Legislative Analyst Calls for Repeal of Cap on Spending

Legislative Analyst Elizabeth G. Hill called Wednesday for repeal of the voter-approved state spending limit and an increase in the gasoline tax. She also sharply criticized Gov. George Deukmejian’s budget-balancing proposals.

The Legislature’s nonpartisan budget analyst, in adding her name to a growing list of officials calling for repeal of the limit, said the expenditure cap will “hamper the state’s ability to provide the services needed to keep California’s economy running efficiently and economically.”

Hill’s comments on the limit and other issues came with release of her analysis of Deukmejian’s proposed $47.8-billion state budget for the 1989-90 fiscal year that will begin July 1. Each year, the analyst’s exhaustive survey becomes the “Bible” that legislative budget committees use in their own review of the governor’s spending plan.

Hill recommended that the Legislature submit to the voters a constitutional amendment that would repeal the spending limit. Such an amendment would be required, because it was the voters who originally placed the spending limit in the California Constitution in 1979.

Hill also recommended that the Legislature raise the gasoline tax six cents a gallon to correct what transportation officials say is a $4.5-billion deficit in the five-year State Transportation Improvement Program. Hill said the only alternative to raising the tax is cutting back on highway construction and maintenance, which she said would hurt the state.

In addition to criticizing various Deukmejian spending proposals, Hill’s budget review also accuses Los Angeles County officials of mishandling collection of child-support payments.

The budget review says the state could have recouped more than $22 million that it paid out in welfare payments to impoverished children if Los Angeles County had done even an average job in collecting support payments. The county also deprived children who do not receive public assistance of $25 million in support payments they should have received from non-custodial parents, the analyst says.

Hill says the state should step in and devise a three-year plan to improve the county’s performance, which she said was the worst in the state.

In all, Hill recommends a combination of cuts and increases in the governor’s budget that would provide the Legislature with an additional $244 million to spend. Included in the recommendations are proposals to reduce expenditures by $191 million.

“It’s a very tight budget,” Hill said.

Gloomy Analysis

Overall, this budget analysis is decidedly gloomier than those issued in recent years, with Hill saying state finances are in their worst shape since the recession wreaked havoc on government finances 1982.

During a Capitol press conference, Hill repeated past warnings that the state would need an additional $1.6 billion in tax revenues if it wants to continue services it provided this year and rebuild the budget reserve to $1.1 billion. Deukmejian is insisting on a “prudent” budget reserve.

The analyst said the state finished the last budget year on June 30 with a deficit of at least $200 million and added that “our current estimates indicate that a second deficit is now likely” during the current budget year.

Deukmejian so far is the only major player in the budget process who has not acknowledged the deficit in last year’s budget. Others who agree that there was a deficit, while disagreeing on how large it was, are state Controller Gray Davis, Treasurer Thomas W. Hayes and the state auditor general.

Hill criticized many of Deukmejian’s proposed budget moves, saying the governor and his advisers balanced the budget by making decisions that ultimately could prove costly to the state.

She noted that Deukmejian’s budget defers “virtually all preventive maintenance” on state highways for two years. Preventive maintenance costs about $5,000 per lane-mile, but it heads off “rehabilitative work which costs about $100,000 per lane-mile,” Hill said.

Prison Criticism

The analyst also said the governor’s proposal to save money by delaying the opening of two new state prisons will intensify overcrowding at other prisons.

Even Deukmejian’s plan to partially finance county trial courts will end up costing counties more, Hill said, “because the increase in costs for state-required programs will outpace the increase in funding to be provided under the program.”

In addition, the analyst criticized a Deukmejian Administration proposal to save $163.5 million in budget-year retirement costs by making a trade-off that will eventually commit the state to an additional $400 million a year in annual expenditures.

Deukmejian’s proposed elimination of the Office of Family Planning, which provides abortion counseling and birth control information, would also be penny-wise and pound foolish, Hill said. By eliminating the agency, the state would save $36 million annually. But Hill said the program is cost effective in eliminating unwanted pregnancies, particularly for poor women who have to rely on the state for medical and other health and welfare services.

Hill also warned that Deukmejian’s decision to finance a state health-care program for poor Californians from cigarette tax receipts raised as a result of Proposition 99, the tobacco tax initiative, could backfire because the higher tax may discourage people from smoking. The initiative imposed a 25-cent-a-pack increase on cigarettes and comparable increases on other tobacco products.