Stimulus won't help Californians avoid cuts, higher taxes

SACRAMENTO — California will retain $948 million in spending cuts and $1.8 billion in higher income taxes after fiscal leaders announced Friday the state will not receive enough federal budget relief to avoid those measures.

As part of their $40 billion February deficit solution, state lawmakers and Gov. Arnold Schwarzenegger made nearly $2.8 billion in cuts and taxes contingent upon how much direct federal budget relief California receives. To avoid those cuts and taxes, the state would have to receive at least $10 billion.

State Treasurer Bill Lockyer and Department of Finance Director Mike Genest concurred Friday that California will receive only $8.17 billion that qualifies under the criteria in the budget agreement. Though fiscal officials believe California state government will receive nearly $50 billion in federal stimulus dollars, they said much of that money will go toward programs like local school districts and unemployment insurance and cannot be counted toward the state's coffers.

The $948 million in cuts include the elimination of services such as adult dental care and optometry services for Medi-Cal patients, as well as lower state wage contributions toward caretakers for patients living at home.

The state also will charge taxpayers a 0.25 percentage point higher rate on income, rather than the 0.125 point that would have been levied. The higher rate means an additional $1.8 billion in tax revenues for the state.

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