County, Cities in Rush to Replace Lost State Funds
By HOWARD FINE and LAURENCE DARMIENTO
As another round of state budget cuts ripples through Los Angeles County, local government agencies are scrambling to crunch the new numbers and figure out how and when they will pass on the cuts to local residents and businesses.
Some, like L.A. city government and the L.A. Unified School District are already preparing their own mid-year budget cuts. Others, like the county health department and service providers for the indigent, are waiting to see how many more cuts will be made in January before they act.
Virtually every local government body is looking at ways to tighten their belts as the state puts much of the burden on them for closing a budget deficit estimated at between $25 billion to $30 billion over the next 18 months.
“Even before these latest cuts were announced, everyone’s budgets were already very fragile,” said Steve Keil, lobbyist with the California Association of Counties. “But they also realize that more substantial cuts are on the way. Everybody’s really looking at what’s going to be coming in January when the governor releases the full budget.”
The $10.2 billion in state budget cuts that Gov. Gray Davis announced on Dec. 6 are only “mid-year spending reductions.” Another $12 billion to $20 billion in cuts will be announced on Jan. 10 as Davis releases the full 2003-04 budget.
Davis called the state Legislature into special session last week to address the budget crisis, but legislators met for only a few minutes before returning home. They, too, are waiting for Davis to drop the other shoe.
But there is also disagreement in Sacramento over how to close the gap. Democrats insist that new taxes and fees be part of the package, saying that the budget deficit is too big to close just with spending cuts. Republicans, though, are holding the line against tax increases, saying that the entire deficit must be closed with spending cuts.
Since a two-thirds majority in each house is needed to pass a budget, Democrats must peel off at least six Republican votes, setting up the possibility of a standoff similar to the one this past summer that delayed passage of the budget by 10 weeks.
Tax measures possible
In recent days, prominent Democrats like Senate President John Burton, D-San Francisco, have indicated their willingness to put some tax measures before the voters in a special election if Republicans block them in the Legislature.
Whatever the outcome, it’s clear that billions of dollars in cuts are on their way many of those coming out of services provided by local governments, from education to health care to street paving.
Davis, in his $10.2 billion mid-year spending reduction package, has proposed more than $2 billion in cuts for health care and human services, $1.8 billion for education, $1.8 billion for transportation programs, $500 million in transfers from redevelopment agencies and nearly $500 million in savings from renegotiations of labor contracts with state employees.
The $2 billion worth of cuts in health and welfare programs statewide likely will have a greater impact on Los Angeles than any of the other reductions the governor is proposing, given the region’s massive numbers of uninsured residents and the fiscal crisis the county health department is already facing.
A large portion of those cuts are being made through a 10 percent reduction in fees that doctors and other health care providers will receive for treating Medi-Cal patients, making it likely that some doctors will refuse to treat some patients.
The governor also is proposing to raise eligibility standards for the Medi-Cal program, which pays for the health care of low income children, pregnant women, the elderly and disabled.
“It’s the perfect storm of a health care crisis,” said Carl Coan, president of the Eisner Pediatric & Family Medical Center, a downtown clinic that treats low-income patients.
If the cut in Medi-Cal reimbursements is enacted as part of a series of adjustments to the current 2002-03 state budget, many doctors will likely treat fewer Medi-Cal patients, said Heather Campbell, a spokeswoman for the California Medical Association. And this could start happening as early as next summer.
About 800,000 county residents now receive Medi-Cal benefits through L.A. Care, a public agency that offers the benefits via enrollment in health maintenance plans. Howard Kahn, the agency’s chief executive, said officials there are waiting for any further state spending cutbacks in January before they release figures on how many members might lose benefits. But he had no doubt that the number will be significant.
“The governor’s proposal as it is now will really have an impact on needy folks,” he said.
There is particular concern locally because any patients who lose benefits will end up seeking treatment from an already overburdened and fiscally ailing safety net system, whose nucleus is the county’s four public hospitals and medical clinics, as well as dozens of private clinics.
Another major area targeted is education. Of the $1.8 billion in cuts, $140 million is expected to come out of the Los Angeles Unified School District’s budget for programs in high-risk youth education, training for principals and math and reading teachers and college preparation programs.
LAUSD officials have already cut $450 million from the current 2002-03 budget, primarily by reversing recent class reduction measures. Now, district officials are scrambling to avoid having to dip further into reserves to cover this latest round of cuts, let alone more cuts almost certain to come in next year’s budget.
L.A. city officials are also looking at making mid-year budget cuts, much as they did last year when they imposed a hiring freeze and put moratoriums on new spending. Last week, City Administrative Officer Bill Fujioka released a report to the City Council’s budget and finance committee in which he recommended immediate deferment of some street repaving, new library book purchases, among other measures.
In the report, Fujioka said the city stands to lose between $15 million and $20 million just from the Dec. 6 round of proposed state budget cuts. The city could be on the hook for tens of millions of dollars more from cuts that will be announced in January, according to John Harris, finance specialist with the City Administrative Office.
The city’s redevelopment agency is also likely to take a hit from this latest round of state budget cuts. Davis has proposed requiring community redevelopment agencies around the state to transfer “unencumbered” low and moderate-income housing funds to the state, a move that his administration estimated could save the state $500 million. The L.A. Community Redevelopment Agency has $71 million in housing funds and is waiting to see how much of that amount it may have to give up.