Gov. Arnold Schwarzenegger signed a $103.4 billion general-fund spending plan Tuesday in his office with little fanfare, officially ending the state's longest-ever budget delay at 85 days.
The Republican governor vetoed $510 million in line-item expenditures, boosting the state's reserve but slashing social service programs. Schwarzenegger's budget signature ensures the state will begin paying nursing homes, community colleges and state vendors for services.
Schwarzenegger plans to maintain his July 31 executive order terminating about 10,000 temporary and part-time state employees and eliminating overtime until at least next July 1, according to Department of Finance Director Mike Genest. The state anticipates saving $340 million from the order.
"It's very important that great things were accomplished in this budget," Schwarzenegger said. "I think that we have a historic budget reform in place. We did a $12.5 billion rainy-day (fund) that we start now accumulating."
"But what is wrong is to drag out the budget process for three months," he added. "And what is also wrong is to not be able to go and resolve, and solve, the most important issue, which is the structural deficit."
The governor's biggest line-item veto was his elimination of the $150 million Senior Citizens Renters' Tax Assistance program, which provides cash rebates to low-income elderly of up to $347.50 each year. He also eliminated a $41 million tax-related rebate program for low-income seniors who own their homes.
"I think in particular, the vetoes of the senior tax programs were unconscionable because if you look at the amount, it's in the tens of millions of dollars," said Assemblyman John Laird, D-Santa Cruz and chairman of the Assembly Budget Committee. "So seniors are going to be paying higher taxes next year, both renters and homeowners."
Other social service programs took hits as well. The California Work Opportunities and Responsibility to Kids (CalWORKs) program suffered $78 million in last-minute cuts. The Department of Alcohol and Drug Programs was cut by $27 million, including $3 million for Drug Court programs and $2.3 million for pregnancy-related substance abuse treatment.
Genest said the governor sought to cut spending that was not legally protected, and that the line-item vetoes were not intended to suggest that Schwarzenegger did not value certain programs. Still, Genest acknowledged that Schwarzenegger did not further slash the University of California or California State University even though he could have legally done so. The finance director said the governor tried to prioritize public safety programs.
The governor's line-item vetoes are the second most in his five-year tenure. He cut $703 million in last year's budget.
The Legislature resolved a $15.2 billion shortfall last week with a mix of spending cuts, internal borrowing and accounting maneuvers. Low-income elderly, blind and disabled, as well as welfare recipients, will receive no state cost-of-living increases. The state will demand that wealthy residents and quarterly income tax filers, such as self-employed individuals, pay more taxes in the first half of the next year and less in the second half.
Unless the economy dramatically improves, California stands to face another multibillion-dollar budget gap next year, fiscal analysts believe. Lawmakers will ask voters to expand the California Lottery in a special election next year, hoping to obtain a $5 billion advance from Wall Street investors in exchange for future lottery revenues to reduce next year's debt.
Schwarzenegger last week threatened to veto the first budget package lawmakers sent him, but then won concessions to strengthen the state's rainy-day fund starting in 2010.
Democratic and Republican lawmakers sparred for months in the longest standoff in state history. Majority-party Democrats and Schwarzenegger sought tax increases in addition to spending cuts to close the gap, but Republican lawmakers, whose votes were necessary to meet the state's two-thirds budget vote requirement, blocked those proposals.
Unlike previous years, Schwarzenegger signed the budget without legislative leaders and without a ceremony in the Capitol rotunda.
The state's $103.4 billion general fund budget represents a slight increase of $68 million over last year's $103.3 billion spending.
