Arnold has tried to promote a 10% across the board budget cut as the cornerstone of his plan to address the $14 billion deficit – but as Judy Lin noted in a recent SacBee article, he cannot do that:

But while such efforts have been talked about in the past, budget experts say straight reductions are impossible in a world filled with legal, financial and political obstacles.

“Can he get across-the-board cuts comprehensively? No,” said Jean Ross, executive director of the California Budget Project, a nonpartisan group that advocates for poor and middle-class families. Not only does the state have to comply with various laws and court orders, it has debts to pay, paychecks to deliver, and everything from schools to prisons to maintain.

“I could go on and on and on,” Ross added.

The Schwarzenegger administration has pledged to spread cuts in a way that “no department shoulders a disproportionate share,” said finance spokesman H.D. Palmer.

Yet the governor’s aversion to taxes has left him little choice but to make cuts that are certain to attract political resistance on multiple fronts, from Democrats who control the Legislature to powerful interest groups such as the teachers and the prison officers union.

So what IS likely to face cuts when Arnold’s proposals are released next week? Education and health care.

A 10% cut to education budgets would require suspension of Prop 98, and would have a devastating effect on schools in the middle of the school year. Here I disagree with Judy Lin, the author of the SacBee article, who claims that the cuts to education would affect things like school buses and field trips – a 10% cut WILL mean cuts in classes and layoffs of teachers. There’s not that much flexibility in the budgets of most K-12 districts, certainly not in higher ed.

As to health care, Hanh Quach of Health Access California explains what a 10% cut would mean:

• A 10% cut in Medi-Cal eligibility would mean denying coverage to 680,000 of the 6.8 million Californians on Medi-Cal–largely low-income children, parents, seniors, and people with disabilities.

• A 10% cut in reimbursement rates in Medi-Cal would be hard, given that Medi-Cal has one of the lowest rates in the nation already (it’s one of the things we are trying to fix with health care reform).

• A 10% cut in benefits would mean having to deny millions of people key services. In the previous budget crises, proposals called for denying coverage for a range of benefits in Medi-Cal, including coverage for prosthetic limbs, medical equipment like asthma inhalers and diabetic test strips, and durable medical equipment like wheelchairs.

Given the likelihood of cuts being disproportionately visited on health and education, things that Californians have repeatedly demonstrated their support for protecting, it seems that Democrats have a strong opening to contest Arnold’s entire approach to the budget.

More importantly, Arnold is trying to reopen the current budget. Whereas in the summer Democrats were under pressure to get a budget done and ensure that schools and health care got the funding they needed, there is no such pressure now. Democrats can delay until July if they like and these vital public services and the Californians who depend on them will be spared. Dems are in the driver’s seat here, as long as they resist the temptation to agree to dramatic cuts so as to not jeopardize Prop 93’s chances.

What this also makes clearer is that spending cuts are not the answer – we MUST seek a revenue solution to this ongoing budget problem.

UPDATE: Well, I spoke too soon. Dan Walters apparently got some blowback on the re-enact the VLF theory.  From today’s Capitol ALert PM email:

Dan Walters backs away from an earlier column suggesting the governor could reinstate the vehicle license fee, because a deal with local governments prevents that. “The net effect of this complex deal was to punch a semi-permanent, $6 billion hole in a budget that was already dangerously out of balance. So while Schwarzenegger was still promising to end ‘crazy deficit spending’ and balance the budget, he was, effectively, making it virtually impossible to do so,” he writes.

Oh well, so much for another one of Dan’s brilliant ideas. Maybe he’ll retract his global warming denials soon. /update

I can’t believe I am writing this. I’ve not hidden my general distrust of Dan Walters. But, he makes a good point yesterday, and so…what Dan Walters said:

Rescinding the car tax cut would be both the easiest way for Schwarzenegger to close the budget gap because it wouldn’t require a legislative vote and, politically, the most difficult, given his vociferous advocacy during his 2003 campaign for governor.

He is, as the old saying goes, hoisted on his own petard – which literally translates into being hurt by his own gaseous emissions.(SacBee 12/9/07)

Of course, most of us understand that if the VLF had not been eliminated back in the day, we wouldn’t be dealing with a budget “crisis” today. It’s just that simple.  But, given his harsh rhetoric, it would be challenging for Arnold to pursue such a course.  But a bold course it would be. But let’s back up a minute:

Schwarzenegger has indicated in private conversations with budget stakeholders that new revenue would be considered in return for spending cuts. The conventional wisdom is that new taxes are politically impossible because Republican legislators would never supply enough votes to meet the required two-thirds margin.

Whoa, while Walters generally veers in bizarre directions on his analysis, his information is generally solid. So, at least the germ of considering increasing revenue is in his head. That’s a start.  But, it’s also true that Republicans in the Legislature will have nothing to do with increasing revenue.

The interesting thing about the VLF is that there is no vote required. You see, it was never really a tax cut, it’s a state backfill to local governments. And if the governor declares that we can no longer afford that backfill, municipalities can resume collection of the VLF.  And the state can hold on to their billions of backfill.  See, one stroke of the pen killed the VLF, and one stroke can bring it back.

The only question here: Does the action hero have the courage to look past his past bravado and see what’s best for the state. I wouldn’t hold my breath on this one, though.

The current budget as signed relies on revenue growth TWICE (5.8%) the rate of last year (2.4%). This budget is relying on something nonexistent. According to the monthly controller’s report we so far are taking in .4% LESS revenue than at this time last year. Making our current budget deficit $5.837 billion covered by internal borrowing

Hate to say I warned you so, but I warned you so. Get ready for insolvency

Nifty! A news roundup first thing in the morning. Whodathunkit? Teasers:Ad buy,debate set, debate silliness, salmon, student walkouts, new state revenue initative,Lake Tahoe.

• I’m only going to mention 2 pieces of the many stories around Schwarzeneggers’ recent staged news event in the form of a small ad buy. The first is this brief and informative piece by an OC Register reporter which compares the claims made in the ad to actual facts and prior Schwarzenegger positions. The second is this Chron “blog’ entry by Carla Marinucci, which uncritically notes the existence of the ad and the pitch, and speaks only to Matthew Dowd, Schwarzenegger’s chief strategist. The Marinucci piece is particularly notable for its failure, even in this informal context, to report on the estimated size of the ad buy. One would think that a reporter charged with statewide political coverage might read at least Bill Bradley’s public stuff, and I’m sure there are insider newletters that say the same type of thing with more detail.
• The SacBee reports that there will be at least one Angelides / Westly debate in Los Angeles, hosted by the League of Conservation Voters. Other debates continue to be the subject of pointlessly pointed semi-public argument between the two campaigns.
• The Contra Costa Times reports that a federal judge has ordered that the Klamath River be allowed sufficient water to fully support its salmon run.
• Tens of thousands of students walked out of schools in the Los Angeles area yesterday in support of the immigration rallies over the weekend.
• Reed Hastings and John Doerr launch a signature drive for a parcel tax initiative — a direct strike at Proposition 13.
• The Sacramento Bee reports on the plight of regular folks who live in Tahoe — even while vacation homes sit empty, they have a hard fime finding an affordable place to live. That’s John Doolittle country up there. Any guesses as to what kind of homes his developer contributors want to build?

That’s it for the news roundup today.