In a much different environment two years ago, Gov. Arnold Schwarzenegger kicked off his second term by pledging to reshape health care in California.

The governor is on the verge of doing so – but hardly in the way he envisioned.

To shrink a $24.3 billion deficit, Schwarzenegger this week asked legislators to make California the first state to eliminate government health coverage for low- to moderate-income children. Schwarzenegger hopes to save $305 million in 2009-10 by closing the state's Healthy Families program, which provides medical, dental and vision care to more than 900,000 children.

The state provides only about a third of the program's overall funding, as the federal government pays two dollars for every dollar California spends – funding that would be lost. President Barack Obama made the federal program such a priority that he signed legislation to expand it during his first month in office.

Advocates say the governor's proposal couldn't come at a worse time because Healthy Families provides a safety net when one or both parents lose employer-based health care. The state had 15 percent more enrollments through the first four months this year than it did last year.

Joshua Stark, 34, of West Sacramento is obtaining Healthy Families coverage for his 2-year-old daughter after losing his job as a parks advocate in April. His wife occasionally earns money grading papers as a graduate student and he has found some part-time work, but he said they don't earn enough for COBRA or private insurance, which can run hundreds of dollars per month.

"I worked multiple jobs all my life, so it didn't occur to me what (public) health plans might be out there," Stark said. "Now that I'm finding myself needing one, I'm happy that I paid for so many years to have it there. ... To have that pulled out from under you, it's beyond ridiculous."

Healthy Families was created for children whose parents earn too much to qualify for Medi-Cal but lack private coverage. To qualify, a family of four must have a household income between $22,050 and $55,125.

Roughly 3 million children below the federal poverty line qualify for Medi-Cal, but the governor has proposed cuts to that program as well that could eliminate health care for as many as 471,000 kids, according to Anthony Wright of Health Access California.

Even after releasing his plan to eliminate Healthy Families, Schwarzenegger said Wednesday in an online chat that he wants to reform health care. But wanting and doing are two different things as the state continues to lose revenues.

"It is painful to know that the kind of programs that you cut that are absolutely essential to people," he said at an earlier event in Los Angeles to promote fuel-cell vehicles. "But when you don't have the money, you can't promise something to people or do something that you can't afford."

Democrats have signaled early opposition. Assemblywoman Noreen Evans, D-Santa Rosa, chairwoman of the Assembly Budget Committee, was alarmed by the plan during testimony at a hearing Tuesday and suggested the governor would be better off pursuing new taxes.

And Senate President Pro Tem Darrell Steinberg, D-Sacramento, said in December that his goal was to ensure all children have health coverage.

It's not clear Republicans are on board. Assemblyman Danny Gilmore, R-Hanford, wrote an opinion piece this month for the Bakersfield Californian telling constituents how to apply to Healthy Families and touting it as a program that works "especially well."

But Assemblyman Chuck DeVore, R-Irvine, said the state must scale back because it cannot afford the benefits it provides. DeVore asserted that overregulation and high taxes have stifled businesses and led to layoffs, while California has compounded the problem with too much public aid.

"When you have an unemployment rate as high as it is in this state, it should be a signal to people to look for jobs in other states with more jobs and a lower cost of living," DeVore said. "We have had policies subsidizing poverty in this state for years, and we can't keep doing that."

Some budget experts believe Schwarzenegger's harshest cuts may have been designed to get the attention of Congress, which the state wants to guarantee billions of dollars in short-term cash borrowing.

Or Schwarzenegger's proposal might be a negotiating stance aimed at getting lawmakers to agree to other cuts, suggested John J. Pitney, government professor at Claremont McKenna College.

Deena Lahn, policy director at Children's Defense Fund California, said she fears the proposal may lead Democrats to acquiesce on lesser cuts to the program. The governor previously wanted to eliminate 225,000 children through stricter requirements to save $54.5 million.

"Our message to legislators is, don't think that just because the governor proposed the program be eliminated means it would be any less significant if one kid loses health care," Lahn said. "I'm afraid that will be the effect. We want to hold all the legislators accountable."

Call Kevin Yamamura, Bee Capitol Bureau, (916) 326-5548.