FEDS SLUG STATE'S POOR KIDS, ELDERLY, ILL HIT, BUT SOFTER THAN FEARED.

Byline: Lisa Friedman Washington Bureau

WASHINGTON - California's needy families will lose more than $550 million a year under a deficit-reduction bill approved Wednesday by the U.S. Senate, marking the first cuts to welfare, Medicare and other entitlement programs in nearly a decade.

Vice President Dick Cheney cut short his Iraq trip to cast the tie- breaking vote on the controversial $39.7 billion package, opposed by California's senators, Barbara Boxer and Dianne Feinstein, both Democrats.

State finance officials said the cuts will hurt many families and children already struggling in high-cost California, but noted that a monthlong lobbying blitz helped avert more than $1.7 billion in additional reductions, including much-feared cuts in child-support enforcement.

``We dodged a very big bullet,'' said David Wetmore, director of Gov. Arnold Schwarzenegger's Washington office.

Still, there will be some hurtful cuts,'' said H.D. Palmer, spokesman for the California Department of Finance. ``It's hard to go through one of these exercises and not know there's going to be some hits coming. We worked very hard to mitigate them or outright defeat them,'' Palmer added.

Because of some technical changes in the measure, the bill must return to the House for another vote but is widely expected to be approved.

The five-year budget bill cuts $4.8 billion from the nation's Medicaid health program for the poor and disabled; $6.4 billion from the Medicare health program for the elderly; and about $13 billion from student loans.

It also denies foster-care payments to low-income grandparents caring for abused and neglected children, a provision that could affect more than 4,400 California foster children.

In pleading with fellow lawmakers to pass the bill, Sen. Judd Gregg, R- N.H., chairman of the Senate Budget Committee, called it ``the one vote you'll have this year to reduce the rate of growth in the federal government.''

Joan Lee, legislative liaison for the California Gray Panthers advocacy group in Sacramento, said the bill increases prescription drug co-payments beyond the means of many low-income senior citizens.

``Frankly, I think there's a way to balance our budget other than to do it on the backs of people like that who can't even afford a few dollars a month,'' Lee said.

Feinstein said she was particularly concerned about the bill's failure to protect Medicaid adult day-care services and about a requirement for states to increase the number of welfare recipients in federally approved work activities by two-thirds in 2007 unless they see a substantial drop in caseloads.

Feinstein said conference negotiators stripped out a provision she had inserted to block the administration from forcing California into a program she said would disqualify 40 percent of participants - about 47,000 seniors and disabled people - from community-based health care services.

A spokesman estimated California will lose $200 million annually under the change.

``This bill is just another step to further the Republican agenda of severely cutting benefits to working-class families while handing out tax cuts to the wealthy,'' Feinstein said on the Senate floor.

Still, Wetmore and Palmer said California sidestepped three more-devastating budget blows.

Medicaid cuts will now cost the state $175 million over five years - significantly less than the $700 million that had been proposed in a House version of the measure.

In addition, House and Senate negotiators decided to ditch a provision that would have opened California's preferred mental health drug list to all newcomers and could have cost the state about $250 million a year.

Officials said the final version also eliminates a major cut to child-support enforcement funding that would have cost California $1 billion over five years.

``That was essentially a billion-dollar gun that was pointed at our heads, and that's now gone,'' Palmer said.

Stan Trom, director of the Ventura County Department of Child Support Services, noted that the measure still restricts funding, but far less than feared.

``It's very encouraging that members of Congress listened to the people involved in child support,'' Trom said.

The Associated Press contributed to this report.

Lisa Friedman, [phone]

lisa.friedman(at)langnews.com

UNFINISHED BUSINESS

In the final clashes of a year of partisan conflict, here are the results:

--A Democrat-led filibuster blocked passage of a bill that includes language opening up Alaska's Arctic National Wildlife Refuge to oil drilling.

--A $39.7 billion package of deficit cuts passes on Vice President Dick Cheney's tie-breaking vote.

--Senators reach agreement to extend current Patriot Act for six months.

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