State Entering ‘Era of Limitations,’ Legislature’s Fiscal Expert Warns

The Legislature’s top fiscal expert grimly predicted Friday that California is entering a new “era of limitations” where spending ceilings will force the state to cut back on public services.

Speaking to the Sacramento Press Club, Legislative Analyst Elizabeth Hill predicted that the spending limit imposed by voters in 1979 will begin to crimp government services.

“I think the problem the state faces,” she said, “is what kind of state do we want to be? As you go further along, the current level of services would not be provided.”

In her first budget review since becoming the Legislature’s nonpartisan budget adviser, Hill recommended that Gov. George Deukmejian’s newly proposed $39-billion spending plan be cut by $540 million.

Looming over the budget is Proposition 4, the so-called “Gann limit” authored by tax crusader Paul Gann and approved by voters in 1979. It sets a spending limit based on population and economic growth in the state.

Hill said her calculations show that Deukmejian’s budget would surpass the Gann limit by $587 million.

In the next few years, Hill predicted, the Legislature will have to make “difficult choices” on which programs get additional money.

She added that lawmakers will have to focus on ways other than taxes to bring in more revenue in order to cope with the Gann limit.

“As we enter this era of limitations, the source of the money, rather than the revenue, becomes the key,” said Hill, voicing a theme last heard during the administration of former Gov. Edmund G. Brown Jr..

Some lawmakers already have proposed repeal or modification of the constitutional spending limit. Other legislators are hinting at imposing “user fees” for government services, which would be exempted from the spending limit.

Hill carefully sidestepped questions on how much money should be set aside from the budget for emergencies. Deukmejian, who has insisted on a “prudent reserve” of $1 billion, criticized Hill on Thursday for not setting a reserve figure.

“I don’t want to comment on the governor’s news release,” Hill said. “It’s very clear that the state needs a prudent reserve. What that exact amount should be is difficult to determine.”