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Even with austere budget plan, California counts on federal funds

Gov. Schwarzenegger seeks to live up to being "The Collectinator."
Gov. Schwarzenegger seeks to live up to being "The Collectinator." (Ken James/bloomberg News)

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By Karl Vick and David Cho
Washington Post Staff Writers
Sunday, January 10, 2010

On Rough & Tumble, a popular California public policy Web site, the lead headline Saturday read: "Arnold to DC: Give Us The Money, Nobody Gets Hurt."

The Golden State is racked with 12.3 percent unemployment and a budget shortfall of $20 billion, and Gov. Arnold Schwarzenegger (R) warned Friday of even deeper cuts to programs without $6.9 billion in new federal funds. In unveiling an austere budget proposal, he went a giant step further with the age-old state gripe about unequal distribution of federal dollars -- actually writing the federal funds in as a budget stopgap.

Some administration officials and lawmakers on Capitol Hill were skeptical that the federal government would provide a bailout to close California's budget gap, partly because it would set off a cascade of demands from other states.

Schwarzenegger is asking Washington to reimburse Medicaid expenses at the national average of 57 cents on the dollar, up from 50 cents (worth $1.8 billion). He is also pleading to make permanent certain federal stimulus outlays set to run out at year's end ($2.1 billion).

Nearly $3 billion more would come from correcting "unfair federal mandates" that oblige the state to cover costs in health care, foster care, special education and, not least, the imprisonment of illegal immigrants. California receives $96 million from the federal government to cover the $973 million it costs to incarcerate illegal immigrants convicted of felonies, who account for about one in 10 prisoners in the state.

"So we're not even getting 10 cents on the dollar," said H.D. Palmer, deputy director of the state's Finance Department. "We're not pulling numbers out of the air. There is a solid analytical basis for every item in our federal request."

The most prominent members of the state's heavily Democratic congressional delegation were chilly to the governor's public pitch, however.

"The federal government is not responsible for the state of California's budget, and we look forward to hearing a sustainable plan for the state to get its house in order," said Drew Hammill, spokesman for House Speaker Nancy Pelosi (D).

In a statement, Sen. Dianne Feinstein (D) said the problems will persist "until there is wholesale reform of the state's budget process." Sen. Barbara Boxer (D) pointed out that because California is receiving billions from the federal stimulus package, state residents overall now get $1.45 for every $1 sent to Washington -- nearly twice as much as the 78 cents Schwarzenegger quoted in his State of the State address.

Schwarzenegger spokesman Aaron McLear said the governor has raised the budget issues with President Obama, White House Chief of Staff Rahm Emanuel and numerous Cabinet secretaries over the past year, as well as with California's congressional delegation.

"You can go back to 2004, when he first came into office, he said, 'You're going to call me The Collectinator,' " the spokesman said.

"This is not something new," McLear said. "The difference this year is the budget we've rolled out is including those federal dollars. For every dollar we don't get, we have a trigger. We have cuts that we've identified that we will make instead."

The new pitch to Washington differs significantly from last year's appeal for the federal government to provide loan guarantees in hopes of sparing the state several hundred million dollars it had to pay private bankers. White House officials declined to express a position on California's most recent efforts to seek federal assistance. In the summer, senior administration officials declined a similar plea for federal aid from California, though they said at the time that they remained open to stepping in if the situation dramatically worsened. But even in that case, any federal bailout would carry conditions to protect taxpayers and make similar requests for aid unattractive to other states.

Staff writer Michael D. Shear contributed to this report.


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