Governor Calls for 6.3% Budget Hike : $33.6-Billion Package Would Boost Spending for Schools, Safety, Roads

Gov. George Deukmejian proposed a $33.6-billion budget for the upcoming 1985-86 fiscal year Thursday, continuing his pattern of “meat and potatoes” budgeting by calling for increased spending for education, public safety and the rebuilding of California’s deteriorating public buildings, roads and sewer systems.

Helped by continuing growth of state tax collections, the Republican chief executive called for increases in most areas of state spending in presenting his third budget to the Legislature.

The new fiscal year begins July 1, and the state Constitution gives the Legislature until June 15 to review and approve the proposed spending plan. The Deukmejian budget represents a 6.3% increase in spending over the current $31.6-billion budget, including all funds, and anticipates ending the next fiscal year with a surplus of just over $1 billion.

The key general fund portion of the budget--used to finance education programs, pay state employee salaries and provide for the daily operation of state agencies--is targeted for a 9% increase.

While providing enough money for substantial budget increases, Deukmejian will be asking lawmakers to further scale back the state work force. He is recommending the elimination of about 2,900 positions through attrition and a continued policy of not filling all budgeted positions. Officials said this could be done without layoffs.

The governor, in comments to reporters during a press briefing, explained his proposal to create a $1-billion surplus while cutting positions this way:

“What we are trying to do is plan in a common sense manner to try to hold down the size of and the growth of government and also to be prepared for any rainy days that we might experience.”

By rainy days, Deukmejian meant a downturn in the economy that could result in state tax collections taking a nose dive, a situation that led to a $1.5-billion budget deficit in 1983.

Pressure is building to use the surplus funds for a tax cut. But most state fiscal officials agree with Deukmejian that the prudent course is to set aside the surplus funds as a reserve because of uncertainty over what the economy will be like in the second half of 1985 and the first half of 1986.

The proposed budget, unlike the first two Deukmejian budgets, seemed to satisfy Democrats.

“It looks good, a welcome change,” said Assemblyman John Vasconcellos (D-Santa Clara), chairman of the Assembly Ways and Means Committee and a sharp critic of the governor’s first two budgets.

Sen. Alfred E. Alquist (D-San Jose), chairman of the Senate Finance Committee, said, “There is not much to quarrel with.”

Heads Off Conflict

Deukmejian headed off one area of potential conflict with Democrats by calling for full 5.3% increases in living allowances for welfare recipients and persons receiving payments under programs for the aged, blind and disabled. In his first two budgets, the governor tried to reduce benefits below those required by law.

Under the proposed budget, a family of three receiving assistance under the Aid to Families with Dependent Children (AFDC) program would see their monthly living allowance boosted from $555 to $584. More than 1.6 million Californians receive AFDC benefits.

Providing full increases according to existing statutes means that the governor can present his budget to the Legislature without the necessity of introducing a companion bill to the main budget legislation. During the last two budget years, this companion bill, the so-called “trailer bill,” has caused almost as much debate and controversy as the main budget bill because Democrats loaded up the legislation with spending programs strongly opposed by the governor.

In keeping with tradition, the two heads of legislative budget committees, Alquist in the Senate and Vasconcellos in the Assembly, will carry the governor’s budget bill in their respective houses.

Republicans also said that Deukmejian’s budget addressed their priorities.

Increased Support

Assembly GOP Leader Pat Nolan of Glendale said it “will allow increased financial support for areas that have been neglected in the past--including education, prisons and highways.”

The budget anticipates a 7.1% increase in state general fund revenues--a $1.9-billion increase. General fund revenues include receipts from the income, sales and other major state taxes.

The projected increase in tax collections is substantially below the 11.5% increase in revenues experienced during the current year.

“Frankly, that is not a whole lot of growth,” said state Finance Director Jesse R. Huff of the predicted revenue increase. The budget is based on tax revenues, such as sales and income tax receipts, that are highly sensitive to changes in the economy.

Huff, who oversees budget preparation for the governor, said Department of Finance forecasts of how the economy will perform in the second half of 1985 and the first half of 1986 were in the middle range of other public and private economic forecasting agencies.

Could Realize More

Huff said that if the most optimistic forecasts prove accurate, the state could realize an additional $1.2 billion in revenues.

Education programs, ranging from state contributions to the University of California to its share of financial support for public schools, represent more than half of state general fund expenditures in Deukmejian’s budget.

Public school programs are targeted for 9% increases.

The University of California was penciled in for a 12.2% increase, the California State University System 10%, and community colleges, 8.7%.

However, the governor’s proposal for community colleges includes $36 million in receipts from the yet-to-start state lottery, and there was some criticism that if the lottery funds are excluded the increase is only about 6%.

Alquist said one of his few areas of disagreement with Deukmejian was over the funding level for community colleges.

“My biggest disappointment is that he did not more adequately fund our community colleges. I don’t see why he proposed less of an increase than he did for the other segments of higher education. I hope we can increase that part of the budget,” Alquist said.

Deukmejian said he expects the lottery to generate $300 million in revenue for state education programs in the new fiscal year. The lottery was approved by voters in November in an initiative that requires 34% of total lottery receipts to go for education programs.

Comments accompanying the budget said that the estimate of lottery receipts for education programs “is lower than generally has been assumed, but is reasonable given that 1985-86 will be the first full year of the new program.”

In other areas of the budget, the governor is recommending that state employes receive a 6.5% wage and benefit increase. College and university faculty members would fare better. State college faculty is targeted for increases of 10.5%, and the UC faculty 8.8%.

The budget calls for an increase in spending of $78 million on prisons and the addition of 1,068 positions.

Increase of 14.8%

Overall, the Department of Corrections, with a proposed budget of just over $900 million, is targeted for a 14.8% increase over the current year.

State budget analysts expect the inmate population to grow to 52,600 prisoners by June, 1986, up from 42,000 in June, 1984, and 27,000 in June, 1981.

The budget allocates additional money for the state’s capital construction program to rebuild declining school and hospital buildings, roads, parks, sewers and water facilities.

Huff said the governor was recommending total capital expenditures in the new fiscal year of $4.5 billion. Because funding comes from a variety of general fund and special fund sources, comparisons with the current year are difficult.

Capital outlay at the University of California will total $151.2 million, and calls for construction of three new engineering facilities at UC campuses in San Diego, Irvine and Los Angeles. The state colleges would receive $56.4 million in capital outlay funds for various construction and campus facility upgrading projects.