Governor Withdraws Budget Plan : Was Warned That Tax Proposal Hurt Bush’s Campaign

In a move that jolted legislative leaders of both parties, Gov. George Deukmejian Friday abruptly withdrew his plan to balance the 1988-89 budget and blamed the press for misrepresenting it as a tax increase.

“I’ve withdrawn the proposal so that no one will be able to say, no one will be able to write, that there was a tax increase,” Deukmejian said during a news conference.

The Republican governor had proposed last month a one-time series of tax changes he called “a correction or adjustment” along with some budget cuts to erase an estimated $2.3-billion shortfall.

The plan was abandoned only days after Ed Rollins, who directed President Reagan’s 1984 reelection campaign, came to Sacramento to meet with Assembly GOP leaders. Rollins warned that the Republican governor’s tax plan was hurting Vice President Bush’s campaign.

Would Lose an Issue

Rollins argued that Bush wants to portray the Democratic front-runner, Massachusetts Gov. Michael S. Dukakis, as someone who raised taxes.

Rollins contended that “one of Bush’s better issues” is taken away if Deukmejian raises taxes, while Dukakis, who has a similar problem in his home state, has managed to avoid doing it.

Deukmejian said he would wait for the Legislature to submit a budget--current legislative versions are around $45 billion--and then would use his “trusty blue pencil” to trim the spending plan.

“Unfortunately some Republican legislators and Republican leaders have gotten caught up in the web spun by the media,” he said.

Leaders React

Legislators, he said, have told him that because the plan was being called a tax increase, “It might make it a little more difficult for some legislators to support it.”

‘Abdicating Responsibility’

Reacting to the news, an angry Assembly Ways and Means Chairman John Vasconcellos (D-Santa Clara) said, “He should resign rather than informally abdicating his responsibility. He’s the governor, man. It’s his budget. We’re waiting for his leadership.”

Sen. John Garamendi (D-Walnut Grove), chairman of the Revenue and Taxation Committee, said the governor had plenty of support for his plan.

“Just before the big game, the quarterback chickened out,” said Garamendi, a former college football player.

Republican leaders used softer words, saying that they were surprised by the move but that it had been mentioned as a possibility earlier last week when Deukmejian met with Sen. Republican Leader Ken Maddy of Fresno and Assembly GOP Leader Pat Nolan of Glendale.

“I think it was the kind of proposal we could have sold to everyone,” Maddy said of the governor’s tax plan.

Sen. Marian Bergeson (R-Newport Beach) the leading Senate GOP budget writer, said about $800 million would have to be taken out of the budget passed by the Senate to meet the constitutional requirement of a balanced budget.

“It can be done without much pain,” she said, suggesting new programs could be delayed.

Three-Part Plan

The governor’s three-part tax plan would have raised $410 million by freezing income tax brackets for one year. It would have raised another $250 million by changing state business tax law to reflect changes in the federal code and another $140 million by postponing for one year a tax break that allowed businesses to carry losses over a 3-year period.

As Deukmejian was meeting with reporters in Los Angeles, the state Senate passed and sent to the Assembly a $44.9-billion budget--adding $429 million to the governor’s proposal and leaving a reserve of $172 million.

In sharp contrast to Thursday’s Assembly action, the Senate engaged in low-key debate for less than two hours before passing the measure on a bipartisan vote of 35 to 1, with only Sen. Don Rogers (R-Bakersfield) opposing.

Attempts to amend the budget by Republican Sens. John Doolittle of Citrus Heights, who wanted to restrict Medi-Cal abortions, and Jim Ellis of San Diego, who wanted more funding for the Agricultural Labor Relations Board, failed.

The Assembly had failed to get the necessary two-thirds vote necessary to pass its version of the budget with some Republicans and the “Gang of Five” dissident Democrats withholding their support.