Governor Signs $44-Billion Budget, Cuts $472 Million

Gov. George Deukmejian, after vetoing $472 million in proposals sent to him by the Legislature, signed a $44-billion budget Friday that will increase overall state spending by 7.3%.

Deukmejian, signing his sixth budget as governor eight days after the start of the fiscal year, set the stage for a hectic August by announcing that he will ask the Legislature to restore $322 million in programs previously cut by lawmakers when they return from their summer recess.

The biggest chunk of money Deukmejian wants restored is $237 million that would go to counties to finance the operation of trial courts. Counties were due to receive $350 million, but the money was dropped from the budget in a series of cuts that began after the state experienced an unexpected drop-off in tax revenues.

The $472 million in vetoes is the smallest amount Deukmejian has ever blue-penciled from the budget, a development due in large part to the more than $1 billion in spending reductions already approved by the Legislature.

Unlike past years, when Deukmejian lashed out at the Legislature for sending him inflated budgets, Deukmejian gave lawmakers a pat on the back.

“I would like to commend the Legislature for making a serious effort to send me a balanced budget with a prudent reserve,” Deukmejian said.

Even so, legislators angrily criticized the governor’s budget reductions, and there were indications that Deukmejian may face political problems when the Legislature reconvenes in August.

Assemblyman John Vasconcellos (D-San Jose), chairman of the Assembly Ways and Means Committee, said that in the key general-fund portion of the budget, which finances daily state operations, health and welfare programs and financial aid to school districts, the overall increase is 5.9%. He said that after inflation is factored out, the real budget increase is more like 1%, not nearly enough to pay for dramatic increases in school enrollment, swelling numbers of state prisoners or mushrooming problems caused by such things as traffic congestion, the spread of AIDS and pollution from toxic wastes.

“The governor said in January that ‘we will not stand for standing still.’ True to his word, we are not standing still, we are sliding downhill--and picking up speed,” Vasconcellos said in a statement released by his office.

Cuts Downplayed

Deukmejian tried to minimize the effects of the vetoes. Even with the vetoes, he said, “this new budget still is $3 billion higher than last year.”

After a chaotic May, June and July, in which Deukmejian and the Legislature scrambled to make up for an unexpected drop-off of $2 billion in income tax revenues over a two-year period, Deukmejian said the state is now “in the black.”

“Our fiscal health is good, our economy is moving, and California is ready for the future,” Deukmejian told reporters during a brief budget-signing ceremony in the Capitol.

Deukmejian said education was his “highest spending priority,” with public schools, colleges and universities receiving 53% of general state tax dollars going into the new budget.

The Republican chief executive, in a key concession, said he was willing to accept, at least for the time being, the Legislature’s desire to use more optimistic revenue projections than those adopted by the Department of Finance.

Acceptance of the revenue estimates by the Commission on State Finance, about $300 million higher than those in Deukmejian’s original budget, allows Deukmejian to finance an inflation adjustment of 4.1% for public schools. Had Deukmejian not accepted the higher revenue estimates, schools would have received an increase of 2.1%.

The governor, who has been accused by state Supt. of Public Instruction Bill Honig of not giving public schools enough money to keep up with inflation and rising enrollments, went out of his way to highlight increases that education programs will receive in his budget.

School Spending Cited

When all the dollars going into school programs are counted, including state, federal and local dollars, Deukmejian said schools will receive 8.2% more than they did last year.

“This means that in the past six years, (public schools) funding will have been boosted by 78% while enrollment has grown by just 13.5%,” Deukmejian said.

Despite the increase, Honig argued that the budget will give schools just enough money “to hang on.”

“What is missing, and what we have sacrificed, is we have not been able to get the investment capital to make the schools improve,” Honig told reporters at a news conference.

Honig, a sponsor of Proposition 98, a November ballot measure that would guarantee public schools a fixed 38% share of the state general fund budget and provide them with annual increases tied to inflation and pupil enrollment, said the budget will fuel the initiative drive. “It’s not good enough just to hang on by your fingertips,” the schools chief said.

Because of the vetoes, much of the interest in the budget action centered on what was left out of the budget.

Deukmejian sharply reduced the pool of money available for state employee pay raises. He saved about $90 million by scaling back his original proposal of giving state workers a 4% increase spread out over six months to one that would provide a raise of 6% for the month of June, 1989, only.

Although this would mean that state workers would have to go another eleven months without a pay raise, state Finance Director Jesse R. Huff, Deukmejian’s budget adviser, said he believes employees might accept the proposal because it would build their base budget for the following year.

At a time when the cost of health insurance, parking, Social Security and the price of groceries are going up, officials of the California State Employees’ Assn. called the proposal “shocking” and “a slap in the face.”

Gene Preston, the general manager of the union, said the CSEA has been negotiating with the Administration on the basis of a 4% increase over six months. “We’ve been at the bargaining tables since early May and now we are hit with this bombshell. It’s devastating,” said Preston.

Among the more dramatic vetoes was a $944,000 cut in the state Coastal Commission budget, a decrease of about 11%. Deukmejian again called on the commission to close its offices in Santa Barbara and Santa Cruz, meaning that people with Coastal Commission business from the central coast would have to travel either to Los Angeles or San Francisco. Deukmejian tried to do the same thing last year, but the commission stretched its budget and kept the two offices open.

‘Serious Blow’

Jack Liebster, a spokesman for the commission, said the vetoed money “is a serious blow to the commission.”

“Prior cuts have already cut deeply into the commission’s ability to do its work. It obviously hampers our ability to deal with our regulatory mandate, and it comes at a time when we have an increasing backlog of enforcement problems,” Liebster said.

Paula Carrell, a lobbyist for the Sierra Club, said: “It’s virtually impossible now for the public to participate in the Coastal Commission process. The governor is out to destroy this agency.”

In its final version, the budget will provide an increase of 3.4% for the University of California.

William B. Baker, UC’s vice president for budget and university relations, said the size of the budget increase raises the possibility that the nine UC campuses may have to freeze or cut enrollment next year. “This budget fails to maintain the university’s budget adjustment for inflation and enrollment growth. An increase of about 7% was needed just to stay even,” Baker said.

Deukmejian, in addition to the extra money he will seek for counties, will ask the Legislature to provide an additional $37.8 million for UC and the California State University system.

In addition, Deukmejian will seek funding of $8.1 million to restore the Office of Tourism, plus a total of $8.8 million in other Admininstration programs cut from the budget by a legislative conference committee. He would also like an additional $10 million to fully restore the Administration’s competitive technology program.

Restorations Planned

Deukmejian said he will restore $76 million of the $100 million cut from the budget by the Legislature without the need for separate legislation. He also plans to restore $14.4 million of the $17 million cut from the California Youth Authority the same way.

As for the counties, Deukmejian said he will set aside $190 million to provide, in effect, six months’ funding for trial courts and add another $47 million in general state financial aid for counties as part of the same package. Los Angeles County would get an additional $20 million to settle a longstanding claim it has had against the state in a dispute stemming from costs of the Medi-Cal program.

The governor cut $191.5 million from health and welfare programs, the largest amount taken from any individual category. Deukmejian cut money for programs to combat Alzheimer’s disease, provide prenatal care for more poor women, finance local mental health programs and shore up the faltering network of trauma care centers.

State support for AIDS research and treatment programs was reduced by about $28 million, the amount the Legislature had proposed adding to Deukmejian’s original budget proposal. Even with Deukmejian’s cuts, the state will spend $67 million on AIDS research, an increase of about 27% over last year. Deukmejian said when federal funds are counted, spending on AIDS will total $89.8 million.

Deukmejian reiterated Friday that he is firmly opposed to raising taxes to provide extra funds to restore money cut from the budget. Democratic leaders say they see little chance for money to be restored for county trial court funding without new revenues. The Senate has passed a bill that would raise $560 million in tax revenues by speeding up state tax collections, but the measure was blocked in the Assembly by Republicans.

Dan Wall, an official with the County Supervisors Assn. of California, said, “The counties are in trouble financially, but there doesn’t seem to be any real prospect for remediation.”

Senate President Pro Tem David A. Roberti (D-Los Angeles) called Deukmejian’s position on taxes and other budget issues “a narrow approach that ill serves California.”

“But there are still opportunities for negotiating compromises with the governor when the Legislature returns in August. I hope that the governor’s actions today do not mean his mind is closed,” Roberti said.

THE GOVERNOR’S CUTS Here are highlights of the $472 million that Gov. George Deukmejian vetoed from the new state budget, of which he set aside $321.9 million for programs he said he would restore if the Legislature agreed to go along next month. The governor explained most vetoes by saying funds were unavailable, would duplicate existing efforts or that he already had proposed sufficient money to finance the program. HEALTH AND WELFARE He struck $191.5 million from the $11.7 billion the Legislature earmarked for social and health care programs, including: AIDS--The governor struck the $28 million the lawmakers added to the budget for wide-ranging research, education and treatment programs aimed at curbing the epidemic of acquired immune deficiency syndrome in California. Included were elimination of funds for expanded outpatient treatment programs, development of an AIDS vaccine and $225,000 for the Barlow Hospice Center in Los Angeles. SENIORS--Deukmejian deleted about $7.5 million in additional spending for sufferers of Alzheimer’s disease, including $1 million to expand day care centers for Alzheimer patients. He also struck $925,000 to provide a cost-of-living increase for nutrition programs for the elderly. TRAUMA--He eliminated $10 million in support for local hospitals that operate trauma care centers for patients who have little or no private medical insurance. TRANSPORTATION TRANSIT--He rejected $11 million the Legislature added to the $64 million he already had called for to construct additional track and other rail transit facilities such as roadbed and bridges. NATURAL RESOURCES COASTAL COMMISSION--The governor erased $994,000 worth of appropriations added to the budget by the lawmakers for support of the California Coastal Commission, a favorite Deukmejian veto target. The cuts fell chiefly on the commission’s plan to expand its management program and to keep two offices in Santa Barbara and Santa Cruz, which Deukmejian previously attempted to close. OFFSHORE OIL--He rejected $1.3 million proposed by the Legislature for a comprehensive study by the State Lands Commission on further development of offshore oil operations. FOREST FIRES--Deukmejian deleted $2.1 million for intensified restoration of wild lands and watersheds that were destroyed last year by forest fires and cut back by $1.5 million an augmentation intended to hire more fire fighters. WATER RESOURCES--He reduced the spending program of the State Water Resources Control Board by $4 million, including funds for hazardous waste site cleanup and eradication of “toxic hot spots” in bays and estuaries. GENERAL Cal/OSHA--As expected, for the second straight year, Deukmejian rejected a $23-million plan by the Legislature to fully restore the worker safety program enforced by the California Occupational Safety and Health Administration. GOVERNMENT AGENCIES--To share the burden of veto pain, Deukmejian cut back his own office budget by 1%, or $61,000. Likewise, he reduced the budgets of most other executive branch government agencies by 1% and dealt the Legislature’s spending plans a 1% cut as well.

Times staff writers Jerry Gillam, Larry Gordon and Jeffrey L. Rabin contributed to this story.