Analyst reviews Calif. budget-cut plan

SACRAMENTO, Dec. 17 (UPI) -- Governor Gray Davis is treading into potentially treacherous political waters with his plan to slash more than $10 billion from California's budget over the next two years as the state wrestles with a staggering deficit, an analysis of the plan has said.

In a cautious assessment of the budget rewrite offered by Davis earlier this month, the independent Legislative Analyst's Office said on Monday that while the plan appeared to be a solid "initial step" in addressing the $20 billion deficit over two years, it would be prudent for the state legislature to proceed cautiously.

"We believe the focus on ongoing actions is a positive feature of the governor's proposal, in that it addresses the need for significant actions to address the enormous shortfall," the report said. "At the same time, however, the plan merits careful legislative deliberation, since it includes much more substantive proposals than last year's, involving many program reductions and eliminations."

After being battered by the electricity crunch of 2000-01, and the bursting of the high-tech bubble, California has found itself in the same unenviable position as many other states. It's caught between flagging tax revenues and mandated spending requirements, and without much help coming from Washington.

Last year, Davis was able to keep a lid on the budget largely through restructuring and rearranging the state's finances. But the governor, who narrowly won re-election in the fall, doesn't have the same wiggle room this time around.

"In contrast to last year's current-year plan, which relied heavily on reversions and funding redirections, this year's plan contains major spending reductions," the LAO report said. "Such reductions account for over two-thirds of the governor's proposed budget solutions. The remainder consists of funding shifts and transfers, loans, and reversions."

Under Davis' plan, budget cuts will be felt in virtually every area of state government. The California State University system Monday raised its undergraduate fees by $72 per semester after making $125 million in spending cuts.

"These are really, really tough times for California," said CSU Chancellor Charles Reed. "We had been told our cuts would be one-time, but now they are permanent. We didn't want to recommend raising fees, but everybody has to share a part of the burden if CSU is to maintain quality and access."

The LAO noted that housing, transportation, the general fund and social services were each being trimmed by about 5 percent. The plan for the Medi-Cal health care system included tightening patient eligibility and reducing reimbursement rates for doctors and nursing homes by 10 percent.

"A 10-percent cut in funding will be devastating to the people we care for," said Jim Gomez, president of the California Association of Health Facilities, a nursing home industry group. "How do we absorb such a blow? Reducing staff is the only option, but it is not acceptable to us and I hope it would not be acceptable to the legislature."

Law enforcement spending, however, appeared to escape relatively unscathed with a mere .04 percent spending reduction. The plan drew sharp criticism Monday from at least one group that in the past has chided Davis for allegedly being too cozy with his contributors in the corrections employees union.

Rose Baez, director of Critical Resistance, alleged that Davis left the corrections budget virtually untouched.

"Meanwhile, the governor proposes eliminating health care for as many as 200,000 Californians, canceling $3 million worth of meals for the elderly and chopping $3 billion from education," Baez accused.

She said activists planned to call on Davis to save money by canceling construction of the new state prison in Delano and reducing the state's inmate population by sending fewer parolees back to prison for "technical" violations such as missing an appointment with their parole officer.

While it might be difficult to cancel a major project such as Delano, Critical Resistance is by no means the only group of Californians who will have a beef with Davis' sobering proposal.

The LAO, however, warned that the spending cuts were likely an indication of things to come.

"In a very real sense, this year's current-year proposal can be thought of as the first part of the governor's 2003-04 budget plan, as opposed to just a mid-year correction to the 2002-03 budget," the report said.

(Reported by Hil Anderson in Los Angeles.)