Surprise Revenue Windfall Revives Pressure for Bills

The surprise disclosure by the Deukmejian Administration that the state has discovered up to $900 million in revenue it did not expect revived pressure in the Legislature on Thursday for passage of a variety of bills, ranging from measures that would authorize tax cuts to others that would create such new programs as state-funded child care.

For most legislators, it seemed like Christmas in May after the unexpected disclosure Wednesday evening by Finance Director Jesse R. Huff, who only three weeks ago sent a pessimistic letter to the chairmen of the legislative fiscal committees telling them not to expect “significant increases” in revenues.

“I was wrong,” Huff told reporters Thursday.

The revelation came at a time when legislative budget subcommittees are in the process of making final decisions on the budget for fiscal year 1985-86. Proposals being talked up in the wake of the new revenue update include a $500-million tax break for multinational corporations, across-the- board income tax rebates and funding of major new child-care, mental health and education programs.

No one is certain how much of the unexpected windfall will be available for new programs. Huff said that even after subtracting $264 million in newly budgeted expenditures, the state would have $550 million to $650 million more than expected in the fiscal year starting July 1.

The governor’s chief budget adviser said the biggest factor in the sharply higher revenue forecast is an unexpectedly large surge in income tax receipts that arrived at the April 15 tax filing deadline.

Huff briefed the governor on the developments during a morning meeting in Deukmejian’s office. A spokesman said later that the governor had not yet had time to digest the information and would not immediately announce recommendations on use of the money.

Subject to Change

Huff cautioned that the revenue estimates are not yet official and thus subject to change.

The disclosure caught most legislators by surprise, although for months some critics of the Administration have been challenging the Department of Finance revenue estimates.

The most vocal was Sen. Alfred E. Alquist (D-San Jose), chairman of the two Senate fiscal committees, who has contended that the surplus could be up to $1 billion more than the Administration was predicting.

Alquist, along with some other legislators, remained suspicious about what seems like an overnight discovery of the change in the state’s fiscal situation.

“I think that (Deukmejian) didn’t want any organized effective efforts to spend it all. He wanted to save it all for his own priorities, perhaps a possible proposed tax reduction next year when he’s up for reelection,” Alquist said.

Assembly Majority Floor Leader Mike Roos (D-Los Angeles), also a member of the Assembly Ways and Means Committee, said he had believed the Administration’s earlier estimates, made as recently as three weeks ago, that there would be no significant changes in the state’s revenue picture.

“It’s staggering,” he said. “It’s much bigger than any of us thought.”

‘Big Problem Areas’

“This is really an amazing development in the whole budget process,” said Assemblyman Bruce Bronzan (D-Fresno), another member of the Ways and Means Committee. “I think we will all be able to look much more closely at those big problem areas that have large price tags on them.”

Bronzan said he believes that the development will help give a push to his proposed legislation to upgrade state mental health programs at a cost of $58 million.

A group of Assembly Democrats, including Roos, John Vasconcellos of San Jose, chairman of Ways and Means, and Maxine Waters of Los Angeles, hastily called a news conference to outline their budget priorities.

They said the priorities are programs for children, law enforcement, toxic waste cleanup and education.

On the Republican side, Assemblyman William P. Baker (R-Danville), vice chairman of Ways and Means, said he thinks the money should be spent on construction projects because they represent one-time expenditures.

Assemblyman Ross Johnson (R-La Habra), said: “I favor a tax cut. Give it back to taxpayers.”

In the Senate, Democrats also talked of possible tax cuts.

Pressure Expected

Alquist said he wants a share of the revenues to help finance legislation he is pushing to repeal the state’s controversial unitary method of taxing multinational corporations. Tax specialists say the repeal could cost the state as much as $500 million annually in lost revenue.

Senate Majority Floor Leader Barry Keene (D-Benicia) said, “There will be a lot of political pressure to return (the money to taxpayers) with an election year upcoming.”

He said he expects some proposals to center on financing ongoing state programs, but he added: “At some point we need to draw the line and put some of this back in the pockets of taxpayers.”

Senate President Pro Tem David A. Roberti (D-Los Angeles) said the unexpected surge in revenues helps boost his proposal to start a new program aimed at so-called “latch-key” children who return home alone after school because their parents work. His bill would provide adult supervision for the children at a cost of $100 million.

Roberti said he does not think there will be enough money for a tax rebate. “The amount of money that each citizen would get would be so small compared to the administrative cost of arriving at a system of rebating the money that, by and large, I think it would be better to keep the money for a reserve,” he said.

Roberti and a number of other Democrats have been critical of Deukmejian budget cuts, which eliminated jobs in the Employment Development Department and the Department of Motor Vehicles, and said they would not support a tax cut until some of those funds were restored.