Study by Union Says State Will Lose $1.7 Billion Under Budget

California would lose $1.7 billion in federal funds under President Reagan’s proposed 1987 budget, according to a study issued Wednesday by the AFL-CIO’s largest union.

The biggest loss would come from the elimination of revenue sharing, which is providing $519 million in no-strings-attached money for California cities and counties this year. The budget calls for curtailing domestic spending to reduce the deficit to the $144 billion required by the Gramm-Rudman budget-balancing law.

16% Fund Cut Seen

In a sharply critical analysis, the American Federation of State, County and Municipal Employees said that the Reagan budget would slash a total of $16.2 billion, or 16%, from the federal aid that state and local governments would receive if Congress maintained all programs at their current levels in the fiscal year that will begin Oct. 1.

The Administration, the union charged, “is bent on protecting its massive defense buildup and tax breaks for wealthy corporations and individuals by shifting the deficit onto state and local governments.”

Gerald McEntee, president of the 1.1-million-member union, told a news conference that the states, despite their budget surpluses, do not have enough extra money to compensate for the proposed cutback in the flow of funds from Washington.

“The bottom line for the states is that the budget cuts the Administration has proposed under the balanced budget law could turn a $3.3-billion surplus in the states into a $15-billion deficit,” McEntee said.

California Gov. George Deukmejian, who has been a staunch supporter of the effort to balance the federal budget, did not have a direct comment on the union report’s estimate of a $1.7-billion loss for the state and its local governments.

“There is an element of uncertainty--we have seen various estimates of the impact of Gramm-Rudman,” Kevin Brett, the governor’s deputy press secretary, said in Sacramento. He said the state would not necessarily use its budget surplus, estimated at $1.16 billion for the fiscal year that begins July 1, to compensate for a reduction of money from Washington.

Brett cited a Feb. 14 letter in which Deukmejian said that “Californians expect Congress to meet this challenge” of balancing the budget. He noted that the Reagan budget would actually result in an increase in total federal money for California--the combination of aid for state and local governments and the value of federal contracts for private firms, including defense contractors.

McEntee, many of whose union members work in programs that would be hit with severe spending cutbacks, denounced the Administration budget, saying: “Congress and the people must reject this prescription for misery.”

California Cuts

The potential reductions for California include $258 million in Aid to Families with Dependent Children, $182 million in the Medicaid program for the poor, $171 million for highways, $135 million for mass transit, $65 million for community development grants, $73 million for child nutrition, $43 million for water purification and treatment, $40 million for subsidized housing and $20 million for airports.