Today, State Treasurer Bill Lockyer and Department of Finance Director Mike Genest concurred that California would not receive $10 billion in federal funds to avoid $1.8 billion in higher taxes and $948 million in program cuts.  The final estimate of $8.2 billion federal funds expected by the Department of Finance is posted on its website here.  The State Treasurer’s letter to the Governor and legislative leadership outlining his decision is posted on his website here.

 This conclusion means that the so-called “trigger cuts” will take effect, as will the full personal income tax rate increase of 0.25%.  The cuts include:

  • Elimination of Medi-Cal optional benefits, including adult dental care, optometry, acupuncture, chiropractic, podiatric, and psychology services.  The proposal also contains a 10 percent redirection of federal Safety Net Care Pool funds away from public hospitals.  These cuts are scheduled to take effect 90 days after the budget was signed (likely May 25, 2009).

  • Reduction of CalWORKS recipient grants by four percent.  This reduction goes into effect July 1, 2009.
  • Reduction of SSI/SSP grants by 2.3 percent, resulting in a $20 per month reduction for individuals and a $35 per month reduction for couples.  This reduction goes into effect July 1, 2009.
  • Cap on the state share of IHSS wages at $9.50 an hour (currently, the state participates in wages up to $11.50 an hour) and maintain the state’s participation in individual health benefits at $0.60 per hour.  Also, increase the share of cost for new IHSS recipients based on their functionality index.  These reductions are scheduled to take effect July 1, 2009.
  • One-time unallocated reduction of $100 million to the judicial branch and elimination of $71 million in funding for new judgeships.
  • Additional cuts to higher education.

While many of these reductions will result in increased costs for counties, we are mindful that the state’s structural budget problem persists, with a deficit of $8 billion now estimated by the Legislative Analyst’s Office.  There are certain to be additional program cuts on the table in May.  In fact, Treasurer Lockyer’s letter to the Governor and legislative leaders is very direct in its statement that pulling or not pulling the trigger still leaves the state in dire straits.  Regrettably, as you are all too aware, it is likely to be some time before the financial news coming out of Sacramento improves.

Paul McIntosh
Executive Director
California State Association of Counties