COLUMN ONE : Tax Revolt 1990: Hello Gridlock : Voter-approved limits have kept state spending down but eroded basic services. Now, all eyes turn to a June ballot measure.

Consider this bleak scenario.

Sheriff’s deputies are laid off in the face of rising crime. Decrepit freeways endanger motorists, while new highway construction comes to a standstill. Hundreds of mentally ill patients wander the streets for lack of care.

Prisoners riot in overcrowded cells while others are released before serving full terms because there is no place to put them. And students cram into classrooms as the backlog for new school construction reaches $5 billion.

A futuristic nightmare? Unfortunately, it’s already here.

Each of these problems has been experienced somewhere in California in recent months.

Just about everyone agrees that California government is in trouble. And most point to the same problem: voter-approved tax and spending limits that have stripped the governor and Legislature of much of their flexibility in running state government.

If nothing is done, state officeholders say, the problems will get even worse. Many are pinning their hopes on a June 5 ballot measure that would authorize a 9-cents-per gallon gasoline tax increase, raise the voter-passed spending limit and allow the state to spend roughly $1 billion more than it can now.

“If it fails, we are in deep trouble,” said Assemblyman John Vasconcellos (D-Santa Clara), chairman of the Assembly Ways and Means Committee. “We are in trouble with it. Without it, we are in a nightmare.”

Government programs, spurred by legal and political pressures, are growing faster than the money needed to pay for them--and have been for several years.

Gov. George Deukmejian, in releasing his new $53.7-billion budget in January, said the budget process--the mechanism that millions of Californians rely on for government services--”is in need of serious structural repair.”

At the heart of the problem are the tax limits, approved by voters in 1978 with Proposition 13, and the Gann spending limit, which followed the next year.

Consider the problems Deukmejian and the Legislature face in raising the gasoline tax.

Just about everyone in the Capitol supports the gas tax proposal on the June ballot to finance highway building projects. Without the new money, California Department of Transportation officials have warned that the state’s highway construction program faces “extensive delays.” Approval of new building projects would be pushed back years.

To put the transportation problem in perspective, consider that 45 million more vehicles are using California roads and highways than when Deukmejian took office in 1983. But ongoing budget problems have resulted in fewer highway-lane miles being built during Deukmejian’s first five years than were built during ex-Gov. Edmund G. Brown Jr.’s last five years--and Brown was sharply criticized for not building enough freeways.

So, why not just raise the gasoline tax and take care of highway business?

The problem is that the state is only $143 million under its maximum spending limit for the 1990-91 fiscal year.

The June ballot measure--which also includes increases in highway user fees--would raise, on average, $1.5 billion a year. Thus, the spending limit has to be raised so all that new money can be spent.

But that, in turn, jeopardizes the gains teachers and schools made with Proposition 98, which mandates that schools receive 40% of general purpose tax revenues as well as the lion’s share of surplus money over and above the spending limit.

So what resulted was a politically risky gasoline tax measure based on a complicated revision of the spending limit that also retools Proposition 98. Some supporters of the measure believe it may be defeated because it is so sweeping and complex.

Much of the current problem over money stems from differences between the Democratic-controlled Legislature and Deukmejian over the steps necessary to correct what the governor calls the built-in “structural problem.”

Deukmejian wants to suspend automatic inflation increases in payments to welfare recipients, and built-in budget increases for health and welfare programs. He would also like to suspend some of the provisions of the school funding measure, Proposition 98. The problem, he believes, lies not in the amount of money coming in to the state, but the lack of flexibility he has in spending it.

Democrats, on the other hand, stoutly defend health, welfare and education programs and have successfully fought off Deukmejian’s proposals. They believe the state simply does not have enough money to meet its various needs. Many Democrats would like to eliminate the provisions of Proposition 13 that make it harder to raise taxes and do away with the spending limit altogether.

The two sides have fought to a standstill for the last seven years. They are in basic agreement, at least for now, in their support for the proposed constitutional amendment, which will appear on the June ballot as Proposition 111.

Sherry Bebitch Jeffe, a long-term observer of state government and senior associate of the Center for Politics and Policy at the Claremont Graduate School, calls the gasoline tax measure “Tinker-toy policy-making.”

She said the compromises that went into the proposed constitutional measure are themselves indicative of another major contributor to the current situation: the lack of strong political leadership.

“Policy gridlock is choking the state,” she said. “Politicians are loathe to take an unpopular, though necessary, stand and risk their job. Someone has to say, ‘Yes, we are going to have to spend more money. Yes, we are going to have to raise taxes.’ ”

The gas tax would help solve transportation problems--but state lawmakers expect to continue to be plagued by money shortages for health, welfare, school, prison and other programs even if the June ballot measure passes.

Vasconcellos, the Ways and Means chairman, said the Gann limit should have been changed several years ago when the state first seriously began to experience budget problems.

“It’s coming awfully late,” he said. “We are $180 million short of what it would take just to bring the mental health system back to the service level we were able to provide eight years ago. Other programs are in just as bad shape.”

Despite the unprecedented prison construction program under way in California in recent years, overcrowding still plagues the system and state prisons are operating at more than 170% of their design capacity.

The Deukmejian Administration already has completed 14 major prison construction projects. Four prisons are under construction, and three others are being designed. Even so, the state is losing ground. After the new projects are completed, by mid-1994 the overcrowding problem will be even worse than it is today.

And Sen. Alfred E. Alquist (D-San Jose), chairman of the Senate Budget and Fiscal Review Committee, complains that spending on prisons is siphoning money from other state programs. Between the 1984-85 and 1990-91 budget years, spending grew by 128% for the Department of Corrections, when adjusted for inflation, but less than 1% for the Department of Aging and 45.6% for local mental health programs.

“Demographic trends--the mini-baby boom and the rising number of Californians in their 70s and 80s--mean the demand for classrooms and long-term nursing care will continue to rise faster than revenues,” Alquist said.

Public schools, despite the funding guarantees of Proposition 98 and lottery revenues, will continue to play catch-up. Even though Deukmejian is proposing to put two school construction bond measures on the ballot this year totaling $1.6 billion, officials say schools need between $3.5 billion and $5 billion to meet their needs.

State Supt. of Public Instruction Bill Honig said schools are still fighting to overcome the erosion in programs caused by inflation and budget reductions dating back to the 1970s.

“We are so far behind the rest of the country that we have a long way to go,” said Honig, who expects school enrollments during the next academic year to rise by 160,000 students statewide, a huge surge complicated by the special needs of the new pupils. Schools, in addition to supplying traditional academic curriculums, must provide language and other special courses to immigrants, deal with drug problems and meet mental health needs of students that the state can no longer provide.

Local governments are faring even worse.

When Proposition 13 passed in 1978, the state had a budget surplus of $3.7 billion--roughly 19% of its overall budget--and this cushion was used to soften the financial pinch on local government.

Proposition 13 cost local governments $7 billion in lost revenues its first year. It took seven years for property tax money to get back to the level where it stood before the initiative passed. Counties are still trying to make up for the losses experienced during those years and are further hamstrung by Proposition 13’s provisions against raising new taxes.

A study by the County Supervisors Assn. in 1986 found that half of California’s 58 counties were “in serious financial trouble and faced drastic program cuts and employee layoffs.” Things are much the same today, county officials say.

Larry E. Naake, executive director of the county supervisors association, said: “From 1981 to 1986, the growth of county costs for jails, courts, welfare and other programs increased by about 150%. During that same period, taxes, fees and fines produced an increase of 48% in revenues. That gap just continues to widen.”

In Los Angeles County, five community mental health clinics closed during 1989 and service reductions have been ordered in seven others. The county’s jail system is bursting at the seams. In a scenario played out in numerous other counties, prisoners are being released before their terms are up because of overcrowding.

Butte County, north of Sacramento, almost went broke last year. Only a last-minute state bailout saved the county. As it was, the county has put its library system in mothballs, closing all branch offices and is laying off nearly all its librarians. The size of the sheriff’s patrol was reduced by about one-third, and 14 probation officers were laid off or lost through attrition, leaving only three probation officers now on the job.

In Contra Costa County, social workers walked off their jobs for a day several months ago, saying that budget cuts have left them stretched so thin that they are being overwhelmed by their individual caseloads.

Santa Clara County Executive Sally Reed said huge caseloads are overwhelming social workers just about everywhere. “Our probation officers serve from 300 to 1,000 clients or more. That is not an acceptable situation for us. We have long waiting lines for drug abuse and other programs. In areas of alcohol services, mental health, drug abuse and the public administrator-guardian, we do the absolute bare minimum we need to survive.”

Orange County Mental Health Director Tim Mullens said the county is forced to restrict its mental health programs to “acute” cases, meaning only the most seriously ill are treated, which is often too late to head off a problem. “I don’t even pretend to be in the business of prevention,” Mullens said.

Comparatively, cities are much better off. Even so, Keith Comrie, Los Angeles chief administrative officer, said the city still has not fully recovered from budget cuts that began with Proposition 13. He estimates that the city has a $1-billion backlog of street repairs. He said even though the Police Department has grown, Los Angeles is still below the national average for the number of officers per capita. “Some cities back East have twice the number of officers we have,” Comrie said.

The League of California Cities concluded in a study published in August that “10 years after the passage of Proposition 13, cities have not returned to their pre-Proposition 13 funding levels. Decreased federal aid, growing populations, rising expenditures, and greater limits on cities’ revenue-raising authority have all contributed to sagging revenues.”

Deukmejian, in the new budget he released Jan. 10, called for further cuts.

Counties face a $150-million cut in a state bailout program they had been counting on to shore up health programs and head off further cuts in mental health, clinic and hospital services.

Deukmejian also proposed knocking some 45,000 people off a highly respected program aimed at steering the elderly and frail away from institutionalization by providing in-home housekeeping and other support services.

The budget also would trim $91.6 million from a job-training program for welfare recipients, halting training to about 164,000 people.

On top of that, legally required health and welfare benefit increases would be frozen for nearly 3 million poor families, senior citizens, and blind and disabled people.

Numerous other cuts were proposed for children’s, family and other human service programs.

Even elementary and high schools, supposed to be protected by Proposition 98, the 1988 voter-approved initiative that guarantees public schools and community colleges funding, face a cut in spending per pupil when grants are adjusted for inflation.

As for the state, it has scrambled for dollars and been forced to use bond-financing to borrow record amounts of money.

State borrowing has increased dramatically since 1978. Bonds have become increasingly attractive to lawmakers because money from bond sales is not counted against the spending limit and voters do not have the same distaste for them as they do for tax increases.

During 1978, voters approved $875 million in general obligation bonds, or bonds that are paid off from general purpose tax revenues (the same pot of money used to finance schools, health, welfare and other state programs). Last year, voters approved $5.5 billion in general obligation bonds. Although state officials say that California is still a low-debt state when compared to others, principal and interest payments will jump from $645 million this year to $832 million next year.

Likewise, fees are being relied on more heavily. Average fees at the University of California, which can vary from campus to campus, have soared from $706 for the 1977-78 school year to a proposed $1,703 for the 1990-91 year. There were comparable increases in the California State University system.

Of course, there is a flip side to all this.

Californians’ tax burden is much lighter than it was before 1978.

Proposition 13 produced big property tax savings, roughly $7 billion the first year. On top of that, the Legislature got caught up in what it viewed as the taxpayer revolt and passed a series of major cuts in taxes on businesses and individuals. The legislative analyst’s office estimates that tax cuts since June 6, 1978, the day Proposition 13 was approved, collectively have saved state taxpayers $178.7 billion in state and local taxes.

According to the state Department of Finance, in 1977 California’s state and local taxes were among the highest in the nation. Last year, California ranked 17th among the states.

Many view 1990 as a make-or-break year.

Assemblyman William P. Baker of Danville, the Republican vice chairman of the Ways and Means Committee, believes that if the June ballot measure lifting the spending limit fails, state officeholders will just have to learn to live with chronic budget problems.

“If it’s turned down, it will be a good long time before folks up here will attempt to adjust the Gann Limit or raise the gas tax,” he predicted.

But Atty. Gen. John K. Van de Kamp, a Democratic candidate for governor this year, believes the Legislature will have no choice but to come back with another ballot measure in November. “The state just has too many unmet needs,” he said. “We are not going to be able to keep up with the things we have to do.”

Even some stout defenders of the tax revolt measures are in a mood to consider changes.

Joel Fox, a spokesman for Howard Jarvis Taxpayers Assn., named after the co-author of Proposition 13, said he could support putting additional flexibility in the limit, but not repealing it outright.

“The limit does a good job of putting some restraint on government,” Fox said. “Government was growing much faster than even people’s personal income the last 20 years. Government is not going to constrain itself. Something has to.”