Will California budget crisis 2010 spread to other states?

arnold schwartzenegger gestering during a speech

The California budget crisis 2010 is forcing Gov. Arnold Schwarzenegger to make deep cuts in programs for the poor, but he vows not to increase taxes. Picassa Web Albums photo.

The California budget was released by Gov. Arnold Schwarzenegger Friday. It outlines bleak fiscal realities for the government of a state that is out in front with most national trends. Decades of tax revolts and governing at the ballot box have converged with the Great Recession to create the California budget crisis of 2010.

The California budget deficit

In attempt to close a $19 billion California budget deficit in the fiscal year beginning next month, Schwarzenegger sounded like he could use a quick personal loan. He called for deep cuts that include a welfare to work program that would affect 1.4 million people, two-thirds of them children. The Associated Press reports that the Republican governor laid out the most severe cuts to health and welfare programs since the recession started fueling the California budget deficit nearly three years ago. He said cuts to government services over the past few years have done away with the “low-hanging fruit.”

California budget crisis 2010 and Medi-Cal

Even with the deep cuts announced Friday, the California budget crisis of 2010 may continue to get worse — thanks to health care reform. The Sacramento Bee reports that California’s Legislative Analyst’s Office found that as many as 2 million more Californians could become eligible for Medi-Cal coverage after the federal health reform law takes effect. Medi-Cal is California’s Medicaid program. The health reform law calls for the federal government to cover initial costs for newly eligible enrollees, but the expanding program is expected to add its toll to California’s shrinking budget.

California budget bad news

California budget news is bad. Low tax revenue is severely worsening California’s budget deficit. The state’s 12.6 percent unemployment rate ranks among the highest in the nation. In April, revenue from personal income tax was $3 billion less than projected. The state’s general fund spending will be $83.4 billion for the new fiscal year, the lowest level in six years. The $19 billion deficit accounts for more than 20 percent of all projected spending.

More bad news for California budget

Spending cuts are the only solution being considered for balancing the California budget. Schwarzenegger
and Republican lawmakers have vowed not to raise taxes. CalWORKS, the state’s welfare-to-work program that was cut Friday, helps single mothers find child care while they go to school to learn new skills. Children from low-income families, the disabled and seniors who rely on state services are bearing the brunt of California’s budget crisis.

California budget showdown looming

The California budget has been affected in recent years as Schwarzenegger and Republicans won a series of corporate tax credits and giveaways, costing the state treasury an estimated $2 billion per year. As reported on taragana.com, Democratic leaders responded forcefully to the latest California budget proposal, saying they will not allow programs for the needy to be gutted. It’s not clear how those programs will be sustained without a tax increase.

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