Deukmejian Sees Red Over Allegations of Budget Deficit

Reacting angrily to the latest allegations that the state is operating in red ink, Gov. George Deukmejian on Wednesday threatened that unless his critics “get their act together” he will balance the books next year by cutting even deeper into state programs.

Deukmejian dismissed the reports of a deficit as an “after-the-fact accountants debate,” saying, “I think all Californians know me well enough by now to know that I would never allow the state to end a fiscal year with a deficit.”

Deukmejian, who was in Mexico to open a California trade and investment office, also charged in a statement released by his office that speculation over the reported deficit “has the potential to damage California’s fiscal reputation.”

The Republican governor’s strong rejoinder came one day after the Legislature’s nonpartisan auditor general declared that the state finished the fiscal year last June 30 with a deficit of at least $590 million and perhaps as much as $1.4 billion. Similar reports, showing somewhat smaller deficits, had come earlier from Controller Gray Davis, Legislative Analyst Elizabeth G. Hill and the Commission on State Finance.

Deukmejian, relying on figures provided by his own Department of Finance, contends that the state ended the year with a $4-million surplus.

Although the Administration’s financial experts stand virtually alone in their insistence that there was no deficit, Deukmejian on Wednesday sought to portray the situation as an argument among accountants. In that debate, the governor said he has no choice but to rely on his own fiscal advisers.

“Nonetheless,” Deukmejian said in his statement, “these conflicting accounts of our fiscal picture and this endless debate over accounting methods are of concern and must be addressed.”

The governor called on all the parties to “get their act together,” adding that if “I am not satisfied that this has been accomplished, then before I sign another budget I will have no option than to substantially increase the prudent reserve I have already proposed through use of my blue pencil.”

“In this manner, we will continue to insure that California stays in the black, no matter which accounting method is used,” he said.

Mounting evidence that the Administration ended the year with a deficit is a bitter pill for Deukmejian, who has carefully attempted to craft the image of a tightfisted fiscal manager. In addition to the figures released by acting Auditor General Kurt R. Sjoberg and the others, it was disclosed recently that the Administration had canceled a number of contracts remaining from the last fiscal year, hoping to save $80 million. Administration officials had hoped that would allow the state to finish in the black.

The $47.8-billion budget that Deukmejian presented for the next fiscal year already proposes to freeze grants for welfare recipients, suspend payments to the State Teachers Retirement Fund, delay the opening of three state prisons and make other deep cuts.

Deukmejian’s threats to cut even deeper now would do nothing to solve last year’s deficit problems. But the cuts could ease fears that California is sinking into a deep chasm of red ink just as he is about to leave office.