Gov. Arnold Schwarzenegger deemed California “the modern equivalent of the ancient city states of Athens and Sparta,” in last year’s State of the State. “California has the ideas of Athens and the power of Sparta.”

The big talk didn’t end there. Schwarzenegger then went on to announce bold, new policy initiatives including universal health care.

A year later, things don’t look so good.

California faces a $14 billion deficit. A plan for health-care reform – which, in an odd coincidence, is expected to cost about $14 billion annually – is pending in the state Senate. And in his Jan. 8 State of the State, Schwarzenegger painted a bleak picture of California’s spending plan, which he will submit on Jan. 10.

On Jan. 8, the governor said the new budget will include across-the-board cuts and no new tax increases.

“The problem is that, while revenues are flat, automatic formulas are increasing spending by 7.3 percent,” Schwarzenegger said in his annual address. “Even a booming economy can’t meet that kind of increase. So the system itself is the problem.”

To face what he called California’s “budget demons,” Schwarzenegger said he again will ask voters to approve a constitutional amendment that would set a spending cap on future budgets, and require the state to set aside money in good financial years to create a reserve fund for cash-strapped times.

Central Coast Assemblyman John Laird, who chairs the Assembly Budget Committee, says Schwarzenegger should take some responsibility for the state’s budget crisis. Upon taking office, Schwarzenegger drastically cut the state’s vehicle tax. “And instead of putting the state on a pay-as-you-go basis in 2004, we refinanced the debt,” Laird says. “Those two things are $8 billion of the problem right now.

“He talked about ‘Professor Schwarzenegger,’ ” Laird says, referring to the governor’s statement that “Professor Schwarzenegger is now going to explain the economics of our budget problem.”

“I think Professor Laird would teach the class differently,” says Laird, who doesn’t think a budget cap is a good idea for the state. “Gimmicks are always easier than actually making the hard decisions about the budget. It would be easy to say, ‘Gee, I’m cutting schools and closing parks because a formula made me do it.’ Those are hard decisions that need to be the province of the Legislature and the governor.”

In a 2005 special election, Schwarzenegger unsuccessfully tried to convince voters to set a similar spending cap.

Looking ahead to the governor’s spending proposal, Democrats say cuts alone won’t solve the budget problems.

“If there’s a $14 billion deficit, you could close every one of the state’s public universities and still be nowhere close,” said Assembly Speaker Fabian Núñez (D-Los Angeles), responding to the State of the State on Jan. 8. “You could kick every Medi-Cal patient out of their nursing homes and still be nowhere close. You could shutter nutrition programs for every child that needs them and still be nowhere close. In fact, you could take all of those steps together and still face a serious budget gap. The conversation can’t just be about price, it has to be about priorities, too.

“And no conversation about where the state should be headed can be complete without acknowledging the overwhelming need to fix the state’s broken health-care system.”

On Dec. 17, the Assembly approved a bill that would overhaul the state’s health-care system. Núñez called the bill “amazing and historic,” and on Dec. 29, Núñez and Schwarzenegger filed an initiative to finance the $14.4 billion plan.

Everyone seems to agree that the California’s current health-care system is broken. But the prognosis on the Núñez-Schwarzenegger plan, now pending in the Senate, remains unclear.

Supporters say the health-care bill, AB 1X1, would provide medical coverage to 3.6 million people in California – including all of the state’s 800,000 children – who currently are uninsured. It would do this by requiring all Californians to buy health insurance, with the exception of some low-income residents who would be covered by state or federal money. The legislation would prohibit insurance companies from denying coverage to applicants. It also would require employers to spend between 1 percent and 6.5 percent of payroll to buy insurance for employees, or pay the same amount into a state fund.

The plan is expected to cost $14.4 billion annually. In addition to mandatory employers’ contribution, the money would come from a cigarette tax, a hospital fee and federal and county funds.

If the state Senate approves the legislation, it would be placed on the November ballot. Political experts say opponents – including Blue Cross, the tobacco industry and the pharmaceutical industry – may spend upwards of $100 million to defeat the ballot measure.

But first, it’s got to get through the Senate. The bill is slated for a hearing on Jan. 16, but before the legislative body considers AB 1X1, Senate President Pro Tem Don Perata (D-Oakland) wants to see an independent study by the Legislative Analyst’s Office.

In a Dec. 17 letter, Perata asked the legislative analyst to address the plan’s expected revenues and costs, and the “risks, cost pressures and implications for the general fund.”

“We cannot make sound decisions in the dark – about the governor’s budget or about financing health-care reform,” Perata wrote in the Dec. 19 daily briefing. “The Senate will debate and act on health-care reform when we have the facts to be sure we’re getting it right.”

“That bill is going to get an extremely thorough hearing so that all 200 pages of it will be known and analyzed, and everyone will be allowed to testify,” says Sen. Sheila Kuehl (D-Santa Monica), who has a competing health-care plan in the hopper, SB 840. Kuehl criticizes the Núñez bill because she says it’s harmful to working – and middle-class families.

“All Californians would be required to buy insurance with no caps on premiums, no regulation of the cost of insurance or medical expense, no maximum deductibles, and no floor on how little coverage you can buy and satisfy the legal requirement,” she writes on her website.

In contrast, Kuehl says her bill would provide health care for all Californians. Under her state-managed, single-payer model, all residents would pay a means-based premium and receive comprehensive health insurance. It would be funded similarly to Social Security in that a 4 percent health tax would be withheld from employees’ paychecks, and employers would contribute another 8 percent. Unlike the Núñez bill, SB 840 would require no new spending.

“Affordability and coverage, that’s been our mantra all along,” Kuehl says.

In 2006, Schwarzenegger vetoed a universal health-care plan authored by Kuehl. A year later, Kuehl again introduced SB 840. The Senate approved the bill, but because Schwarzenegger promised to veto it, Kuehl asked the Assembly to hold SB 840 in a committee. The committee will hold a heading on SB 840 in the late spring, Kuehl says.

“Until then, we plan to have a number of briefings, especially about the funding aspect of the bill [SB 840]. I want to be able to display it and back it up as a real contrast to the phantasmagorical, herky-jerky funding in his [Núñez’s] bill.”

Laird, who supported AB 1X1, says it’s too early to predict what will happen in the Senate. “Everybody is talking about it right now, and I don’t think there is a clear outcome right yet.”

And ultimately, he says AB 1X1 may be a boon to future state budgets.

“I think the health program, if it’s approved, would help the budget over time by stabilizing Medi-Cal rates and preserving children’s health coverage as we know it. I think there’s a case to be made for moving ahead with this.”