The governor focuses on budget stabilization, a 10 percent across-the-board cut and no new taxes.

Social service providers and higher education focus on the “devastating” impact of the cuts and the need for revenue enhancement.

Meanwhile, the state withholds gas tax payments to counties and will suspend Medi-Cal check reimbursements to providers beginning June 18.

It’s the perfect storm for a nightmarish state budget battle that begins in earnest May 14 — the date the governor releases his revised budget.

“I don’t think anyone is going to be happy with what we see in the governor’s revised budget,” Assemblymember Patty Berg, D-1st District, said. “The main story will be how much worse the revenue picture has become. My biggest concern is that this is a real crisis and I don’t believe that the public understands this.”

“The May revise will be when the real struggle starts,” said John Travis, chairman of the California Faculty Association political action legislative committee. “Everyone will have a better idea of the scope of the problem.”

The governor estimated a $12 billion deficit during last month’s visit to Eureka; now the numbers floating out of Sacramento go as high $20 billion. The Los Angeles Times reported last week that the governor’s staff is laying the groundwork for new taxes and service fees to close the gap and give Republicans political cover to back away from their pledge.

“I think it’s going to show a larger deficit than we even are thinking about,” said Joyce Hayes, executive director of the Humboldt Senior Resource Center. “The cuts are going to be deep in every area. We have to be really creative in looking at other funding options. We have to be looking at both sides of the budget — revenues and expenditures.”

Glenn Reed of Tri-County Independent Living, Maggie Kraft of Adult Day Health Services and TCIL executive director Chris Hill said increasing revenue must be on the table.

“Get creative, try to figure out where revenues come from,” Gov. Arnold Schwarzenegger said in his April 9 visit to Eureka. “I’m not against revenues, but I am against raising taxes. We can’t go to the people every single time when we have this problem and say let’s raise taxes, because eventually you’d end up with 100 percent taxes. And the mistakes were made in Sacramento, not by the people of California, so why go out and punish the people of California and raise their taxes?”

Travis said closing tax loopholes is an oft-mentioned fix; but he said that’s hard to do. “The loophole is there because somebody has a big interest.”

The Legislative Analyst proposed elimination or modification of a dozen tax exemptions and credits to increase revenues $2.7 billion.

“The valley solution that scares the hell out of a lot of people is to reduce the sales tax to 5 percent but increase its application to services,” Travis said. “It’s pretty common in other places, even other states.”

A revenue enhancer that concerned Neal Ewald, the manager of Green Diamond Co., would require timber companies to pay for the state’s review of the required permits. Ewald said that would double the firm’s cost to produce timber in California and make it 20 times more costly than in Oregon.

Schwarzenegger called that a job-killer that he would oppose, but it’s an example of what Travis called the many trial balloons that have been floated.

Schwarzenegger is pushing a budget stabilization amendment that limits spending increases to California’s 10-year average of 5.4 percent revenue growth. He argues for structural reform to save money in prosperous times rather than dole it out in flush years, which creates an unsustainable spending level during poor revenue years.

“The governor is right that our budget system needs to change,” Berg said. “But it looks like his proposal would result in one more layer of auto-pilot control. I think we need less of that, not more.”

“I was impressed with the governor’s plan for capping state spending, keeping the state in the black for the long term and setting aside surpluses in good years to help carry the state through the rough years without cutting essential services,” said Joseph Mark, chief executive officer of St. Joseph and Redwood Memorial hospitals.

Mark also believes the governor’s health care reform package has merit and should be explored, but it never made it out of a Democratic Senate committee.

Mark asked the governor on his April 9 visit to avert the proposed 10 percent cut that will cost his two local hospitals almost $2 million in Medi-Cal revenue.

The governor called the impact of the proposed 10 percent cuts “terrible” and said they could be stopped in the future with his budget stabilization amendment.

Cindy Denbo, executive director of the Area 1 Agency on Aging, expressed frustration with the “devastating” effect cuts would have on local seniors and the “relentless annual conversation about restricting, reducing and eliminating” programs.

Herrmann Spetzler of the Open Door Community Health Centers agreed that in rich years “we have a responsibility to put resources away” while Allan Katz of the Community Health Alliance said the structural repair had “a lot of merit and ought to be looked at.”

But Katz noted the governor’s structural reform is for the long term and does nothing to solve the looming crisis or to prioritize spending choices.

Compounding the problem is that so much of the state budget is “set aside and sacrosanct,” Zuretti Goosby said.

Goosby is the field representative for State Sen. Patricia Wiggins. He and Berg representative Nancy Stark were part of an April 29 press conference at Tri-County Independent Living to discuss the effects of the governor’s proposed budget cuts.

“The pot of money that is not earmarked is social services, care giving, (higher) education. That’s the money we have to haggle over,” he said.

The governor’s office claims about 90 percent of the budget is tied up with contracts or statutory requirements.

Disability rights activist Jene McAvoy sat in her wheelchair and spoke of the discretionary nature of the in-home care that enables her to live at home. Her voice cracked as she told of watching a tribal elder die for lack of care.

“That’s the choice we’re looking at right now,” she said. “Taking care of those who can’t take care of themselves. We aren’t entitled (to in-home care). We’re at whim. We’re the most vulnerable.”

“In poor countries, we let sick, poor and frail people die,” Kraft said. “That’s the option because other options aren’t available. If we want to go third world, we can do that. But if we are going to go there, we need to have that discussion and not go there by default. We should cop to it. I don’t want to wake up and realize our country slipped into not caring about people.”

“We’re all going to experience cuts and just have to do the best we can with it,” Hayes said. “Non-profits are used to pulling together. Sometimes to our detriment, we’ve taken what we’ve been given and made a lot out of it. Sometimes the public doesn’t understand what we have to do internally to keep services constant, but we can’t keep doing it.”

Hayes said the next step is to “talk with the community and decide what we can support. It’s a discussion we’re starting to have.”

Hayes allowed that the discussion is painful as diverse programs all have value within a single agency or state.

“It’s a struggle within,” she said, referring to the impending battles on the local and state level,

“What you are hearing more and more is we can’t cut our way out of this,” Travis said. “It’s too big of a crisis. We’ve shifted the burden into the future and indebted ourselves into the future as much as we can.”