Californians debating how much stimulus state will receive

McClatchy NewspapersMarch 9, 2009 

WASHINGTON -- California will get more than $50 billion in federal stimulus money, more than enough to avoid a trigger that would force higher personal income taxes and deeper cuts in social services, according to a study released Monday.

The study by the California Budget Project disputes the administration of Gov. Arnold Schwarzenegger, which last week said those cuts and increased taxes will be likely.

The dispute revolves around part of the budget deal signed into law by Schwarzenegger last month. The deal requires the state to meet a $10 billion threshold that the state must receive from Washington to eliminate $1.8 billion in additional income tax increases and $948 million in further spending cuts.

Under the budget deal, lawmakers and the governor made $2.7 billion in tax increases and spending cuts contingent on how much money comes in from Washington. It requires the state treasurer and state finance director to determine by April 1 whether the state will receive the $10 billion through the next fiscal year.

Last week the Department of Finance estimated that California would fall $2 billion short of the goal.

The California Budget Project, which advocates for the working poor, said the Finance Department was "unrealistically conservative" in making its determination.

The study estimated that California will receive at least $15 billion of the $50 billion by June 2010 and that all of it can be used to meet the $10 billion threshold.

The California Budget Project said the state is guessing low on much money stimulus money the state will receive in Medicaid and education funding.

Finance Department spokesman H.D. Palmer said the agency's estimate was based on an internal review with assistance from Schwarzenegger administration officials in Washington and state agencies.

While the debate is complicated, much is at stake for Californians.

If a determination is made that the state does not meet the $10 billion, taxpayers will pay an additional 0.125 percent on every income tax bracket in 2009, equal to $1.8 billion in higher taxes.

Failure to hit the $10 billion mark also would eliminate various health benefits for Medi-Cal patients starting July 1, such as adult dental services and podiatry. It would cut $100 million for higher education. And it would reduce monthly SSI/SSP grants for low-income disabled and elderly residents by 2.3 percent and monthly grants for welfare families by 4 percent.

McClatchy Newspapers 2009

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