Governor Hints at Tax Rebate; Gann Lid Cited

Gov. George Deukmejian hinted for the first time Tuesday that Californians could be in line for a state tax rebate under a long-forgotten provision inserted into the state Constitution by a popular 1979 ballot initiative.

Gleeful Administration officials privately contended that the constitutional amendment had backed liberal Democrats into a political corner where they legally could not spend more money or raise taxes, even if they were able to enact such legislation.

The 1979 measure, sponsored by anti-tax crusader Paul Gann, imposed a strict limit on state spending--a limit based on inflation and population growth. Any time state revenues exceed the amount that legally can be spent, taxpayers are entitled to a rebate.

Temporarily Moot

The ballot measure, Proposition 4, was passed by a 3-1 margin at the height of California’s tax rebellion and was soon forgotten. Extraordinarily high inflation, followed by a recession that held down tax revenues, rendered the amendment temporarily moot. Inflation ultimately was brought under control, however, and the economy recovered.

As a result, the $36.7-billion state budget that the Republican governor sent to the Legislature last Friday was only roughly $100 million short of reaching the constitutional spending limit. That means that if the state Finance Department underestimated state revenues by a mere three-tenths of one percentage point, a tax rebate presumably would be triggered. It would be payable within a two-year period.

“I have not considered a tax rebate to this point,” Deukmejian said at a Capitol press conference, his first since mid-September, “primarily because upon taking office (three years ago), we found that there were many essential services and programs, especially in education, that needed rebuilding. . . .

“However, we are approaching the limit imposed by Proposition 4. . . . If we get close to that limit, and if indeed there are then some additional unanticipated revenues, then we would have to consider returning those revenues, because that’s what the law provides.”

In an opening statement before answering reporters’ questions, Deukmejian said voters had “wisely” enacted the spending limit.

“If California were a separate nation, we would have the 14th largest governmental budget in the world and we don’t even have a department of defense. I think that’s plenty of government,” he said.

Deukmejian noted that roughly half his proposed budget for the next fiscal year is earmarked for education. He challenged Democrats to propose cuts in this or other popular programs if they disagree with his priorities.

Gubernatorial aides, who asked not to be identified, said the suddenly functional spending limit had changed the political ballgame between the Republican governor and Democratic legislators.

“It’s going to make it much more difficult this year than in years past for them to say, ‘You’re not spending enough, governor,’ and just throw in a spending bill,” one adviser said. “He’s always had the power of the veto. Now, he’s also got the power of the Gann initiative.”

‘We’re Just Learning’

Lois Wallace, assistant finance director, said the spending limit “has never become an issue before and nobody has taken it seriously. Now, obviously, it’s something that has to be taken seriously. We’re just learning about this thing.”

She said the state’s economic experts will take a hard second look at their revenue forecasts, and then Administration officials will meet with legislators “to make sure we’re all tracking the same way.”

In his 55-minute press conference, Deukmejian also questioned whether Assembly Democrats could be trusted to keep their word, something most politicians regard as their most valuable commodity in dealing with each other. The governor again assailed Assembly Democrats for torpedoing his proposed government reorganization plan for cleaning up toxic waste after they had reached a compromise with him on its terms last September.

“I have great concern about how we’re going to be able to do business around here,” said Deukmejian, who served 16 years in the Legislature.

Angry Assembly Democrats scuttled the toxics reorganization bill on the final night of the 1985 legislative session after Republicans refused to vote for a bill boosting Medi-Cal benefits for the aged, blind and disabled.

Attack on Bradley

On a purely political matter, Deukmejian for the second straight day accused Los Angeles Mayor Tom Bradley--his likely opponent for reelection--of political opportunism for changing his positions on various subjects. It goes to the issue of the mayor’s “character,” Deukmejian said.

The governor cited Bradley’s decision to run for governor only a few months after having successfully asked Los Angeles voters for a fourth term as mayor. Then Deukmejian was asked the obvious question: Would he promise to serve a full four-year term if he is reelected to a second term, forgoing a shot at the 1988 presidential ticket.

“Well, I’ll promise right now that I won’t run for vice president if the mayor will promise not to run for governor,” Deukmejian said.

Pressed for a more serious answer, the governor commented:

“You don’t campaign for the office of vice president. . . . Whoever is elected to go on the ticket is selected by the person who has received the (presidential) nomination. And I’ve said a number of times . . . anyone who is going to be on the ticket along with the presidential nominee is somebody who will also have campaigned all around the country for the presidential nomination. . . .

“I also think in this time in our history that there’s a very strong likelihood that the second person on the ticket in both parties will probably be a woman. And I don’t qualify under those circumstances, either. It’s just not at all realistic to be talking about.”