Schwarzenegger’s class-war budget

"THE GOVERNOR has declared war on the poor today." That was the reaction of Michael Herald, legislative advocate for the Western Center on Law and Poverty, to California Gov. Arnold Schwarzenegger's "May revision" budget proposal announced May 14.

Herald is right. The Terminator's budget is an effort to force the poorest Californians to pay nearly every penny of a reported $15.2 billion state fiscal shortfall next year. His plan would slash billions in dollars from public education, health care and welfare programs that are already desperately underfunded. And his only proposals for increasing revenues will hit working people the hardest.

Schwarzenegger's proposed cuts include:

Slashing a total of $3.4 billion from state health care programs, a cut of an additional $1 billion compared to the governor's preliminary budget proposal in January.

Cutting thousands of impoverished families from eligibility for the Medi-Cal health care program. Under the governor's new rules, a single parent making over $8,540 a year would no longer qualify for Medi-Cal.

Eliminating cash assistance to more than 10,000 legal immigrants who are elderly, blind or disabled. This cruel cut would save the state $111 million, less than 1 percent of the total deficit.

Restricting in-home support services for elderly or disabled Californians needing assistance with household tasks. About 84,000 people would be cut off from this aid.

Cutting 5 percent from grants under the Cal-Works welfare program instead of providing a cost-of-living increase. The state will save $187 million, just barely more than 1 percent of the total deficit. Welfare recipients will see their benefits decrease during a period of inflation, especially in food prices.

Keeping $109 million (again, less than 1 percent of the total deficit) in federal cost-of-living increases for the Supplemental Security Income (SSI) program for the disabled. SSI recipients will face today's inflation with no increase in their benefits.

Denying health care benefits to immigrants who have been in the country less than five years, except for emergencies, pregnancies, nursing home care, and breast and cervical cancer treatments.

Cutting $288 million from the California State University system, which has raised fees by $276 per student this year, capping a 50 percent increase in student fees over the last five years alone.

Limiting admissions to California universities, where cuts have already led to 400 students with perfect high school grade-point averages being denied admission this year.

SCHWARZENEGGER IS trying to get some political mileage from claims that his budget revision fully funds K-12 education. He is publicizing a report from the California Department of Education estimating that, under this revised proposal, schools will receive $183 million more this year than last.

But this is a classic spin-doctor trick of using numbers that are not adjusted for inflation and population growth.

In fact, the governor's new budget does propose $1.8 billion more for public schools than his January proposal. This meager concession was enough to prompt the Los Angeles Times to suggest cynically that the governor is "yielding to groups with more political clout, such as teachers' unions."

But if you adjust for inflation, Schwarzenegger's "increase" in K-12 funding still amounts to a $4 billion cut, and his May revision still demands 10 percent cuts in school transportation, class-size reduction programs and school counselors. California already ranks 46th in the nation in per-pupil spending, and dead last in both class size and counselor-to-student ratios.

Several thousand teachers and thousands of other school employees across California have already received layoff notices, and despite Schwarzenegger's proposed additional funds, many school districts are still planning to close schools as a result of proposed education cuts. The Los Angeles Unified School District (LAUSD) estimates that its deficit due to the governor's budget cuts will be $350-500 million. LAUSD is the state's largest school district.

Unlike other school districts, LAUSD has yet to officially announce any layoffs, but it has started floating the idea of laying off thousands of probationary teachers, increasing class sizes, forcing teachers to pay $150 million in increased health care costs and imposing "furlough days" which would amount to a 1-2 percent pay cut for teachers.

The truth is that Schwarzenegger's proposals will have a devastating effect on a public education system already pushed to the brink.

SCHWARZENEGGER'S BUDGET cuts in education, health care and other social services are all completely unnecessary. California's wealthiest individuals and corporations could make the state's multi-billion-dollar deficit disappear overnight (and then some) without even breaking a sweat.

Currently, the richest 1 percent of Californians pay only 7.2 percent of their incomes in state and local taxes, as compared to 11.3 percent paid by California's poor. If the richest 1 percent merely paid the same 11.3 percent rate that the poor pay, that would immediately bring $10 billion into state coffers, wiping out over half of this year's deficit in one fell swoop.

Why so much? Because the combined income of the richest 1 percent is greater than the combined income of 60 percent of the population.

But that's only the beginning. If we actually had progressive taxation in California, where the wealthy pay a higher percentage of their incomes in taxes than the poor, we would be looking at a multi-billion dollar state budget surplus, even in the face of the collapse of the housing market and the recession. Moreover, over half of California's profitable corporations pay no state taxes at all.

California's wealthy enjoy some of the lowest residential and commercial property taxes in the nation.

A few years ago, Wall Street guru Warren Buffet (currently the world's richest man, with a net worth of $62 billion) made headlines by pointing out that he paid more taxes on his $500,000 home in Omaha, Neb., than he did on his $4 million California vacation home. Rich Californians can even weasel out of paying any sales tax when they purchase yachts and private airplanes by parking these expensive toys out of state for 90 days.

But instead of raising the pathetically low taxes currently paid by the wealthy, Schwarzenegger wants to make the poor pay for the budget mess. His main proposal for raising revenues for the state is a bizarre scheme to borrow $15 billion from Wall Street against future revenues of the California lottery. The governor has met with investors who think that a "modernized" California lottery could make a lot more money.

Simply put, this would be an indirect tax on California's poor and working class, by having the state try to get us to spend more money gambling on an expanded variety of lottery games. Meanwhile, by borrowing against future lottery profits, the governor is setting us up for more budget cuts down the road, as lottery money would go straight into the pockets of our Wall Street creditors instead of state coffers.

The governor wants to put this lottery proposal as an initiative on the November ballot. His plan is to set it up so that if voters reject the lottery scheme, California would automatically implement a 1 percent increase in the state sales tax. This sales tax hike, like the "modernized" lottery, will disproportionately pick the pockets of poor people.

As bad as this is, the state legislature is likely to prevent Schwarzenegger's budget from passing--because it isn't right wing enough. California's constitution has an undemocratic requirement that any budget must be passed by a two-thirds majority of both houses of the legislature.

As a result, the state's Republican Neanderthals, despite holding only 40 percent of the seats in the assembly and 37.5 percent of the seats in the Senate, have enough votes to block any budget they don't like. And what they don't like is tax increases, especially for the corporations and millionaires who fund their electoral campaigns.

Senate Republican leader Dave Cogdill of Modesto predicted that no Republican senator would vote for the Governor's sales tax plan. "We don't believe that raising taxes is the solution to our budget problem in this state," he said. "We still have a severe spending addiction." In other words, Republican legislators will aim to stop any budget that doesn't take even deeper cuts from education, health care and welfare programs.

Californians can expect a long, hot summer of budget battles. If the politicians are successful in setting the terms of the debate, the fight will be over exactly how to make the poor pay for the budget crisis.

It will take a massive and determined struggle by teachers, nurses, students, government employees, unions and working people in general to scare Sacramento into taxing the rich and implementing some real solutions to the budget mess.