Congress pulls back state aid package,
leaving a $2-billion hole in California budget
House Democrats kill a $24-billion fund to help cash-strapped states cover costs. States are lobbying hard to have it restored, warning of further devastating cuts to healthcare and social services.
By Richard Simon and Evan Halper, Los Angeles Times
June 3, 2010
Reporting from Washington and Sacramento —
With the federal deficit a growing political liability,
lawmakers in Congress are backing off plans to send more aid to financially
strapped states, putting in jeopardy billions of dollars that California and
others were counting on to balance their budgets.
The potential loss of funds is a significant setback for Gov. Arnold Schwarzenegger and state lawmakers, who may not see nearly $2 billion in federal assistance that they intended to use to help bring California out of the red.
The money was to be California's share of $24 billion in proposed assistance, mostly to cover healthcare spending, spread among all states. Budget experts say that is enough to wipe out about one-fourth of the combined state budget shortfalls.
In California and elsewhere, officials thought the funds were a sure thing. The money was one of the few elements of Schwarzenegger's budget plan on which there was bipartisan agreement. But House Democratic leaders last week stripped the money out of legislation amid election-season jitters.
"This is a serious problem," said Jean Ross, executive director of the California Budget Project, a Sacramento-based nonprofit. "The fear of deficits seems to be overtaking Washington. They are not realizing the bigger threat is the economy could slide back into recession as a result of state and local budget cuts."
In California, the governor has already proposed eliminating the state's welfare program, cancelling state-subsidized day care for hundreds of thousands of low-income children, freezing school spending and making a number of other deep cuts to close a $19.1-billion budget gap.
By May, he acknowledged that was unlikely but suggested the state could safely assume it would receive half that amount. Now the state is facing the prospect of getting barely more than $1 billion.
Among those resisting the governor's push for more assistance are his fellow Republicans in the state's Congressional delegation, who say Washington has its own budget problems.
While the loss of Medicaid funds would hit California hard, the House bill does include provisions that would benefit the state.
Among them is an extension of the Build America Bond program that has been used in California to fund infrastructure projects. There is also $400 million in increased Medicare payments to doctors in a wide swath of the state to address longstanding complaints that low reimbursement rates have discouraged them from taking on new patients.