The country is watching as California law makers attempt to balance the state’s staggering 26 billion dollar budget deficit. Just as the unemployment rate rose to a record 11.5% in May 2009, Governor Arnold Schwarzenegger revealed an aggressive plan to solve the budget deficit by reducing state spending for virtually all departments receiving state funding: Education, state workers, Health and Human Services, State Parks, Local Governments, and Corrections. From the perspective of supporting low-income families who have been especially hard hit during this recession, the most alarming aspect of this budget crisis is the severe cuts in funding for the department of Health and Human Services, which is the state department that administers safety net programs.

Two plans emerged to close the budget deficit, one proposed by the governor and the other approved by the Democratic-Controlled Conference Committee. This is a snapshot of the two proposals as it relates to safety net programs.

As part of a larger plan to reduce state spending, the governor proposed to eliminate funding for core programs like CalWORKs and Healthy Families, while the Democratic-Controlled Conference Committee tried to retain these programs by reducing benefits and limiting certain components to the most needy. CalWORKs is the states welfare-to-work program, which helps move low-income families out of poverty by helping unemployed parents find work, underwriting child care, and providing cash assistance as they move toward self-sufficiency. Healthy Families is a program that provides affordable health insurance to very low income children. Millions of low-income Californians who are already struggling to make ends meet in this tumultuous economy now face added uncertainty about their future as vital safety net programs shrink or are eliminated.

During economic downturns safety net programs play an essential role in helping stabilize low-income households and preventing moderate-income households from spiraling downward. When low-income households receive job assistance, affordable health insurance, or child care, they are better positioned to begin saving and moving out of poverty. If households living at or near the federal poverty line lose benefits that supplement their income, they are left to make difficult trade-offs among basic necessities like food in lieu of health insurance. California’s growing ranks of low-income households face a turbulent future as they deplete their savings, fall into greater debt, bankruptcy, and perhaps even face homelessness to get by in this high cost state. This is harmful to the well being of children and their prospects for economic mobility.

Before the current recession, poverty rates were already high in California. The Working Poor Families Project reports that 32% of children in the state were raised in low-income working household in 2006; meaning, nearly one third of children in California come from households that earned less than $41,228 a year for a family of four. The number of children and families in poverty is probably much higher now given the mounting foreclosure and unemployment rates in the state. Recognizing the vital role safety net programs play in stabilizing families during economic downturns, the federal government enacted the American Recovery and Reinvestment Act in March 2009. This landmark bill sends billions of dollars to states to protect safety net and asset-building programs. By cutting funding for safety net programs, our state leaders are not only walking away from billions of federally matched dollars but they are also allowing millions of families to slide deeper into poverty.

California should not radically rewrite its social contract at a time when families face more economic uncertainty and require more help than ever. Our state leaders should, instead, consider solutions that involve increasing revenue to bridge this budget shortfall. According to Peter Orszag, Director of the Office of Management and Budget, and Nobel Laureate Joseph Stiglitz, “… tax increases on higher-income families are the least damaging mechanism for closing state fiscal deficits in the short run.” New Jersey’s recently approved budget has enacted this advice by temporarily raising personal income tax on wealthy families, earning more than $400,000 a year. Additionally, they are increasing taxes on cigarettes and alcohol. A growing number of prominent individuals and groups like the Center on Budget and Policy Priorities, Economic Analysis and Research Network, Nobel Laureate Paul Krugman, and 200 Economists from various parts of the country are urging state leaders to protect safety net programs and raise taxes to bridge budget deficits if necessary.