As California’s budget continued to careen headlong toward the cliff of insolvency, Republican Gov. Arnold Schwarzenegger last week delivered a state-of-the-state address shorn of the bold pronouncements that marked his five previous addresses.

Calling the state’s estimated $42 billion deficit by 2010 “a rock upon our chest and we cannot breathe until we get it off,” the governor told legislative leaders, “It doesn’t make any sense to talk about education, infrastructure, water, health care reform and all those things when we have this huge budget deficit.”

His speech drew wide criticism, with the head of the state labor federation calling the governor “caught in a time warp” and assailing his “slash-and-burn” budget cutting tactics.

Current budget talks to deal with the soaring deficit have been stalemated for over two months as the economic crisis deepens.

California is one of just three states requiring a two-thirds majority to pass a budget and to raise taxes. The Democrats’ legislative majority falls short of that, virtually all Republican legislators have signed a no-new-taxes pledge, and the governor, who continues to insist on cuts unacceptable to Democrats, can’t budge fellow Republicans for his own revenue proposals.

Schwarzenegger issued his proposed 2009-2010 budget on New Year’s Eve — some 10 days ahead of the constitutional deadline — in an effort to jump-start the stalled budget process. Observers said the document rehashed health and human services cuts that had already been rejected by the legislature’s budget committees.

Reaction was swift and sharp to both budget and speech.

“While the rest of the country is focused on turning the page on eight years of failed Bush economics, it’s clear that Gov. Schwarzenegger is caught in a time warp,” California Labor Federation head Art Pulaski said in a statement. “The governor’s repeated slash-and-burn tactics to balance the budget have left working families much worse off than we were five years ago,” he added.

Pulaski urged Schwarzenegger to emulate President-elect Obama “and stimulate the economy by creating, not eliminating, jobs,” and called for strengthening the unemployment system and reversing the home foreclosure tide.

Anthony Wright, executive director of the Health Access coalition, comprising more than 200 organizations, wrote that Schwarzenegger’s proposals would both directly impact the state’s health system and cost the state hundreds of millions in federal matching funds.

Wright said the governor’s budget would deny Medi-Cal (state Medicaid) coverage to more than half a million low-income working parents; cut out dental, mental health and other benefits to 2.5 million parents, seniors and disabled people covered by Medi-Cal; cut health coverage for young children, and take funds away from public hospitals and providers.

Calling Schwarzenegger’s proposals “a disaster for the students of California,” California Federation of Teachers President Marty Hittelman wrote on that the governor not only fails to provide adequate school funding, but also “undermines vital health and human services that students need to achieve their best.” He added, “Long-term solutions to our state’s revenue shortfall are missing, due to Republicans’ allegiance to a blind and inflexible anti-tax philosophy.”

Last week the nonpartisan Legislative Analyst’s Office warned the state could run out of cash as early as Feb. 1. The LAO said the state’s severe drop in revenues is complicated by its inability to borrow in frozen credit markets. And Controller John Chiang said that while he could still pay school and some welfare payments, he would be forced to delay over $3 billion in payments for many health and welfare programs as well as state income tax refunds.

Meanwhile, legislators returned from the holiday break to start yet another special session on the budget, while talks between the governor and legislative leaders remained stalled.

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