Deukmejian Says He’ll Consider a Compromise on Surplus Rebate

Gov. George Deukmejian said Friday that he is willing to consider compromising with Democrats on how to comply with a state law requiring that more than $1.1 billion in surplus funds be rebated to taxpayers.

The governor has steadfastly insisted that the money be returned through a one-time rebate to income taxpayers. Democrats, however, favor suspending the state sales tax until the surplus money is gone.

The governor hinted that he might be willing to accept a compromise that included a combination of one-time income and sales tax breaks.

Deukmejian noted that the competing income and sales tax plans have been the only two “serious” proposals advanced so far to dispose of the huge sum that the state government now is legally prohibited from spending.

“If there is some kind of compromise in between there that someone can come up with, certainly I’ll be willing to listen and consider it,” the governor told reporters during a visit to the High Sierra resort community of Mammoth Lakes in remote Mono County.

He asserted, however, that his proposal to give income taxpayers rebates of up to $150 for single filers and $300 for married couples was the “fairest way to do it,” while a sales tax reduction favored by Democrats was “not logical.”

Discrimination Charged

Deukmejian contends that because income taxes account for the biggest part of the surplus, income taxpayers should receive the rebate. Democrats, however, maintain that the governor’s plan would discriminate against lower-income Californians who are exempt from income taxes but who do pay sales taxes.

Even though the Democratic-dominated Legislature and the Republican governor remain deadlocked over disposing of the surplus, the governor said he will work “vigorously” to get a rebate enacted in the upcoming final three weeks of the current legislative session.

Deukmejian flew to Mammoth Lakes as part of his program to visit rural areas of the state. He inspected a state fish hatchery, handed a facsimile of a $50,000 economic development check to local officials and served as starter of two bicycle races up steep Mammoth Mountain.

For his efforts at the bone-shaking Mountain Bike World Championship races, Deukmejian was given a shiny new mountain bike by the Raleigh bicycle company. He joked to the racers that he fights a lot of “uphill battles around Sacramento and maybe I can use (the bike) there.”

The $1.1 billion in excess state funds occurred as the result of a 1979 ballot initiative that clamped limits on state and local government expenditures. The law basically requires revenues exceeding a certain level to be returned to taxpayers, but it gives the governor and Legislature two years to devise a way to do so.

Some Democrats have called for consuming the surplus by suspending the sales tax during the Christmas shopping season. Others have suggested submitting to the ballot the question of whether voters want an income tax refund or the sum to be kept by the state and spent on such programs as public schools and highways.

Deukmejian told reporters he was “somewhat encouraged” by news reports that Assembly Speaker Willie Brown (D-San Francisco), at least, “supports the idea of returning this money to the taxpayer. . . . We have not heard that yet from the Senate (Democratic) leadership.”

Earlier this summer, Brown proposed suspending the sales tax during November and December.

However, Deukmejian said such a move would enable “persons of great wealth to get the greatest gain by being able to make very large purchases during that period of time.