$44.2-Billion Budget Handed to Deukmejian

The Legislature sent Gov. George Deukmejian a $44.2-billion state budget Thursday that calls for a 10.9% boost over current year spending and contains healthy increases for health, education, welfare and other programs.

The Senate, with just hours to go before the start of the new fiscal year, sent the budget bill to the Assembly on a 34-2 vote. Shortly after the vote, the Senate adjourned and lawmakers began their monthlong summer recess.

The vote in the Assembly, which sent the budget to the governor, was 57 to 19.

Deukmejian has 12 days to review the budget and use his veto power to make a final series of spending cuts. Because today marks the start of the new fiscal year and the state will not have the legal authority to write checks until the governor signs the budget, Deukmejian said Thursday he will begin work on the budget immediately in an effort “to avoid any disruption of state services.”

Payments on Hold

Since the state lacks the authority to write checks, state Controller Gray Davis said $17 million in payments to workers who provide support services to disabled Californians will be held up.

The state will also delay payments of $156 million to the federal government for its share of a supplemental income for the aged, blind and disabled and $21 million to cities and counties for the administration of welfare payments.

A spokesman for the controller said the checks will go out as soon as the budget is signed.

In addition to approving the budget, the Senate also passed bills that would speed up collection of $560 million in tax revenue and restore many of the more than $1 billion in spending cuts made during the last week by a budget conference committee.

The tax measure, facing a certain veto by Deukmejian, passed 23 to 8, but then ran into trouble in the Assembly where Republicans used parliamentary maneuvering to block a vote on it.

A companion bill, which would require that the extra tax revenues be used to restore budget cuts, passed 29 to 6 in the Senate but also ran into trouble in the Assembly.

Lawmakers will take up the two bills in August when they return from their summer recess.

The budget, despite more than $1 billion in cuts by a six-member conference committee, would increase spending over the current year by $4.4 billion, or 10.9%, according to an analysis by the Assembly Ways and Means Committee.

Still, lawmakers argued that they needed the tax bill and its $560 million in extra revenues to finance programs that did not make it into the main spending bill.

‘Simply Is Not Enough’

Sen. Alfred E. Alquist (D-San Jose), who carried the budget bill in the Senate, said: “This document simply is not enough. Too much is left out.”

Assemblyman John Vasconcellos (D-Santa Clara), the author of the budget, said in the Assembly floor debate that the spending plan was so small that he was almost too “embarrassed” to bring it up for a vote.

The problem, as Democrats and an increasing number of Republicans see it, is that California and its problems are growing faster than the state’s ability to pay for them.

The state’s population will grow by 600,000 next year, with many of the new residents seeking state-funded health and welfare services. Public schools face the influx of 140,000 new students at a time when authorities say California has one of the worst classroom overcrowding problems in the nation. There will be 10,000 more prisoners in state prisons, up about 14%.

Doctors and medical authorities are calling for a substantially higher investment in AIDS research and treatment programs than the state can afford. There are waiting lists for nursing homes and child-care centers. Local governments want more money than the budget contains for parks, libraries, health programs and highways.

Deukmejian and other Republicans, while acknowledging the problems, believe the state can handle its needs within the current tax structure. They are adamantly opposed to a tax increase.

Assemblyman William P. Baker (R-Danville) said: “There are only six nations in the world with budgets larger than ours. . . . Each and every one of our important state services is up in spending over last year.”

Over the course of the next week or so, Deukmejian is expected to sharply reduce the record appropriations bill with budget vetoes, but even so spending will grow by at least 6% when all the dust settles next week.

A Deukmejian spokesman said the governor will begin working on the spending plan today but will not complete his final review and be ready to announce his vetoes until next week.

Deukmejian press secretary Kevin Brett said there is “no chance” the governor will approve the tax legislation.

Deukmejian in late May proposed tax increases of $800 million but did a quick about-face because of legislative opposition. He promised weeks ago that he would veto any tax bill or any bill that is perceived as a tax increase.

Democratic authors of the tax bill hoped to win his support by crafting a bill that would speed up tax collections, rather than one that would adjust rates or impose new taxes. Basically, the tax bill would allow the state to collect taxes in June of 1989 that normally would not be due until July, 1989. The month’s difference is important because state budget years run from July 1 to June 30.

Under the tax bill, individuals and corporations who make estimated tax payments to the state would have to pay 90% of their estimated taxes rather than 80%, as is now required. Corporations with worldwide operations would have their estimated tax payments boosted from 70% to 90%. There would be other changes in collections of sales and corporate taxes.

Lawmakers, on their way to approval of the budget, had to overcome problems caused by the unexpected drop-off of $2 billion in expected income tax payments because state officials miscalculated the effects that changes in federal and state tax laws would have on California tax collections.

Senate President Pro Tem David A. Roberti (D-Los Angeles) said Deukmejian’s flip-flop on the tax legislation “left us with an $800-million hole in the budget.”

Roberti added, “The governor put the ball in our court because he decided he didn’t want to play anymore.”

Once the revenue shortfall was discovered, lawmakers either had to cut more than $1 billion from the budget or leave the job to Deukmejian.

The result is a budget with an odd assortment of cuts and spending increases.

As leverage to force Deukmejian to support the tax bill, Democratic budget writers who controlled the budget conference committee cut programs that the GOP chief executive had made a high priority. They then moved to restore most of the cuts in the bill that they tied to the tax measure.

The largest of these cuts was elimination of $350 million that Deukmejian wanted to give the counties to pay for operation of civil and criminal courts. The state’s assumption of court costs would allow counties to shift more of their funds to health, law enforcement and other programs.

On top of the the county funding cut, Democratic budget writers cut $8.1 million that Deukmejian wanted to use to promote California tourism, lopped $105.9 million from the $1.5-billion Department of Corrections budget to run state prisons, and cut $27.8 million from a job-training program for welfare recipients that has been closely linked with the governor. Loans for students attending private colleges were cut from the $15 million proposed by Deukmejian to $3 million.

For the most part, however, the budget calls for significant increases in most areas of state spending.

Rise for Health Programs

Local mental health programs were given an extra $31 million over the $500 million proposed by Deukmejian. Research and treatment programs for AIDS patients received an extra $28 million above the $76 million originally proposed by the governor.

Funding for the multiplicity of programs that come under the $6-billion Medi-Cal program ranged from 2.5% to 50%. The state provides half of the money for Medi-Cal and the federal government provides the rest.

Overall funding for public schools increased by nearly $1 billion. But the conference committee voted to cut the basic inflation increase of 4.1% in half, saying the money could be restored if Deukmejian agrees to accept more optimistic revenue estimates. In all, state financial aid for public schools would go up 7.7%, bringing the cost of kindergarten through high school programs up to $13.4 billion.

When all funding sources are counted, including local property taxes and lottery funds, public schools will receive $22.8 billion next year, an increase of 10.7%.