SACRAMENTO, Calif. - Gov. Arnold Schwarzenegger on Tuesday is expected to make additional cuts to the California's latest spending plan -- a move that advocates fear could hurt the poor.
With much of state spending tied up by federal and constitutional requirements, the Schwarzenegger administration believes more cuts are necessary to provide a cash cushion in case of emergencies such as earthquakes and wild fires.
"I just want to assure everyone that we will build up our reserve. We will make the necessary cuts," the governor said Friday in announcing he'll sign the budget passed by the Legislature.
Social service advocates worry the Republican governor has little choice but to go after money that counties receive to administer welfare and social service benefits. Likely targets include welfare-to-work assistance, in-home support, foster care and health insurance for poor families.
California's economy has been hit by the housing market slump and high unemployment. This budget is the latest efforts to close a $26 billion shortfall, just five months after lawmakers and the governor ended months of negotiations to close a previous $42 billion deficit.
The governor and lawmakers had planned for a reserve in the revised budget, but the Assembly rejected two measures - raiding local transportation funds and authorizing additional oil drilling - that would have brought in $1.1 billion to the state.
The governor's spokesman, Aaron McLear, said Schwarzenegger will try to fill that $1.1 billion but isn't expected to cut by that much.
"We will always be in a position to aggressively respond to disasters," McLear said.
It would be just the latest blow to social programs, since the Schwarzenegger administration has reduced benefits in response to the recession.
Under the budget the governor will sign Tuesday, the state will impose tougher sanctions on welfare recipients who don't meet work requirements. And in-home support workers will have to undergo background checks and have their fingerprints taken.
In earlier rounds of cuts, California lowered Medi-Cal reimbursement rates for health care providers and eliminated optional benefits such as dental and eye care for adults.
"Why further punish children, low-income families, and the aged and disabled because the Legislature did not approve borrowing gas tax revenue?" said Frank Mecca of the County Welfare Directors Association of California.
Once Schwarzenegger signs the budget, his finance team is expected to begin briefing the state treasurer and controller, creditors and analysts on how the latest spending plan will impact day-to-day cash flow.
The governor and lawmakers are hoping their latest plan provides the assurance lenders need for the state to take out loans and stop issuing IOUs to thousands of vendors.
Matt Fabian, a bond analyst at Municipal Market Advisors, based in Concord, Mass., said the plan was filled with accounting tricks and will likely do little to improve the state's poor credit rating.
Fitch Ratings placed at California's general obligation bond debt at BBB. Most states have a AAA or AA rating.
