Rival Plans Spark Debate on Spending

The two sides sponsoring competing June ballot initiatives aimed at raising the state’s spending ceiling accused each other Monday of trying, in effect, to eliminate the limit.

The exchange involved state Supt. of Public Instruction Bill Honig on one side and anti-tax crusader Paul Gann on the other.

It was the outgrowth of a Senate-Assembly tax committee hearing on Propositions 71 and 72, the two spending limit measures that voters will decide in the June 7 primary election.

Formula Changes

Proposition 71, which is backed by Honig, teacher groups and other education interests, would raise the limit by adjusting the formula now used to determine how much the state budget can grow each year. It would use different measurements of the economy to determine annual inflation rates and make other adjustments that would allow substantially higher spending levels.

The rival measure, Proposition 72, would not change the formula, but would exempt transportation programs and the $1-billion budget reserve from spending limitations. It would also transfer to highway and transit programs the state sales tax on gasoline that now goes to support general government.

Basically, the arguments raised Monday boiled down to claims that each of the measures would raise the current spending limit so high that it would never be reached in future years.

Presently, state budget increases are limited by a formula based on the national rate of inflation and California population growth.

Taxpayer Rebates

Under the formula, the state last year took in more tax revenues than it could spend and Californians received $1.1 billion in income tax rebates as a result. Projections show that in eight of the next 10 years there will be budget surpluses and possible future rebates if the limit is not changed.

Gann, the author of the 1979 measure that placed the original spending limit in the state Constitution and a sponsor of this year’s Proposition 72, started the fireworks Monday by attacking Honig’s measure at a news conference before the hearing.

Gann claimed that the rival measure, Proposition 71, would allow so much increased spending that it would lead to future tax increases. It was a rare public appearance for Gann, who is suffering from AIDS.

Lew Uhler, head of Californians Against Higher Taxes, appeared with Gann, calling the Honig-backed measure a “disguised but complete repeal” of the spending limit.

Looking to the Future

Gann and Uhler backed up their comments with a report by the legislative analyst’s office, which was released later, showing that over the next 10 years, the Honig-supported measure would allow the state budget to grow by $49 billion more than would be allowed if the limit is left unchanged. (The analyst’s office did not make 10-year projections for Proposition 72.)

Honig accused Gann and Uhler of using misleading information.

The schools chief said that the opponents of Proposition 71 were leaving out predictions that state tax revenues would increase by roughly the same amount as the new spending, so that new taxes would not be necessary.

Honig, who canceled an appearance at the hearing because of the flu, noted in a telephone interview that his opponents also ignored another report by the legislative analyst’s office showing that the Gann-backed measure would allow even more spending than his would.

“For Paul Gann to accuse us of breaking the limit when their initiative raises it more than ours does seems more than a little unfair,” Honig said.

In the hearing, state Finance Director Jesse R. Huff said that if Proposition 72 is approved, next year’s proposed budget will have to be reduced by $200 million because of the requirement that future sales tax revenues on gasoline be earmarked for transportation programs.