We Must Begin Now

NOTE: In a recent letter to The Times, Gov. George Deukmejian complained that this newspaper frequently proposes new programs without saying where it would get the money to pay for them. In this third and final editorial response, The Times proposes specific additions to the governor’s 1989-90 budget and the tax increases needed to pay for them.

For all the problems confronting California, the state’s most urgent needs can be met without a burdensome increase in taxes. The cuts and omissions in Gov. Deukmejian’s $46-billion budget for 1989-90 could be restored with about $1.3 billion more in general fund revenue.

This money will not make up for the spending shortfalls of past years, but it would lift California from the budget hole that has made planning for the state’s future impossible. Californians still would be taxed less than residents in most other major industrial states and far less than they were before the state began providing $115 billion in cumulative reductions beginning in 1978.

California also must develop a coordinated strategy for managing growth and must plan the public works required to make such a strategy realistic.

The immediate problem, however, is the 1989-90 budget. Here is our plan:

TRANSPORTATION

The 1989-90 budget contains a shortfall of nearly $700 million in state highway construction and maintenance, growing to $4.5 billion over the next five years.

California should raise its gasoline tax--dedicated entirely to highways and other transportation uses--from the present 9 cents a gallon to 19 cents, yielding an additional $15 billion to $20 billion over the next decade. The new tax would cost the average motorist an estimated $63 a year, but poorly maintained roads and time lost in traffic jams are said to cost $122 for every California driver annually.

EDUCATION

For kindergarten through 12th grade, an additional $160 million for class-size reductions and $37 million for teachers’ continuing education and staff development. For higher education, $24 million for operating funds at the California State University, $19 million in student aid, $140 million for community college reforms and $32 million to reverse a 10% fee increase at the University of California and CSU. Total $412 million.

MEDICAL AND SOCIAL SERVICES

Restore proposed elimination of $272 million in cost-of-living increases in Medi-Cal; county health services; supplemental income for the aged, blind, elderly and disabled and welfare recipients.

Also, $132 million for mental health; $65 million for the new workfare program; $36 million for the Office of Family Planning; $6 million for in-home services for the elderly; $81 million for Medi-Cal case load and other factors, and $259 million for health services for the poor and county hospitals.

REVENUE

Support legislation by Sen. Alfred Alquist (D-San Jose) to restore, on taxable incomes of $100,000 and more, the top state personal income tax bracket of 11%, reduced to 9.3% by the 1987 state tax reform act. This raises about $600 million a year.

Replenish the state’s depleted reserve fund over several years rather than all at once as proposed by Deukmejian for a one-time savings of about $500 million.

Adopt legislation to further conform state tax law to federal tax statutes, about $300 million.

Other reasonable methods of raising additional revenue, if needed, would be to eliminate some exemptions from the state sales and use tax, a potential $2 billion; partially restore the inheritance tax with a threshold that would not affect children taking over family homes, farms and small businesses; scale back the full indexing of personal income taxes to a percentage of inflation; tax services such as fees charged by lawyers; create a split roll in the property tax so that businesses would pay at a higher level than homeowners, and raise the tax on alcoholic beverages.

None of this money could be spent as long as the Gann spending limit, which restricts government growth to a formula based on inflation and population increases, remains in state law (although there can be a one-year emergency overrun). The Gann limits should be abolished. If that is not possible now, the formula by which the ceilings are calculated should be changed to reflect the faster real growth of key cost factors such as school and prison populations and the cost of health care.

Proposition 13, which faces potentially crippling court challenges, must be revised in a manner that retains a reasonable limit on property tax increases--especially for those on fixed incomes--but eliminates some of the inequities created by the poorly drafted 1978 initiative. The tax on a newly purchased home can be as much as 10 times the levy on a similar house next door that has not changed ownership for some time. Also, since businesses change ownership less frequently, homeowners have assumed a far greater proportion of the total property tax--and businesses less--than in 1978.

Proposition 13 also should be stripped of provisions requiring a two-thirds vote of the Legislature to raise state taxes and a referendum by the people to increase local revenues.

The reasons for the anti-tax crusade triggered by Proposition 13 were understandable at the time. But the unintended consequences could not be foreseen: the granting of billions in tax relief to Californians and the shrinking of the tax base to the point that it no longer will finance the state’s most urgent needs. This problem will not fix itself. Much political leadership and courage is required to get California back on the road to a productive future. The journey must begin now.