Governor to Ask Legislature for $1.1-Billion Budget Reserve

Gov. George Deukmejian, drawing a line for the looming budget fight with the Democratic-controlled Legislature, said Saturday that he will insist on a $1.1-billion reserve in the state’s 1989-89 budget.

Democrats, beginning their spring attack on the governor’s $47.8-billion spending plan, severely criticized proposed cuts in health and welfare programs last week and indicated the reserve should be cut.

“In the coming weeks, you are likely to hear some voices suggesting that we reduce the reserve and spend more money,” the Republican governor said in remarks prepared for his weekly radio address.

“But in actuality, if these big spenders were to succeed in gutting our prudent reserve, and California were caught in a major fiscal crisis, essential programs would be put at risk and these same voices would try to blame our Administration.”

He said his proposed budget contains a $1.1-billion reserve, 3% of the general fund.

However, Legislative Analyst Elizabeth Hill said Deukmejian’s proposed reserve for general spending is only $870 million using his figures. The other $230 million is in a special reserve that can be spent only for school programs, in accordance with Proposition 98, the school funding initiative approved last November.

In his speech Saturday, Deukmejian said the reserve is needed because it maintains the state’s high rating with New York bond houses, allows spending on natural disasters, meets unanticipated expenses such as prisons, provides a cushion in case tax revenues drop and protects the state in a recession.

He said an economic report he plans to issue next month will show “some signs of a slowing economy: interest rates are up, defense spending is down, inflationary pressures are building, housing costs are up and construction is slowing.

“Given these warning signs of slower growth, this is no time at all to be playing fast and loose with our prudent reserve,” Deukmejian said.