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California Republicans Propose Program Cuts to Close Gap

Governor of California Jerry Brown
The plan doesn’t rely on extending about $11 billion in temporary taxes and fees sought by Governor Jerry Brown, while it ends programs that help children and the ill. Photographer: Ken James/Bloomberg

May 13 (Bloomberg) -- California Assembly Republicans proposed stripping funds from child-development and mental-health programs as well as cutting state employment costs by 10 percent to help close a $15.4 billion deficit.

The chamber’s minority party also would suspend a program that pumps extra money into poorly performing schools as part of $7.4 billion in cuts to help balance the most-populous state’s budget without new taxes. The plan rolled out yesterday in Sacramento also relies on revenue gains from existing levies.

The proposal offers the first detailed Republican road map to bridging the gap. The party’s Assembly caucus said the cuts and revenue gains would preserve funding for public schools and colleges. The plan doesn’t rely on extending about $11 billion in temporary taxes and fees sought by Governor Jerry Brown, while it ends programs that help children and the ill.

“We don’t want to see the services that are making a huge difference in our communities undercut,” Eduardo Vega, the Mental Health Association of San Francisco’s executive director, said yesterday in a telephone interview. Rolling back such aid to early-1990s levels isn’t the way to go, he said.

Brown, a Democrat, plans to release a revised budget on May 16, according to a news advisory yesterday from his office.

Child Services

Under the Republican plan, funds earmarked for mental-health services and early-childhood development would be drained of $2.4 billion. In 1998, voters passed a 50-cent tax on packs of cigarettes to pay for the child services. Six years later, a 1 percent income-tax surcharge on those earning $1 million or more was passed to help pay for mental-health programs.

In 2009, voters blocked then-Governor Arnold Schwarzenegger from using the two funds to close a deficit. That part of the Republican plan would require public approval at the ballot box.

“People voted against redirecting this funding because they didn’t want to see people with mental illnesses on the streets or in jail,” Vega said. About half of his group’s $800,000 annual budget comes from the fund targeted for elimination.

A new vote is likely to produce a different result than in 2009, when the measures shared ballot space with proposals to increase taxes and fees, Connie Conway, the Assembly’s Republican leader, told reporters at a briefing in Sacramento. “It’s all in how you bill it,” she said.

No Added Taxes

Conway wouldn’t say how Republicans would take $1.1 billion out of state employment costs. Measures may include reducing wages, unpaid time off or job cuts, she said.

“For once, we’re going to live within our means and not kick the can down the road,” Conway said. “Our plan doesn’t add to the tax burden.”

On March 29, Brown declared a failure in negotiations with Republican lawmakers over extending taxes and fees set to end in June. Brown needed at least four members of the minority party to join fellow Democrats to put the issue before voters.

Last month, the 73-year-old governor said he may try to get the extension on a November ballot, either by winning Republican support or by bypassing the Legislature through a voter-petition initiative. The deficit amounts to about 18 percent of Brown’s proposed $84.6 billion general-fund budget. He and lawmakers have already narrowed the gap by about $11 billion.

Surplus Funds

The Republican plan would produce a surplus of as much as $800 million in fiscal 2012, depending on how much community redevelopment funding is reduced, according to a financial outline of the proposal. The extra revenue would be held in a reserve account, the document shows.

Republicans have split on a Brown-backed proposal to dissolve about 400 redevelopment agencies that employ tax revenue to spur economic growth in blighted areas. Brown’s budget proposal would erase the authorities and put much of the money they use into schools.

Republicans “appear to have come to their senses” on the development agencies, Gil Duran, a Brown spokesman, said in a statement. Other parts of their plan are “the same old short-term, smoke-and-mirrors approach to budgeting that got the state into dire financial straits in the first place,” he said. “If Republicans wanted to play a serious role in finding a budget solution, they wouldn’t have waited until the middle of May.”

Bond Market

The Republican plan would forestall a long-term solution to California’s financial strains, making it difficult for the state to issue bonds, said Tom Dresslar, a spokesman for Treasurer Bill Lockyer, a Democrat.

“The bond market would see this plan for what it is: more fantasy budgeting, more fiscal mismanagement, and another blown opportunity to get our financial act together,” Dresslar said in an e-mailed statement. “Rating agencies would see that it’s not responsibly balanced.”

Brown won election in November on a pledge to end recurring deficits that have left California, whose economy is bigger than Russia’s, with the lowest credit rating of any state from Standard & Poor’s, at A-. The governor, whose two previous terms ended in 1983, has said letting voters decide whether to retain the temporary tax increases is crucial to closing the budget gap without making deeper cuts to education and public safety.

Republicans have said that any referendum should also let voters decide whether to replace current state pensions with a plan that mixes traditional defined benefits with 401(k)-style savings accounts.

Leaders of the Legislature’s minority party also want to give voters a chance to cap state spending. The limit they’ve suggested would be based on a formula tied to inflation and population change. Republicans also have sought a referendum on undoing environmental rules that hinder business growth.

To contact the reporter on this story: James Nash in Sacramento at

To contact the editor responsible for this story: Mark Tannenbaum at

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