Gov. Gray Davis, unveiling his revised budget Wednesday in the state Capitol, is joined by police officers, firefighters and teachers who stood with the governor but did not speak.

By David Kline
Editor

Gov. Gray Davis’ revised state budget, released Wednesday, continues to call for major reductions in state funding but reduces the level of previously proposed cuts to the SSI/SSP program for poor seniors.

The May revision of Davis’ January budget rescinds an earlier proposal to cut Supplemental Security Income/State Supplemental Payment benefits approximately 6 percent on July 1.

The program, which provides cash assistance to people with low income and very few assets, currently provides a maximum monthly grant of $757 per person or $1,344 for couples.

Davis’ budget would cancel the state’s share of cost-of-living adjustments that otherwise would occur next month and again in January 2004, but would not touch a federal COLA of 2.1 percent that will be effective next year.

Like the January proposal, the revised budget calls for reducing Medi-Cal reimbursement rates to doctors by 15 percent, eliminating several Medi-Cal benefits that aren’t mandated by federal law and repealing a previously scheduled expansion of Medi-Cal benefits to seniors and disabled Californians with incomes up to 133 percent of the federal poverty level.

“Difficult times force us to examine our priorities and make difficult choices,” Davis told reporters at a Capitol news conference. “I have done that and my choices reflect my values.”

The budget proposal, Davis said, preserves necessary spending on education and public safety, while cutting $7.6 billion in General Fund spending, increasing taxes and borrowing to bridge an estimated $38.2 billion difference between previously authorized spending and anticipated revenue.

To focus media attention on the areas least affected by cuts, the governor made his budget announcement in front of a large group of teachers, firefighters and law enforcement officers invited to the event.

Davis’ only mention of seniors’ programs was a reference to providing “additional resources to help the most vulnerable members of society — the frail, elderly and disabled.”

The budget calls for a spending increase of $27 million for investigation and prevention of Medi-Cal fraud, for an anticipated savings of $20 million in the next fiscal year and as much as $188 million in 2004-05.

Anthony Wright, executive director of Health Access California, an advocacy group which supports major expansion of government-funded medical benefits, said he is pleased that Davis backed off some of the spending cuts proposed in January, but is worried that the remaining cuts will hurt some residents.

“Even with the revenues proposed, the budget proposal continues to seek to limit and indirectly deny access to basic care for 6.5 million children, parents, seniors and people with disabilities in Medi-Cal,” Wright said.

Davis’ plan would rely on massive borrowing and accounting changes to balance the 2003-04 books on paper. The plan calls for $2.9 billion in loans, $1.9 billion in transfers, $2 billion in “fund shifts” and $10.7 billion in deficit financing.

The Democratic governor said the deficit would be whittled down in the next few years, but did not provide a specific timeline for getting the state out of the red.

Long-term budgeting is necessary, the governor said, because both parties in the Legislature refused to go along with his January proposal for a budget that would be balanced, on paper, in one year.

Democrats have opposed many of the governor’s proposed spending cuts and Republicans have opposed his proposed tax increases, leaving many major budget decisions still left to be made before the July 1 start of the new fiscal year.

The budget plan assumes that the state’s vehicle license fee will increase without legislative action because it was written to be triggered when the economy is bad. The tax would cost California drivers more than $4 billion — about $130 per year for the average driver, on top of existing registration fees — Assemblyman Tim Leslie, R-Roseville, said.

Davis’ revised budget also calls for tax hikes that would require legislative approval: a sales tax increase of one half-cent per dollar of purchases, a tobacco tax increase of 23 cents per pack of cigarettes and a new 10.3 percent state income tax bracket to take $2.7 billion from Californians who make more than $150,000 a year.

The governor said the sales tax hike would be a temporary tax that would be written to cancel itself as soon as the state’s deficit is gone.

Despite his call for $7.8 billion in new taxes plus the vehicle license fee, the written explanation of the budget revision indicated that Davis agrees with Republicans who have been arguing that high taxes harm the economy.

“[T]he national economy is better positioned to get back on track than it was last year at this time,” the budget summary said. “In addition, the anticipated federal tax cut will give it a boost in the second half of the year.”

Leslie said he and other Republicans — whose support is needed to give the budget its needed two-thirds majority vote — will continue to push for a plan that doesn’t increase taxes.

“We are not in this situation because working Californians have been taxed too little — we are in this situation because Sacramento politicians spent too much,” Leslie said.

State Controller Steve Westly, a Democrat serving his first term, said the governor’s plan will help him negotiate to borrow $11 billion through revenue anticipation warrants.

“Investors want to see that California is taking concrete steps toward solving its budget crisis,” Westly said. “This budget moves us in the right direction.”