Governor May Reverse His Field : Might Endorse Repeal of Spending Limit He Has Backed

Gov. George Deukmejian, withdrawing his long-held support of the government spending limit, said Thursday that he may join efforts to repeal the limit because of voter approval of the education funding and tobacco tax initiatives.

Deukmejian said passage of Propositions 98 and 99 in the November general election “blew large holes” in the spending ceiling because they will allow massive new increases in education and health spending.

Proposition 98, backed by teachers and educators, exempts money spent in support of public schools and community colleges--about 39% of the state General Fund budget of $36 billion--from the spending limit. It also requires that the largest share of any future state budget surpluses be turned over to schools, rather than be rebated to taxpayers, which currently is the case.

Proposition 99 imposes a 25-cents-a-pack increase in the tax on cigarettes, calls for proportional increases in the tax on other tobacco products and earmarks the new revenue for public health and education programs. All of the new revenue and spending, expected to be about $600 million annually, will be exempt from the spending limit.

The Republican governor revealed his new stance on the spending limit during a break in a two-day conference he is hosting at the Century Plaza that is delving into possible solutions to the high cost of running prisons.

Currently in the process of preparing next year’s $44-billion-plus state budget, Deukmejian said he is having trouble working around Propositions 98 and 99.

He said the two initiatives, both of which he opposed, have made the job of balancing state finances “much more difficult.”

Widely known as the Gann limit after the man who authored the 1979 constitutional amendment, the spending ceiling provides that state and local government budgets cannot grow faster than the rate of inflation.

Critics complain that the annual inflation adjustments are not enough to finance the rapidly growing state prison system, keep pace with mushrooming enrollments in public schools, or provide enough money to deal with problems that were nonexistent when voters created the limit in 1979, such as the spread of AIDS.

For many years, the spending limit was not a factor in state finance because state revenues were not growing as fast as the rate of inflation. But two years ago, the state reached the ceiling and since then pressure has been building to lift the limit. The California Taxpayers Assn., a business-supported lobbying group friendly to Deukmejian, is among those pressuring for changes in the spending limit.

Defending his new stance, Deukmejian told reporters: “I said from the very beginning that we would try to make the Gann spending limit work. (I said) if we found that it was no longer workable, then we would consider perhaps offering some suggested changes or even proposing to completely eliminate (the limit).”

In response, Paul Gann, who led the original 1979 drive to impose the spending limit, said he was disappointed in Deukmejian’s new posture.

‘I’m a Little Surprised’

“I had no idea the governor would be this quick to come out in opposition to the spending limit. He has been very, very tough in defending the limit. I’m a little surprised, but I guess he is under a lot of pressure,” Gann said during a telephone interview from his office in Sacramento.

Gann said he also is disturbed by passage of Proposition 98, the school-funding measure. But he said his answer is to repeal the proposition, not the spending limit.

Deukmejian said he is still considering his alternatives. “Right now, we are just considering it. I want to talk to a lot of other people, before making any kind of a final decision on it,” Deukmejian said.

In the June primary election, two initiatives were offered to repeal provisions of the spending limit, but voters rejected them both. One was Proposition 72, supported by Gann himself, that would have exempted expenditures on transportation projects from the limit. The other, Proposition 71, backed by public employee groups, would have changed the inflation formula in such a way that it would have allowed substantial increases in government spending.

Conference on Prisons

Deukmejian spent most of the day meeting with prison and business officials invited to the conference he is sponsoring with the National Governors Assn.

The governor and other officials are looking for ways to reduce the cost of running prisons, such as letting private corporations run them on a contract basis and putting prisoners to work at jobs sponsored by private corporations.

Deukmejian said an experiment putting juvenile offenders to work as reservation clerks for Trans World Airlines has worked well and he hopes for an expansion of similar kinds of programs. The inmates, wards of the California Youth Authority, are trained by TWA, work at TWA supplied computer terminals, but remain under lock and key. They are paid, and from their pay shares are deducted for a victims’ restitution fund and to help defray the cost of their incarceration.

“We view it as truly a win-win situation,” Deukmejian said in a speech opening the conference. “Taxpayers win because the program helps defray the cost of running correctional facilities. The employer gains by having access to a consistent work force. For the youthful offenders, the program provides valuable work experience.”

Deukmejian said, “It’s about time they earned their keep just like the rest of us.”