Forecast on Spending Off by $1 Billion--Governor

Gov. George Deukmejian, conceding what critics have been predicting for months, announced Saturday that state expenditures will be $1 billion more than expected during the current and upcoming budget years.

“Today I regret to tell you that the state will have just over $1 billion in new bills to pay over the next 14 months,” Deukmejian said during his weekly radio broadcast.

Deukmejian said the bills were “unexpected.” But, citing an upsurge in tax revenues, he said the state will have enough money to pay them. Critics in the Legislature have insisted for months that Deukmejian had underestimated expenditures, both in the current budget year that will end June 30 and in the new fiscal year that will begin July 1.

Warning in March

In March, Sen. Alfred E. Alquist (D-San Jose), chairman of the Senate Budget and Fiscal Review Committee, declared: “The governor is $1.3 billion short of financing current legally required expenditures.” Alquist was not available for comment Saturday.

Deukmejian’s announcement comes on the heels of estimates last week by two generally reliable state agencies that the governor has also dramatically underestimated tax receipts. The Commission on State Finance and the legislative analyst’s office both said that tax receipts during the current budget year are running $1.5 billion higher than expected.

On top of that, the Commission on State Finance predicted that revenues during the next fiscal year will be up by another $1.3 billion, meaning state revenues would be $2.8 billion above what the governor has been forecasting over the next 14 months.

Thus, according to the estimates, the state will still be in relatively healthy financial condition even after the governor provides for the more than $1 billion in new expenditures.

Deukmejian so far has not confirmed the recent revenue forecasts, although he agreed Saturday that tax receipts are running higher than expected.

Announced on Radio Address

During his three-minute radio address carried by 17 stations, Deukmejian said, “It is clear that our income will be higher than all the experts predicted back in January.”

The radio broadcast appeared to be an attempt by Deukmejian to head off likely pressure in the Legislature to spend the extra tax revenues for a variety of health, education, transportation and other programs.

The governor likened the expected increase in state revenues and the problem of unpaid bills to a situation that a family might experience if the breadwinner came home with a $1,000 raise.

“Just as you are about to spend that windfall,” the governor said, “you discover that your utility bill is also going up. Then, there’s a rent increase, unexpected repairs on the car and some new doctor bills to pay.

“Before you know it, most, if not all, of your salary increase has been devoured by an increase in expenditures. And you wave goodby to all those great ideas for spending your raise.”

Deukmejian said most of the new expenditures were due to unexpected increases in the number of persons utilizing health and welfare programs and the large influx of new students into the public school system.

The governor said costs of providing health and welfare services are up $540 million, while education programs will cost an additional $260 million. He also said the prison system was running $36 million over budget.

A Deukmejian spokesman said that of the $1 billion in new expenses, $400 million will be felt this year and $600 million next year.

Deukmejian first presented his preliminary $39.3-billion budget for new fiscal year in January. At that time, he estimated the number of students in the public school system, the number of persons on welfare rolls and so on. The new cost estimates outlined in his radio address represent an update of those earlier estimates.

The governor’s announcement will provide critics in the Legislature with more ammunition. The $1 billion in new expenses comes on top of a $215.2-million deficiency bill the governor signed less than two weeks ago to shore up the $5-billion Medi-Cal program and allow it to meet its expenses through the end of May.

Democrats say that during his first four years as governor Deukmejian went to the Legislature for more emergency funding bills than former Govs. Ronald Reagan and Edmund G. Brown Jr. did in the prior 12 years combined.

Called an Inexact Science

Deukmejian Press Secretary Kevin Brett, defending the governor’s revenue and expenditure forecasts, said economic forecasting is an inexact science. Brett noted that Brown’s last budget anticipated a $500-million surplus when he signed it in June of 1982 but that within six months the state faced a $1.5-billion deficit.

The governor, Brett noted, relies on the Department of Finance for his revenue and expenditure forecasts. Brett said, “The Department of Finance has an excellent track record. It makes the best estimates that it can. Financial estimates are just that--estimates.”

Finance Director Jesse R. Huff was not available for comment.