Finance Director Donna Arduin laid out the details of the first phase of Schwarzenegger's fiscal plan to the Legislature today -- the spending limit, the bond measure and the first round of budget cuts. He wants to limit spending next year to Arduin's revenue forecast this May, and then cap spending at population growth plus inflation after that. While the bulk of the cuts in the near-term and those that come later due to the spending cap would come out of health and welfare programs, the education lobby is already threatening war over the impact on K-12. The spending cap, some are arguing, is a re-write of Proposition 98, because it would apply a different inflation factor and siphon off revenues for a new reserve.
Bottom line: Schwarzenegger is asking legislators to freeze spending next year, which translates into service cuts because state spending left on its own would climb by about $14 billion to $87 billion.
In her remarks to the Legislature, Arduin delivered what amounted to a manifesto and state spending and management. Here is an extended excerpt:
Over the past five years, state bureaucracy has grown and agencies have been allowed to consistently spend above and beyond their budgeted levels.
State government programs do not have accountability. By which, I mean that both lawmakers and taxpayers have no way of truly knowing if programs and services are effective, if policy goals are being achieved, and if bureaucracies are being run in an efficient manner.
The state's ability to save money and spend more wisely has been constrained by the fact that competition has been removed from government by preventing state agencies to bid out services. When you have a monopoly and no one is telling you "no," there is no incentive to be efficient with the taxpayers' dollars.
In corrections, state prisons have been continually mismanaged, running deficits every year over the past five years, rising to an estimated $500 million this year. In addition, health services are far too expensive when they are compared to private sector costs.
Parole has become a revolving door for prisons, using parole revocations as a supervision tool and letting local governments off the hook.
In health and human services, the costs for social service entitlement programs have spiraled. The gatekeepers for these programs have no incentive to make sure people coming in for services are, in fact, eligible for the programs, eligible to remain on these programs, and receiving only those services that they truly need.
Persons who are not citizens of the United States are receiving roughly $1 billion in state-funded health and social services every year without participation from the federal government - the same government that decides who should come through our borders and into our country.
Posted by dweintraub at 3:46 PM
The governor’s first list of cuts – his first list – is out and the reaction is predictable, and understandable. Schwarzenegger may have shied away from cutting food for guide dogs, but the stuff he is willing to do demonstrates how ugly the situation is for California right now. He wants to cut reimbursements to doctors who care for the poor by 10 percent, a move that the medical profession says would prompt more doctors to close their doors to Medi-Cal patients and possibly increase the public’s cost for emergency room care. He wants to take away homecare services to the aged, blind and disabled, which advocates say would force more of those clients into nursing homes, driving up the state’s cost for that service. And he wants to freeze enrollment in state programs, including Healthy Families and aid for the developmentally disabled, that have been entitlements until now. He also has cuts for transportation and higher education which, while not matters of life and death, represent setbacks for the state’s future economic growth. All of this and more to cut just $2 billion next year – or half the $4 billion taxpayers will save from the rollback in the vehicle license fee. Even if the Legislature accepted every proposal, and early reaction suggests that is very unlikely, Schwarzenegger would still have to do this six more times, with deeper and deeper cuts, if he is to balance next year’s budget with spending reductions alone. He is facing a $14 billion gap between projected spending and revenues. This gets him one-seventh of the way there – and that’s assuming he can find enough cuts in this year’s budget to pay for the first installment of his car tax rollback. But the list should also be sobering for Democrats in the Legislature. They want a tax increase, to be sure. But with a $14 billion gap, they would need more than $12 billion in tax hikes to avoid cuts at least this deep. Say that somehow, the political winds suddenly shifted and Democrats won approval of an $8 billion tax increase. Probably fanciful, but indulge me. They would still need Schwarzenegger’s $2 billion in cuts and $4 billion more. Something has to give. Here is the Bee story on the proposal.
Posted by dweintraub at 7:42 AM