Deukmejian Vents Anger Over Budget Deficit Talk

Gov. George Deukmejian scolded independent state officials and the news media Thursday for creating a “confusing, contradictory” debate over a reported budget deficit that he argues never existed.

In his angriest comments yet on the debate over the reported deficit in last year’s budget, Deukmejian said in a speech to the California Taxpayers Assn. that talk of the state being in the red “is little more than a bookkeeper’s fantasy.”

“Our state Department of Finance has determined that California ended the 1987-88 fiscal year in the black. We had cash in the bank, and we were able to pay all of our bills,” Deukmejian told more than 200 business and government leaders.

Later, the Republican governor refused to answer reporters’ questions about why he is virtually the only state official who still insists that the last budget had no deficit.

During the speech, Deukmejian disclosed that he and other state leaders have agreed to try to establish a uniform method of accounting that will prevent such disputes in the future.

Deukmejian said he is concerned that “the solid fiscal state of our state is called into question by a confusing, contradictory, after-the-fact bookkeepers’ debate about whether California ended the last fiscal year with a deficit or with a surplus.”

The debate, at least for everyone but Deukmejian and his staff, is not whether there was a deficit but just how big it was.

Deukmejian, using Department of Finance budget figures, insists that the state ended the 1987-88 fiscal year last June 30 in the black by $4 million.

Everyone else with a say in forecasting budget figures is in disagreement, with estimates of the deficit ranging from $97 million to perhaps as high as $1.4 billion, depending on who is making the estimate and what expenditures they are counting.

The debate over the deficit was triggered last month when Deukmejian released his proposed $47.8-billion budget for the 1988-89 fiscal year and disclosed that certain expenditures from 1987-88 no longer were being counted for that particular year.

Critics say the accounting changes were made to avoid having to admit to a deficit.

The lowest estimate of the deficit is $97 million, which comes from Treasurer Thomas W. Hayes, chairman of the Commission on State Finance, and is based on accounting methods closest to the ones used by Deukmejian. Hayes actually is a Deukmejian political ally, having been named to the treasurer’s office by the governor.

The highest estimate, $590 million and perhaps as high as $1.4 billion, was made by acting Auditor General Kurt R. Sjoberg, based on the same generally accepted accounting principles used by other government agencies and private corporations.

In between are Legislative Analyst Elizabeth G. Hill, who pegged the deficit at $200 million, and Democratic state Controller Gray Davis, who says it was $343 million.

‘Different Bottom Line’

Deukmejian, who boasts frequently of taking over a deficit-plagued state in 1983 and restoring it to a AAA credit rating, said each state official “is using a different accounting method to reach a different bottom line.”

He cracked, “I guess accountants are like economists. If you line them up end to end, they never reach a conclusion.”

At one point, Deukmejian revealed a display of four newspaper headlines that reported the various estimates of the deficit and accused the press of being “drawn into the confusion.”

Departing from his prepared text, Deukmejian said, “It is a little strange, I suppose, that there are no headlines that say that the Department of Finance says that we ended the year in the black.”

To underscore his point, Deukmejian said he wore a black tie for the speech.

“The point is that apparently it doesn’t make news when you end up in the black. It only makes news when somebody says you ended in the red,” the governor said.

After the speech, Deukmejian hurriedly left the Hyatt Regency without answering reporters’ questions. Typically, Deukmejian will stop to answer a few questions.