California Gov. Arnold Schwarzenegger (R) on Thursday proposed a $101 billion state budget for fiscal year 2008-2009 that would reduce funding for health care programs and other services to help close a projected $14.5 billion budget shortfall, the San Jose Mercury News reports (Zapler, San Jose Mercury News, 1/11).

Under the proposed spending plan, funding for Medi-Cal, the state's Medicaid program, would be reduced by about $1 billion to $13.6 billion (Mendel, San Diego Union-Tribune, 1/11). However, according to the Mercury News, actual Medi-Cal funding losses could be closer to $2 billion because the federal government matches state funds for the program (San Jose Mercury News, 1/11).

The proposed budget would reduce by 10% Medi-Cal reimbursement rates for physicians and hospitals, which are already among the lowest in the nation. In addition, two-thirds of Healthy Families beneficiaries would pay higher premiums under the proposal. Healthy Families is the state's version of SCHIP (Los Angeles Times, 1/11). The budget plan also calls for eliminating some Medi-Cal services, including most dental services for the three million adult Medi-Cal beneficiaries, and includes cuts to HIV/AIDS drug assistance and prevention programs.

Schwarzenegger's plan would require Medi-Cal beneficiaries to file income reports every three months, and if their income or assets exceeded a maximum level, they would lose coverage (Fernandez, San Francisco Chronicle, 1/11). The governor also proposed immediate cuts to Medi-Cal of about $33 million (Chorneau, San Francisco Chronicle, 1/11).

Schwarzenegger also proposed an across-the-board spending cut of 10% that would affect nearly every state department. The cuts would generate about $9 billion in savings next year and $217 million for the rest of the current fiscal year (Yamamura/Lin, Sacramento Bee, 1/11). Schwarzenegger declared a fiscal emergency, giving lawmakers until Feb. 23 to begin reducing a $3.3 billion deficit for the current year before they can move to other issues or adjourn (San Diego Union-Tribune, 1/11).