On May 19th, California voters rejected several budget proposals put forth by Governor Arnold Schwarzenegger to solve the state's severe fiscal crisis. This means there is now a $21.3 billion hole to fill in the state's finances, according to the Governor's office. And so soon after heroically overcoming a $42 billion deficit. So why this new shortfall? The answer: the recession.
Recession and the Housing Bubble
California has been hit worse than most states by the economic downturn. This is due, in large part, to its own housing crisis. NPR's All Thing's Considered reported that in 2007 California accounted for six of the top ten metropolitan areas for most foreclosures per household. According to the Chief Economist of the California Association of Realtors, new housing permits dropped 45.1% and median home prices dropped 46.8% between 2007 and 2008.
The Budget Crisis
So how does Governor Schwarzenegger hope to solve the fiscal crisis? With hefty slashes in state services, a massive yard sale of state assets, and a hodgepodge of other measures.
Education, Healthcare, and Welfare
Education spending will be cut by between $2.3 billion and $5.4 billion, meaning a school year shorter by a week and thousands of teachers laid off. Even higher-education will suffer; outreach funding for the University of California and California State University will be terminated and enrollment will fall by some 50,000 students.
Public health and social services will take the brunt of the fiscal scalpel. 225,000 children will likely lose health coverage under the Healthy Families Program and funding for Medi-Cal, the state's healthcare program for the poor, will be cut by about 10%. Sexual education, HIV prevention, substance abuse treatment, and child abuse programs will either be drastically slimmed down or eliminated all together.
Prisons, Federal Money, and Oil
Other measures being considered include releasing 38,000 inmates from the state's overburdened prisons (mostly undocumented immigrants), borrowing money from local government coffers, selling real estate holdings, halting restoration work on the State Capitol, renewed offshore oil drilling (this in one of the most eco-friendly states), and even imploring Secretary of Health and Human Services Kathleen Sebelius for increased flexibility in the use of economic stimulus money.
