California Lawmakers OK Budget Plan

California lawmakers have finally come up with a budget deal. Negotiations went late into the day Monday on a deal that means painful cuts for many Californians. Steve Inskeep talks with member station KQED's John Myers, who has been following the budget negotiations these past few months.

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LINDA WERTHEIMER, host:

This is MORNING EDITION from NPR News. I'm Linda Wertheimer.

STEVE INSKEEP, host:

And I'm Steve Inskeep.

After months of arguing, after losing ballot initiatives, after paying state bills with IOUs, California lawmakers came up with a budget deal overnight. Lawmakers hope this is a solution to a problem that has given Californians bragging rights all year. No matter how much trouble other states are in, California could usually say that its budget is worse.

John Myers is with member station KQED. He's been following the budget negotiations these past few months and joins us now. John, good morning once again.

JOHN MYERS: Good morning, Steve.

INSKEEP: So who wins and who loses?

MYERS: Well, frankly, I don't think there are any winners in this. This is a deficit solution that's a real scaling back, I think, of California government as it now exists. It includes more than $15 billion in spending cuts. And tops on that list that everyone will be talking about: $9 billion from California schools, colleges and universities. But it really goes a lot further than that. It's more than a billion dollars cut from California's version of Medicare, which is known here as Medi-Cal, and more than another billion dollars from state prisons, which could force the early release of inmates. And the deal was announced around midevening Monday here in Sacramento by Governor Arnold Schwarzenegger.

Governor ARNOLD SCHWARZENEGGER (Republican, California): We have accomplished a lot. This is a budget that would have no tax increases, a budget that is cutting spending. We have made around - we dealt with the entire $26 billion deficit.

INSKEEP: John Myers, just based on the sound of that actuality there, that tape, it sounds like as part of this budget deal, California removed its computers to replace them with typewriters. Is that correct?

(Soundbite of laughter)

MYERS: I think that's the press in the background.

INSKEEP: Oh.

MYERS: The governor likes to stand out in his hallway and talk sometimes, you know.

INSKEEP: Okay, fine. But in any event, I mean, we shouldn't joke too much, because this is cutting health care, you mentioned. This is cutting a lot of things.

MYERS: Yeah. It's cutting deep into a lot of programs that Californians really have become accustomed to using. And I think that's going to be a bit of an awakening. Plus, it's really not the end. I mean, most people don't think the California economy has bottomed out yet, in which case the lawmakers and the governor will be back here trying to do more of this before the end of the year.

INSKEEP: Now as brutal as these cuts are, the governor, Arnold Schwarzenegger, said that at least they were not going to just push this budget problem into the future. Have they actually dealt with the full budget problem, or is it kicked into the future to some degree?

MYERS: Well, I think they've dealt with more of it than they might have in the past. I mean, the governor won some concessions from Democrats on what he's been calling reforms to welfare assistance, and to a program that provides in-home support care for the disabled and elderly - things like fingerprinting, stricter work requirements, things that he said would cut the waste and the fraud. But there really are several billion dollars of questionable solutions that were penciled in that makes the state look like it has more revenue than it really does. And I think those do feel a little bit like a can being kicked down the road, which is the governor's favorite term.

INSKEEP: Hmm. And what about these IOUs that the state has been issuing to pay its bills?

MYERS: Well, as of last Friday, California had issued $681 million in IOUs. That's not even including the interest on them. But the state controller has to look at this deal, I think, and see if it helps put cash back in the bank. And he can stop issuing them. Also, the deal is going to get scrutinized by Wall Street because California needs a thumbs-up from the financial markets so it can borrow operating cash later this summer and into the fall.

INSKEEP: Oh, so we don't really know if this is over, even if the legislature passes it. It has to pass muster with Wall Street for California to get back to normal.

MYERS: I think at the endgame, right. We've got to see exactly how the people with the money react to what's going on.

INSKEEP: So does this budget deal mean that, in some sense, California will be a different state, or feel like a different state?

MYERS: Well, I certainly think the public is going to take notice of a lot of this. I mean, what happens when police and fire protection's affected or teachers are laid off? We even had a story this past Friday in San Francisco - or near San Francisco of a freeway spill that wasn't cleaned up for hours, in part because that was the day that state highway workers were on furlough. So the public's reaction, I think, is going to be next big chapter in this.

INSKEEP: And I want to ask about one other source of revenue in here. Isn't there something about oil drilling that helps the state make money?

MYERS: There is. There's $100 million in this budget deal for off-shore drilling off of the coast of Santa Barbara County on the Southern California coast. It would be the first such drilling in 40 years in California. It's a limited project, but it's got a lot of criticism from environmentalists.

INSKEEP: Interesting that this state, where the politics are so famously liberal, is now pushing itself to a point where it's going to allow more off-shore oil drilling. It's going to be cutting back on health care, going to be cutting back on education and welfare.

MYERS: There's some sense here, I think, Steve, that people are searching for the change in the sofa cushions in California, and so every deal seems to be on the table.

INSKEEP: John Myers of KQED, thanks very much.

MYERS: You're welcome.

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