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State budget passes with $7.4 billion in cuts, no new taxes

POSTED October 8, 2010 11:10 p.m.

Gov. Arnold Schwarzenegger set a new record by signing the $87.5 billion 2010-2011 state budget into law Friday night.

It was the latest a state budget had ever been approved, 100 days after the constitutional deadline to pass a budget.

Negotiations took longer than ever this year due to Schwarzenegger’s insistence that the budget did not raise taxes and reformed the budget and pension system.

“I am proud of the legislature for coming together to pass a budget that doesn’t raise taxes and implements long-term reforms,” said Schwarzenegger. “I have been fighting to fix California’s broken budget and pension systems since I came into office, and I made a promise to the taxpayers this year that I would not sign a budget that didn’t include comprehensive reform. These historic reforms put California on the path to long-term fiscal stability, and I applaud the legislature for stepping up and implementing them.”

The State of California entered budget planning facing a $17.9 billion deficit. Schwarzenegger’s initial budget proposal called for $12 billion in cuts, including the elimination of the state’s CalWorks welfare-to-work program.

The budget, as approved by the State Assembly on Thursday and Senate on Friday morning following an all-night legislative session, includes $7.4 billion in spending reductions and no new taxes.

Schwarzenegger vetoed an additional $962 million in spending before signing the budget, including $366 million from CalWorks, $256 million from a program providing childcare for families leaving welfare, and $133 million from mental health services for special education students.

The savings will help bolster a new rainy-day fund, intended to stem the boom and bust budgeting practices of the past, which will go before voters in 2012. Annual transfers to the rainy-day fund would be mandatory, and the fund could only be accessed when the state faces significant financial difficulties.

A further $5.5 billion in the budget will be accounted for through fund shifting and other revenue, including $2.8 billion in transfers from other state funds, $1.2 billion from the sale of state property, and $1.2 billion from postponing a corporate tax break.

Balancing the budget relies on some rosy revenue projections as well, including state revenues $1.4 billion higher than previously forecast. The budget also calls for $5.4 billion in federal funds; Washington has thus far promised only $1.3 billion.

More than $1.5 million in savings will come from revamping the state pension system. Current employees will contribute between 2 and 5 percent more to their retirement, while new employees will see the retirement age raised by five years. The agreement also eliminates the practice of pension spiking, whereby state employees could cash in vacation days to raise the pay which retirement benefits were calculated based on.

“These are sobering times, we all know, for California and for the country and for the whole world,” Schwarzenegger said. “These are tough economic times; we are just going through three years of the biggest recession since the Great Depression. So I'm proud that we used this crisis as an opportunity to pass major reforms, reforms that will help ensure that we never have to suffer through a crisis like this again.”

K-12 funding down; higher ed up

K-12 education lost out in the budget, with spending down $3.1 billion from proposals but at the same per-pupil level as a year ago. A majority of that cut – $1.7 billion – will be repaid next year.

“It is clear that no one who cares about the welfare and education of children can be satisfied with this state budget,” said California State PTA President Jo A.S. Loss. “As a voice on behalf of all children and students in the state, California State PTA cannot support a plan that makes additional cuts to education, especially on top of the $17 billion already cut from schools in recent years.”

But higher education won big in the budget, with funding increasing more than $1.2 billion.

The California State University and the University of California systems will each receive $199 million to backfill a one-time reduction made in the 2009-2010 budget. An additional $60.6 million will fund the expansion of CSU enrollment by over 8,000 students system-wide.

“This funding increase is a much needed salve for our students and faculty who have seen their futures slipping away due to persistent budget cuts in recent years,” said Lillian Taiz, president of the California Faculty Association and a professor of History at CSU Los Angeles. “This change of direction toward restoring the CSU budget would not have happened if we had not stood up and said that public higher education is important and worth fighting for.”

Locally, the University of California, Merced also saw major support in the approved budget. The university will receive $81 million for the construction of the Science and Engineering II building, $10 million in base funding for operations, $6.5 million for continued site development and infrastructure, and $5 million in supplemental operating funds."We are very pleased that the approved state budget reflects the critical importance of higher education to the people of California," UC Merced Chancellor Steve Kang said.

To contact Alex Cantatore, e-mail acantatore@turlockjournal.com or call 634-9141 ext. 2005.

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