Analyst Urges Cut of $540 Million in Governor’s Budget

The Legislature’s nonpartisan budget analyst Wednesday recommended that Gov. George Deukmejian’s proposed $39-billion state budget be reduced by $540 million.

Legislative Analyst Elizabeth G. Hill, in her first review of the budget, recommended that the Legislature scrap several of Deukmejian’s most controversial budget proposals.

One of Hill’s recommendations was that the Legislature reject the proposed phase-out of state spending on a handful of specialized education programs in order to provide $132 million over a two-year period to reduce class sizes in the first, second and third grades of public schools.

The analyst said the benefits of reducing class sizes did not outweigh the harm that would be caused by ending state support for education programs set up for such students as slow readers and intellectually gifted children.

Among the biggest cuts in the governor’s budget proposed by Hill in a 1,447-page analysis is a recommendation that $250 million in state-financed highway projects be eliminated until the Legislature draws up guidelines on the handling of projects once financed by the federal government. The federal government has cut back on highway spending because of its own budget problems.

Hill also recommended that the state save $89 million by shortening prison sentences of parole violators. Under her proposal, they could earn early time off by participating in a work-training program.

One of the smallest savings among the dozens of proposed budget cuts was a recommendation that $800,000 be trimmed from the Department of Fish and Game’s budget for fish food it uses in hatcheries. The analyst cited overbudgeting for fish food in the past.

The legislative analyst’s annual budget review will be used by Assembly and Senate committees in the coming months to prepare the budget that the Legislature is supposed to finish work on by June. The Legislature often, though not always, follows the analyst’s recommendations.

In a long discussion of a state spending limit just starting to take effect, Hill concluded that the demand for state services by taxpayers is likely to grow faster than the limit will allow, and that the cost of these government services will rise faster than the state’s ability to pay for them.

Disagreement on Cap

Hill strongly disagreed with the governor on the question of how close state spending is getting to the expenditure cap, which was placed in the California Constitution by voters in 1979. While Deukmejian has said his budget for the fiscal year beginning July 1 would bring the state to within $80 million of the so-called Gann spending limit, Hill asserted that the state is already over the limit in the current year.

Continuing a disagreement that was begun by her predecessor, former Legislative Analyst William G. Hamm, Hill said she thinks the state will exceed the expenditure limit by $221 million during the current year and by $587 million next year.

The biggest difference stems from how contributions to the State Teachers’ Retirement System--$354 million during the current year and $383 million next year--are counted toward the limit. The governor does not consider the retirement contributions as expenditures covered by the limit and Hill does.

Desegregation Spending

They also disagree on whether state payments to school districts because of court-ordered desegregation programs should be counted as expenditures included under the spending cap. The governor doesn’t count the desegregation payments, which total $268 million over two years, while Hill does.

Lois Wallace, assistant director of the Department of Finance, which prepares the governor’s budget, said “we totally disagree” with the analyst’s interpretation of the spending cap. “We did not try to manipulate numbers or contrive them in any way,” she added.

Hill said that regardless of the outcome of the dispute, the state is rapidly approaching what she described as a “zero sum” budgeting situation. By that she means that spending is so tightly controlled that in order for some state programs to grow, others will have to be cut.