State budgeting, already hit in court, may face new legal woes

The state budget, already tangled in an unprecedented number of court fights, is all but certain to prompt yet a new series of legal challenges as the Schwarzenegger administration seeks to cut social programs, government employees’ pay and medical services, while tapping funds intended for transportation projects and local governments.

A clock is ticking. The federal stimulus money is expected to expire midway through the new budget year, just as a new governor is sworn in.

Some of the proposals, long expected, include continuing forced furloughs for state workers – currently three Fridays per month, the equivalent of a 14.5 percent pay cut  – beyond next June, and taking an estimated $2 billion in local redevelopment funds and using the money instead to fill state budget holes. Some 201,000 of the state’s 238,000 state employees are being furloughed, a figure that does not include employees of the state university systems.

Two dozen lawsuits, most brought by government-employee unions, have been filed over the past 12 months challenging the legality of the administration’s use of the forced furloughs, and other suits have been filed as well. A listing of the furlough suits can be viewed here.  The redevelopment agencies, who earlier filed two lawsuits against the administration for tapping their funding, believe Schwarzenegger’s budgeting practices violate the state constitution, are likely to return to court again.

The bulk of the lawsuits filed thus far target the legality of the furloughs, and only indirectly focus on the budget cuts themselves.

But that is likely to change after Jan. 8, when the governor unveils the 2010-11 budget, which will deal with a budget shortage estimated in October at $20.7 billion but which is likely to swell further by January.

The shortage includes $6.3 billion in the current fiscal year, which ends June 30, and $14.4 billion for the next fiscal year which begins July 1. The huge numbers are not unprecedented, but they follow a string of multibillion-dollar deficits that were never resolved by the governor or Legislature, and they are occurring in a severely weakened economy.

The combination of negatives suggests that the state’s next budget fight, the last for Schwarzenegger, may be among the most difficult in the state’s history. And the spending plan will be fought out with the gubernatorial election as a backdrop.

Potential cuts in social service programs are likely to draw new fire.

The Schwarzenegger administration earlier sought to save money by boosting the families’ reporting requirements for children on Medi-Cal, and by cutting the qualifying income threshold from 100 percent of the federal poverty level – about $18,000 for a family of three – to 70 percent, or $13,000. The state was forced to roll back on those provisions or lose federal stimulus dollars.

But what happens when the stimulus dollars peter out?

“I would not be shocked if the new budget institutes quarterly status reports and requirements for low-income parents beginning in January 2011,” said Anthony Wright, executive director Health Access, a health-care advocacy group supported in part by organized labor. “The flip side of this is that there is federal legislation pending (the national health care reform package) that requires the states to continue their ‘maintenance of effort’ – existing support – for its health care programs.”

On Dec. 23, the Los Angeles Times reported that Schwarzenegger intends to appeal to Washington for some $8 billion in financial help to help balance the state’s 2010-11 budget. Absent the money, the governor said he will be forced to make deep cuts in social service programs, including welfare assistance and in-home health care, and cut back on two tax breaks for corporations that were part of the last budget fight.

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