Deukmejian Says He’ll Consider Tax Revisions : Will Consider Tax Revisions--Deukmejian

Gov. George Deukmejian said today that his financial advisers will consider options including spending cuts, reducing the state’s emergency reserve and revising tax laws to cope with a budget shortfall that could reach $2 billion in the fiscal year beginning July 1.

“I’m going to approach it very carefully,” Deukmejian said of the problem. He spoke briefly with reporters after opening the 3-day Government Technology Conference at the Sacramento Convention Center.

“We’re going to be looking at everything and try to determine how we’re going to deal with this situation . . . not curtail any essential services and . . . try to operate with a balanced budget.”

Deukmejian said the options are being considered to counter the impact of legislation last year that brought California tax laws into conformity with changes in the federal tax code. Deukmejian noted that financial analysts had predicted that the the conformity bill would neither add to nor subtract from the state treasury.

“Unfortunately, this (projected deficit) happened late in this fiscal year . . . and we have to make decisions for the next fiscal year without knowing what caused the revenue shortfall,” he said. “The best guess is that it resulted from the tax reform bill.”

On Tuesday, Deukmejian’s Finance Director Jesse R. Huff refused to characterize an overhaul of last year’s tax laws as a tax increase, although such action would be designed to raise more revenue.

“It’s not a tax increase because what you have is a situation where a miscalculation may have been made” that created a “windfall” for Californians on their 1987 tax bills, Huff said.

Deukmejian was asked if he will consider reducing the $1-billion emergency reserve in his proposed $44.3-billion budget for the new fiscal year. In the past, Deukmejian has insisted upon the reserve--often vetoing heavily from legislative spending proposals to maintain it.

“This is on our table,” he said. “We’re including everything, including the size of the emergency reserve.”

Huff said that state income tax revenues are about $1 billion below those of last year and that the shortfall could continue, reaching a total of $2 billion in the fiscal year beginning July 1.