Governor Signs $105.4-Billion Budget

Gov. Arnold Schwarzenegger signed a $105.4-billion state budget before a cheering crowd Saturday, enacting a compromise spending plan that avoids new taxes but depends heavily on borrowing.

Before signing the budget bill, Schwarzenegger used his veto power to trim an additional $116 million from social service, education and environmental programs on top of the cuts he already had worked out with legislative leaders.

The budget is taking effect a month late. Its signing follows a contentious month marked by bitter and prolonged disputes between Schwarzenegger and the Legislature. Even so, the governor was exuberant as he signed the budget at a desk set up under the Capitol dome.

“This budget keeps California on track for economic recovery,” he said. “We see that businesses are coming back now. I am convinced that California will become again the powerful job-creating machine that it once was. We proved again that if both parties work together in a bipartisan way, we can accomplish anything.”

Los Angeles Mayor James K. Hahn and other local government leaders at the ceremony praised the governor. Cities and counties agreed to accept $2.6 billion in cuts. In exchange, lawmakers and the governor agreed to support a measure before voters in November that would restrict the state’s ability to take money from them in the future.

“The state can’t ever balance its checkbooks anymore by raiding the piggybanks of local government,” Hahn said.

Others warned that such deals come at a cost. The budget includes few significant long-term spending reductions. Its reliance on borrowing and optimistic assumptions leaves behind a projected budget gap totaling as much as $17 billion over the next two years.

“With his signature on this budget, Gov. Schwarzenegger has broken his word to the people of California to end the state’s ‘crazy deficit spending’ and balance the budget,” said state Treasurer Phil Angelides. “All he has done is box the people of California into years of paying for his debts and deficits.”

The treasurer released a “credit card statement” listing billions of dollars in bills the state owes, but that the budget pushes into the future.

The budget also relies on $11.2 billion in borrowing from the bond package voters approved in March.

Assembly Republican Leader Kevin McCarthy (R-Bakersfield), who also stood behind the governor during the signing, said that although the budget doesn’t erase the budget shortfall, it brings it under control.

“This governor didn’t go out and spend,” McCarthy said. “He held back. He could have gone further, from the standpoint if we didn’t have the Democrats controlling this place.”

McCarthy said an administration plan to save billions of dollars by overhauling the state bureaucracy would help bring California’s books into balance. That plan is being released Tuesday.

McCarthy was the only one of the four legislative leaders to attend the ceremony. It was unclear whether his counterpart -- Assembly Speaker Fabian Nunez (D-Los Angeles) -- was even invited.

Nunez, who sparred with Schwarzenegger throughout weeks of difficult negotiations, said he didn’t get an invitation from the governor. “As governor, he invites the people of his choice and we did not make the list,” Nunez said in a statement.

But Vince Sollitto, a spokesman for Schwarzenegger, insisted that Nunez had been invited -- both by the governor and by the office of the governor’s top legislative aide, Richard Costigan. “The speaker and all the leaders were invited,” Sollitto said.

The governor’s $116 million worth of line-item vetoes account for only a fraction of a percent of state spending, but they will have a big impact on some programs. A large portion of the cuts came in the area of health and human services, on which the state will spend more than $30 billion.

A mental health program for children will be reduced by more than $19.6 million. The move comes as advocates gear up their campaign for an initiative on the November ballot that would tax millionaires to provide more money for mental health services.

“These are kids not otherwise served,” said Assembly Budget Committee Chairman Darrell Steinberg (D-Sacramento), a leader of the initiative campaign. “It is unfortunate that mental health is again on the chopping block.”

Employment programs for welfare recipients run by the counties will lose $40 million in federal funding. Administration officials said CalWORKS employment offices can meet their goals without the funds, which the state will hold onto until next year.

The state will cut an additional $17 million from foster care and other child welfare programs also run by the counties.

A much smaller cut in the governor’s veto package -- $750,000 -- has triggered anger among AIDS activists. The money was to be used to keep reimbursements for drugs from being cut at community clinics. Officials at the AIDS Healthcare Foundation said the clinics could not afford to provide the drugs for the same prices as chain pharmacies. The foundation is planning to challenge the cut in court.

A fund that provides community colleges extra money to foster excellence among students and faculty was cut by $31 million. Administration officials said the program lacked adequate performance standards.

The governor also vetoed $36 million in spending for environmental programs. The reductions mostly affect plans to create two new land and water conservation programs in Northern California.