Less Federal 'Gold' for the Golden State

Federal budget cuts could carve up to $50 billion out of California's health care, social services

JACK O. is all for wiping out the federal deficit by 2002. But the freshman at the University of California, Los Angeles says he could get hit from two sides if Republican budget proposals now on the table in Washington become law.

''I could lose my student loan at the same time my mom loses her job at the [county] hospital,'' he says, strapping his backpack to a moped outside the student union.

All across the Golden State, public officials and private analysts are trying to assess the broad array of congressional budget-cutting proposals that could amount to $50 billion less in Medicaid and Medicare projected funding just for Californians.

Similar arithmetic is being calculated from Salt Lake City to Salem, Mass., as a historic shift in who pays for the services the government provides is pondered on Capitol Hill.

Here, in the state with the nation's largest number of immigrants, poor children, elderly, and disabled, many are concerned that cutbacks would hit these vulnerable populations hard.

Others point out that the overall savings from a leaner federal budget will benefit California's lagging economy. State leaders claim that having more control over how government money is spent will allow them to serve their constituents in a more creative and efficient manner.

The nitty-gritty

''Los Angeles County is going to have to close down if Republican proposals go through,'' warns Rep. Henry Waxman (D), of Los Angeles. ''The impact of these health cuts is going to be devastating, particularly for those hospitals dealing with poor, elderly, and children.''

Democratic Senators Dianne Feinstein and Barbara Boxer have also come out against the federal budget-balancing bill. At present, Republican lawmakers from the US House and Senate are hashing out the final details to hand to the president. California's senators have assessed the reverberations that are likely to be felt in their state:

* On social services. Block grant funds to California for the elderly, child care, adoption programs, child-abuse prevention, deaf access, and child welfare would be cut by 20 percent or $3.3 billion over seven years.

* On the Earned Income Tax Credit Cut. This proposal would effectively raise taxes for nearly 3 million California families, more than 21 percent of taxpayers in the state, by an average of $500 each year for seven years. More than 615,000 working Californians will lose their eligibility for the credit because it will no longer be available to families without children.

* On child support. Some 600,000 California child-support cases may have to now pay proposed child-support collection fee.

* On Medicare and Medicaid. The total drop in the growth rate of California's Medicaid spending would be up to $18 billion over seven years. California public hospitals could lose $2.3 billion over seven years, and children's hospitals are set to lose $900 million by 2002. California could lose more than $32.5 billion in Medicare over seven years, including $7.5 billion in Los Angeles County where there 1 million people collect federal funds.

''This bill, I believe, is immoral, egregious,'' says Senator Feinstein. ''And in my 2-1/2 years I never thought I would stand here on the floor of the Senate and see the largest state of the Union be treated the way it is in this bill.''

California Republicans see the budget cuts in a different light.

''The overall spending reductions are going to stimulate the economy and the benefits are going to be felt in California and everywhere else,'' said Armando Azarlosa, spokesman for Rep. Howard McKeon (R) of Santa Clarita, Calif.

''It will make homes more affordable; ... every single consumer will benefit from the lower interest rates,'' he contends.

State Republican officials are also playing up the $3 billion approved by the US House that could be directed to California for the cost of providing health care to illegal immigrants.

''We see these funds as important in restoring some fairness to the plan that has wrongly burdened Californians for the cost of the federal government's failure to secure the border against illegal immigrants,'' says H.D. Palmer, director of the state finance office.

And Janice Ploeger, spokeswoman for the State Department of Health Services welcomes the new legislation as an opportunity to restructure a state system that is 60 years out of date.

''While these bills might provide a daunting task in funding,'' she says, ''we will take less money if it means we can have more authority and flexibility to redesign these programs. We have become a state that is far larger and more diverse than when these programs were designed.''

Paul Kranhold, spokesman for Republican Gov. Pete Wilson, adds that handing over federal programs to state control, as is proposed in the budget bill, will allow California to solve problems in the way best for their state, not based on a generic federal plan.

''Frankly, one of the reasons federal programs are so inefficient is that they try to accommodate everyone from Montana to Florida,'' Mr. Kranhold says. ''We feel we can do a better job.''

Stretched thin

But John Borland, economic analyst for the California Journal, says that is a valid argument only up to a certain point. ''There will be major opportunities for restructuring in the new programs, but no amount of efficiency is going to make up for these cuts.''

Mr. Borland says those heaviest hit will be counties, whose budgets have already been raided for five years by state legislators looking to plug holes in the state's mammoth budget deficits.

''If we have those kinds of reductions, county health officials will simply not be able to meet their responsibilities,'' says Victor Pottorff, deputy executive director of the California Association of Counties.

''We will have to develop an entirely new relationship with both the state and public sector just to maintain the status quo,'' he says.

Mr. Pottorff reminds that although broad outlines of cuts are on the boards, the actual numbers have yet to finalized. And because a presidential veto looms, nothing is settled yet.

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