-04 budget year, which begins July 1.

The governor also proposed cuts and savings of $2 billion in health and human services, $1.9 billion in government operations and $1.7 billion in transportation and housing.

If all those cuts were adopted, more than 200,000 Californians would lose health benefits, and some school districts would have to lay off employees — just two snapshots of the human suffering the cuts would inflict, state officials conceded.

State employees, a favorite target of Republicans demanding cuts in the size of state government, face an uncertain year. Davis said the state could save $470 million in employment costs through pay cuts, furloughs, layoffs and other means.

As promised, the governor didn’t propose a tax increase. But he did recommend an increase in state park user fees to raise an estimated $4.5 million.

Davis’ proposed cuts provoked swift and sharp reaction from potential targets, offering a preview of the extraordinary pressure legislators will face as powerful interests try to protect their share of the budget.

“A cut of this magnitude in the current fiscal year will absolutely undermine our core mission to educate kids,” said Kevin Gordon, executive director of the California Assn. of School Business Officials. “There will almost certainly be an increase in class size and massive layoffs of support staff if we are forced to implement these kinds of cuts.”

Many school district leaders were scrambling Friday for information about Davis’ proposed cuts. Los Angeles schools Supt. Roy Romer learned details when a reporter called and recited the list of reductions.

Romer was not happy with what he heard. He openly fretted about making additional cuts in a district that already has slashed more than $400 million from its budget this year — in part by raising class sizes in most grades. “It’s going to be very painful and tough,” he said.

The second-largest chunk of the state general fund budget — health care — faces about $1.2 billion in cuts, most of which were recommended by Davis this summer but rejected by legislative Democrats.

The governor proposed $167.4 million in reductions to Medi-Cal, the health-care program for low-income Californians. That includes a 10% cut in payments to doctors, nursing homes and other providers of Medi-Cal services, which would save about $90.4 million. Hospitals and federally qualified health centers are exempted from the reductions.

Davis spared Medi-Cal services for children and Healthy Families, the health insurance program for the working poor.

Still, the cuts will be devastating, said Beth Capell, a Sacramento lobbyist whose clients include health-care consumers and workers. Up to 1 million people, five times more than state officials earlier estimated, could lose health coverage, she said.

“The poorest people will have the most difficulty in getting health care,” said Capell. “The optional [Medi-Cal] benefits sound abstract, but these are people making $1,000 or $1,500 a month, and we’re asking them to pay out of pocket for diabetes supplies. These are people like diabetics in danger of losing their toes for not being able to go to a podiatrist.”

Davis also proposed eliminating child care for former clients of the CalWORKS program to save about $98 million.

State Finance Director Tim Gage said the state was prepared to renegotiate labor contracts with state employees in an effort to achieve needed savings.

“We’re going to ask [state employees] to recognize the fact that the state is in a dire economic circumstance,” said Gage, who fielded questions from reporters in Sacramento after Davis announced the cuts by telephone in Los Angeles.

The governor hopes the Legislature will act on the package by the end of January, Gage said.

As the size of the budget dilemma has come into grim focus in recent weeks, legislators on both sides of the aisle have waited for Davis to take the lead in proposing painful cuts. Friday, some were quick to criticize the package he presented.

“I told the governor prior to the press conference that I thought Senate Republicans would be supportive of many if not most of his proposals,” Senate Republican Leader Jim Brulte said from Hawaii. “I said for three years if we didn’t get spending under control, we would have nothing but a series of very, very bad options. We now have a series of very, very bad options.”

Three of the state’s four legislative leaders are in Hawaii: Assembly Speaker Herb Wesson (D-Culver City); Brulte of Rancho Cucamonga and Assembly Republican Leader Dave Cox of Fair Oaks. They and several other legislators are attending a gathering sponsored by one of the state’s most powerful lobbies, the prison guards union.

In Sacramento, some Democratic legislators criticized Davis for failing to put tax increases on the table for discussion, even though many independent experts say those will have to be part of the solution.

Davis, for example, did not propose raising vehicle license fees, an increase widely supported by legislative Democrats and expected to be presented in next week’s special session. Restoring the fees to 1998 levels could raise about $3.8 billion a year. Many Democrats also support an increase in the upper-end personal income tax brackets, but any general tax increase will require two-thirds approval in the Legislature — and thus the support of some Republicans.

Davis must win the votes of at least two Republicans in the Senate and six in the Assembly for final passage of the 2003-04 budget next summer.

In addition to elementary- school cuts, Davis’ proposals would slash nearly $350 million from the state’s community college and four-year college systems. Those mid-school-year reductions are expected to translate into the first fee increases in eight years, along with class cutbacks and other reductions.

The boards of the 23-campus California State University system and the nine-campus University of California system will hold special meetings Dec. 16 to consider cuts and fee increases. The fee boosts would take effect in time for the January term.

CSU undergraduates who are California residents currently pay an average of $1,926 in annual fees, including systemwide and individual campus charges.

The UC Board of Regents will be asked to approve a $135 fee increase for the spring term. Currently, in-state undergraduates pay an average of $4,408 in fees, including health insurance.

That boost, is expected to yield $19 million. Still, the governor proposed an additional $74-million in midyear cuts to such areas as UC’s libraries, student services, outreach, cooperative extension and administrative operations, and some research.



Davis cuts, slashes

Governor proposes $10.2 billion worth of spending reductions, but no tax increases.


The Orange County Register

A TARGET: Physician Elsie Rosso Hidalgo examines a child at the UCI Family Health Center in Santa Ana. Government health care is among Davis’ cuts.



SACRAMENTO Gov. Gray Davis’ $10.2 billion worth of proposed budget cuts Friday hit hardest at the schools, the poor and those who depend on government medical care – and he made it clear that more bad news is on the way.

“We are not out of the woods by a long shot, and we may not be for several years,” Davis said as he proposed $3.4 billion in immediate cuts, plus $6.8 billion more for the fiscal year beginning July 1. “No program will be held harmless.”

Although some fee increases appear to be in the offing – most notably for university students – Davis did not recommend any sweeping tax increases.

The flat economy, weak stock market and increasing unemployment are pushing state revenue below projections through at least June 2004, forcing the cuts. California’s economic outlook is unlikely to improve soon, and 40 other states are in similar straits.

The cuts, by far the deepest ever proposed for consideration by a new Legislature in a special session, drew praise from Republican legislators and Democratic Assembly Speaker Herb Wesson, D-Los Angeles. Assemblyman John Campbell, R-Irvine, the GOP’s top budget writer in the Assembly, said Davis’ cuts are “a good start.”

But the most powerful member of the Legislature, Senate Leader John Burton, D-San Francisco, was ominously silent. He declined to discuss Davis’ plan, but he called a news conference for Monday, the first day of the special session. Davis needs the support of the mercurial Burton – who often opposes cuts in social services – to get his plan passed.

The cuts must be in place by the end of January to take full effect, Davis’ staff said. But even if all the cuts are approved, they will resolve at most only half of the projected deficit.

Davis offered 22 pages of cuts and changes – more than 400 items: Freezing cost-of- living increases for the poor and disabled. Cutting K-14 education. Eliminating a lunch program for seniors. Boosting fees at most of California’s 274 state beaches and parks. For example, at the state’s most expensive park compound, the group camp at Anza Borrego, sites that can handle multiple RVs will go from $150 to $270 per night.

He cut $50 million from trial courts across the state, borrowed money from special funds – he got $1 million from the real estate appraisers’ fund – and held back at least $100 million this year that was destined to help relieve traffic congestion, plus $500 million next year. Caltrans Director Jeff Morales said projects would be delayed, but he didn’t identify them.

Davis wants to redraw labor contracts with the unions of about 240,000 state workers to save as much as $470 million – money the state likely would have to pay back later. He plans to leave at least 10,000 state jobs vacant. He wants to tap into funds set aside by redevelopment agencies across the state to pick up $500 million more.

By far, most of his proposals involve spending reductions. “About 85 percent are direct cuts,” said Davis budget writer Tim Gage. Davis even cut out a new air conditioning unit for a kitchen at the state complex in Porterville.

Davis proposed 10 percent cuts in the money that the state pays to reimburse doctors who treat Medi-Cal patients, and he sought tightening of Medi-Cal eligibility standards to save nearly $125 million in state funds over two years.

The proposal cuts funding for K-12 schools, community colleges and the two university systems by nearly $3.8 billion over the next 18 months, his staff said, although not all the reductions were spelled out.

The K-12 schools alone face about $3.1 billion in cuts, slightly less than educators had predicted the day before.

“We’re going to be going from delivering programs to students to survival mode,” said Bill Eller, superintendent of the Cypress School District.

Even as Davis spoke, the University of California announced it would boost student fees by $135 a quarter. California State University is considering the issue.

The Democratic governor did not propose new taxes, which drew immediate fire from health-care advocates.

“About one million Californians would lose health-care coverage under the proposed cuts,” said Beth Capell, a lobbyist for Health Access, a health-care advocacy group.

“All discussions of cuts should be accompanied with discussion of revenues. We can’t cut $20 billion or more without causing real human suffering,” Capell said. “The Legislature rejected these cuts last year because they recognized the suffering that would be caused by them. We hope they will be rejected again.”

But Republicans are glad Davis didn’t raise taxes – at least for now.

Campbell said more cuts should have been proposed for the current year but that Republicans are encouraged that Davis adopted a number of money-saving proposals the GOP caucus had suggested during last summer’s budget debate. Those include eliminating optional Medi-Cal benefits for adults, such as acupuncture, chiropractic and dental services.

“Isn’t that funny? That stuff was wholly rejected last year and in August, and now it gets proposed,” Campbell said.

Senate Republican Leader Jim Brulte, R-Rancho Cucamonga, said his 15-member caucus will be supportive of most of Davis’ proposals.

“I’ve been saying for three years the state was overspending,” Brulte said.



Davis: $10 billion in cuts

Schools, roads, the elderly: No group is left unscathed

By John Hill — Bee Capitol Bureau

Published 2:15 a.m. PST Saturday, December 7, 2002

The grim and far-reaching consequences of California’s budget crisis began to hit home in earnest Friday as Gov. Gray Davis announced $10.2 billion in midyear cuts and other adjustments.

They touch on nearly every facet of state operations, from a boost in state park fees to the elimination of cost-of-living benefit increases for aged, blind and disabled people.

Education accounts for half the general fund budget and had been largely spared from earlier cuts. But that ended Friday when Davis proposed a 3.7 percent across-the board cut to education from kindergarten through community colleges, as well as reductions in specific programs.

The cuts and other measures, which lawmakers will consider in a special session beginning Monday, would help bridge a shortfall estimated by Legislative Analyst Elizabeth Hill at $21.1 billion through the next fiscal year.

Davis and other officials have said the gap, in a general-fund budget expected to exceed $80 billion, is probably several billion dollars bigger.

“These budget reductions are severe by any measure,” the Democratic governor said. “Enacting these cuts in midyear will be an extraordinarily difficult task, but we face an extraordinary challenge.

“No program will be held harmless, and it will not be possible for us to meet this fiscal challenge if decisions are driven by politics, fear or rigid ideology.”

Davis proposed only two fee increases and no tax hikes. Advocates for people who get state services responded that drastic cuts should not be considered without also looking at ways to raise revenue.

“I realize it’s a horrendous crisis, but there are no revenues proposed here,” said Casey McKeever, directing attorney in the Sacramento office of the Western Center on Law and Poverty. “The question is, how do you balance the burden, and it seems like the burden isn’t being balanced very fairly.”

Democratic lawmakers agreed.

“This budget cannot be balanced by cuts alone,” Assemblywoman Jenny Oropeza, a Long Beach Democrat who chairs the Assembly Budget Committee, said in a prepared statement. “The time has come for responsible revenue increases.”

Republicans applauded the Davis proposal as a first step to weathering the budget crisis without raising taxes, and said they could support many of the cuts.

When it comes to schools and transportation, “Republicans are probably less happy than Democrats to see some of this,” said Assemblyman John Campbell of Irvine, the GOP spokesman on the budget. “But we want to see the budget solved without taxes.”

Davis’ proposal would hit Medi-Cal, the health care program for low-income and disabled people. It includes a 10 percent cut in the rates paid to doctors and others who treat Medi-Cal patients. Providers in recent years received a rate increase averaging 16 percent; they said it was badly needed to keep physicians from abandoning Medi-Cal patients.

Some Medi-Cal benefits would be eliminated, including dental care and podiatry for adults. And the state would reinstate a requirement that patients submit quarterly status reports, a measure expected to push some people out of the program. Davis proposed these and other steps earlier this year, but they were rejected by the Legislature.

“The cuts just to health care would mean over 1 million Californians will be denied access to needed care,” said Anthony Wright, executive director of Health Access, a statewide health-care consumer coalition of 200 organizations.

Advocates said the loss of some benefits would be devastating. Patients with advanced diabetes, denied access to podiatry, might more often require foot amputations, said Angela Gilliard, legislative advocate for the Western Center on Law and Poverty.

In education, Davis proposes to ease the impact on schools by suspending a requirement that they keep a 3 percent budget reserve. He would also allow them to more freely transfer money between program categories.

But education advocates said the midyear cuts will cause chaos.

The proposal “is going to absolutely undermine our ability to deliver a decent instructional program to kids,” said Kevin Gordon, executive director of the California Association of School Business Officials.

While some of the cuts aimed at specific programs are smart, Gordon said, “the across-the-board cut is what’s going to be nearly impossible to achieve.”

The elimination of cost-of-living increases for elderly, blind and disabled people will cost them about $20 a month, McKeever said. The increase would also be slashed for CalWORKS recipients, a loss for a family of three of about $25 a month.

“When you’re at that minimal level of subsistence, every dollar counts,” McKeever said.

Another proposal would end the current practice of giving former recipients of CalWORKS, a welfare-to-work program, preference in getting subsidized child care. In effect, that step would reduce the total number of subsidized child care slots.

“It’s disappointing that so many of the reductions affect very low-income Californians,” McKeever said.

The cuts and other measures — such as loans, transfers, and shifts between funds — add up to $3.4 billion in the current fiscal year. They would garner another $6.8 billion in the fiscal year that begins July 1.

About 85 percent of that amount is covered by cuts. That contrasts with the budget approved by the Legislature this summer, which relied mostly on accounting maneuvers and one-time steps to address a $24 billion budget gap.

Other proposals include deferring payments to local governments for programs mandated by the state and taking back $500 million in unused money from community redevelopment agencies. That money was intended for low-and moderate-income housing, but many of the agencies have resisted spending it for that, Finance Director Tim Gage said.

An array of changes would be made to highway programs. In one case, Davis proposes to take back $100 million that had been dedicated to a fund to relieve traffic congestion.

“Clearly, with less money coming in, something has to happen, something has to give,” said the director of the California Department of Transportation, Jeff Morales. “So we’re going to go back and prioritize.”

Davis offered little cheer, saying the free-fall in state revenues has not hit bottom. Tax receipts are down even in comparison to the projections made in September when the budget was signed, he said.

“It now appears that the lingering effects of the national recession will be with us for a number of years, as they were during the last national recession in the early ’90s,” he said. “In short, we’re not out of the woods by a long shot, and may not be for several years.”

The Legislature is scheduled to take up Davis’ proposal Monday.

“We have nothing but a series of very, very bad options,” said Senate Republican leader Jim Brulte, “and we’re going to have to start acting on them.”

Anthony E. Wright

Health Access

1127 11th St., #234, Sacramento, CA 95814

Ph: 916-442-2308, Fx: 916-497-0921

Health Access California promotes quality, affordable health care for all Californians.
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