Schwarzenegger signs $85B budget with additional welfare, health cuts

SACRAMENTO, Calif. — Gov. Arnold Schwarzenegger signed a revised $85 billion budget Tuesday that he said contained "the good, the bad and the ugly," including additional cuts to child welfare programs, health care for the poor and AIDS prevention efforts.

Schwarzenegger used his line-item veto authority to save an additional $656 million that will let the state restore a reserve fund he said is needed for tough times. Democrats immediately questioned whether he had the authority to make some of the cuts.

The new budget should help the state's cash crisis. It remained unclear, however, how soon the state could stop issuing thousands of IOUs to vendors and contractors.

The governor's vetoes included $80 million from child welfare programs; $61 million from county funding to administer Medi-Cal, California's version of Medicaid; $52 million from AIDS prevention and treatment; $50 million from Healthy Families, the low-cost health insurance program for poor children; and $6.2 million more from state parks.

"Those are ugly cuts and I'm the only one that is really responsible for those cuts because the Legislature left, they didn't want to make those cuts," he said after signing the budget in his office.

Senate President Pro Tem Darrell Steinberg, a Democrat who negotiated the original budget compromise with Schwarzenegger, immediately questioned the legality of many of the governor's vetoes.

"We will fight to restore every dollar of additional cuts to health and human services," Steinberg said in a written statement. "This is not the last word."

Schwarzenegger called the budget package aimed at balancing the state's budget through June 30, 2010, the toughest since he took office in 2003. Still, the Republican governor said the package included reforms he has long sought and forces government to live within its means.

He said additional cuts were needed to build a $500 million reserve fund after the state Assembly rejected about $1.1 billion in revenues from local transportation funding and by allowing new offshore oil drilling.

With much of state spending tied up by federal and constitutional requirements, the Schwarzenegger administration wants to ensure the state has a cash cushion in case of emergencies such as earthquakes and wildfires.

California's economy has been hit by the housing market slump and high unemployment, and the latest efforts to close a $26 billion shortfall came just five months after lawmakers and the governor ended months of negotiations to close a previous $42 billion deficit.