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Originally published Thursday, June 21, 2012 at 11:06 AM

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California's budget deal cuts welfare, health care

California will close its projected $15.7 billion budget deficit by restructuring the state's welfare program, streamlining health insurance for low-income children, and reducing child care coverage and college aid, as part of a deal Gov. Jerry Brown and Democratic leaders announced Thursday.

Associated Press

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SACRAMENTO, Calif. —

California will close its projected $15.7 billion budget deficit by restructuring the state's welfare program, streamlining health insurance for low-income children, and reducing child care coverage and college aid, as part of a deal Gov. Jerry Brown and Democratic leaders announced Thursday.

The governor and lawmakers provided only broad outlines of the cuts and few hard dollar figures, but Brown said the deal met his demand for permanent welfare reform and is enough that he now is willing to sign the main budget bill Democratic legislators sent him last week.

Even with the changes, the state's new spending plan still relies heavily on voters in November approving Brown's initiative to raise the state sales tax and increase the income tax on people who earn the most. If that ballot measure fails, automatic cuts would be triggered; among other things, public school years would be cut by as much as three weeks.

Senate President Pro Tem Darrell Steinberg said with a budget outline in place, it's now up to voters.

"If we pass those taxes in November we will be in a new chapter," the Sacramento Democrat said.

The Legislature passed a $92 billion budget Friday but the Democratic governor pressed members of his own party for deeper cuts to welfare and other social services. Several companion bills must also pass before the state's spending plan can take effect July 1. Votes will occur next week.

"This agreement strongly positions the state to withstand the economic challenges and uncertainties ahead," Brown said in a statement. "We have restructured and downsized our prison system, moved government closer to the people, made billions in difficult cuts, and now the Legislature is poised to make even more difficult cuts and permanently reform welfare."

Democrats have majorities in both the Assembly and Senate and can pass the budget without any Republican votes. Republicans have been shut out of the budget negotiations and said the pending agreement won't receive adequate public scrutiny.

"My biggest concern is I think the public has a right to see what's in this budget before we vote on it, and that's not going to happen," said Sen. Bill Emmerson, the ranking Republican on the Senate Budget Committee.

He objected to provisions that take hundreds of millions of dollars from a national mortgage settlement with big banks to help balance the budget, and he said the welfare revisions would not save the state money in the upcoming fiscal year.

"I just don't see where it is going to create the savings they say it is," Emmerson said.

Under the state's welfare-to-work program known as CalWORKS, Democratic leaders agreed to Brown's request to phase in a two-year time limit for new recipients to find work. Currently, parents on welfare have four years before they risk losing cash aid.

The two sides agreed to eliminate Healthy Families, a children's health insurance program for low-income working families, by slowly moving 880,000 children into Medi-Cal, the state's version of Medicaid. Lawmakers say the move will streamline health coverage and save the state on administrative costs.

Welfare advocates applauded the transition to make health care more efficient, but doctors and advocates for families currently in Healthy Families worried the move would limit access to care. Currently, a family of four can make up to $30,000 and qualify for Medi-Cal, while a family of four can qualify for Healthy Families with an income of up to $56,000.

"The governor and legislative leaders have struck a short-sighted deal that unnecessarily puts the health of California children at risk," said Wendy Lazarus, founder of The Children's Partnership, a Santa Monica-based nonprofit children's advocacy group.

Doctors and health providers receive a higher reimbursement rate from Healthy Families than from Medi-Cal. Dr. James Hay, president of the California Medical Association, said the shift could make it harder for children to see their doctors.

Brown and Democratic leaders also agreed to reduce funding for child care assistance by 8.7 percent, which will reduce the number of slots available to low-income families by 10,600. Cost-of-living adjustments will also be suspended through 2015.

College aid under the Cal Grants program will also be reduced beginning in the 2013-14 school year.

Steinberg, the Senate leader, said legislative negotiators prevented deeper cuts to in-home support for now but will negotiate more savings in the future.

"We have a good deal with the governor," said Assembly Budget Committee Chairman Bob Blumenfield. "We were 99 percent there with the governor before. He took our bills, he still was pushing to go a little bit further, and we were willing to work with him and try to work out some of the details, and we've done it."

The deal counts on voters approving Brown's tax initiative, which would raise income taxes for people earning $250,000 or more a year and increase the state sales tax by a quarter cent for four years. The governor projects the tax would raise $8.5 billion in the upcoming fiscal year.

A rival proposal, backed by Los Angeles attorney Molly Munger, would raise income taxes on nearly all Californians, with the biggest increase on the wealthiest Californians. All revenue from her proposal would go directly to public schools, while Brown's measure would use the money to prevent deeper cuts to schools and guarantee money for local public safety.

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Associated Press writers Hannah Dreier and Don Thompson contributed to this report.

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