Deukmejian Lashes Out at Legislature : Budget: Governor blames lawmakers for ‘gridlock’ in dealing with possible $1-billion shortfall. He vows to cut spending and avoid a tax increase.

Facing a potential $1-billion gap between revenues and expeditures, Gov. George Deukmejian on Monday blamed the Legislature for “budget gridlock” and vowed to “do whatever it takes” to cut spending and avoid a tax increase.

The governor, speaking to the Sacramento Rotary Club, criticized the Legislature in tough words and harsh tones that are certain to end an uneasy truce that has existed for months between the two branches of state government.

After the speech, Deukmejian, who will leave office at the end of the year upon completion of his second term, made it clear to reporters that he was sending the Legislature “a message.”

He wants the Legislature to go along with his longstanding efforts to suspend legal guarantees that link health, welfare, education and other state spending programs to inflation indexes that automatically require increases whether the state has the money or not.

“I’m certainly not going to leave office without getting this budgetary reform package completed,” Deukmejian vowed during an impromptu news conference.

The Republican governor warned that if the Legislature turns him down, “There will not be a budget come July 1.”

An Administration official, who asked not to be identified, said Deukmejian “is really digging in his heels.” The official said the budget fight could very well be carried past the July 1 start of the new fiscal year.

Even though the state is legally required to have a budget in place by July 1, the governor and the Legislature frequently miss the deadline.

The looming budget problem stems from soft tax revenues and higher than anticipated costs. Although all receipts for the 1989 tax year have not been counted, legislative budget sources believe that taxes could be down by at least $500 million to $600 million. In addition, spending on public schools alone is expected to be up $300 million to $400 million during the current and upcoming budget year because of inflationary increases and higher than expected enrollments.

During his luncheon speech, Deukmejian complained that what he considers a healthy 8% increase in tax revenues may not be able to cover state expenses when all the legally mandated increases are tallied. He lashed out at what he called “disinformation, doublespeak and downright deception which is peddled by some of our budget critics.”

The governor added, “If we’ve increased a program expenditure, but not quite as much as the Legislature wanted to, they call it a cut. If we increase the budget billions of dollars, but still cannot afford to meet every additional demand for additional spending, they say we have a shortfall.”

Deukmejian said revenues during the coming budget year will be 8% greater than the current year, but expenditures--driven by a variety of laws, court decisions and federal regulations--would be up 11%.

The governor reiterated that he is opposed to a general tax increase. “Tax increases are no answer . . . an 8% increase in income ought to be enough.”

Deukmejian doesn’t think this position is in conflict with his support for a June ballot initiative that would raise gasoline taxes. He believes the increase is justified because gas taxes are specific in scope and are the traditional means for supporting highway and other transportation projects.

“I am going to do whatever it takes to leave this office with a balanced budget, a prudent reserve, an AAA credit rating and a positive climate for the creation of jobs because that is absolutely vital for the future of California,” Deukmejian said.

Deukmejian said suspending statutory cost of living increases could save $400 to $500 million.

Sen. Nicholas C. Petris (D-Oakland), a member of the Senate Budget and Fiscal Review Committee, said he expects Democrats to turn thumbs down to Deukmejian’s proposal.

“A big fat ‘No,’ ” he said when asked how Democrats would receive the proposal. “The poor are getting poorer and the rich are getting richer. In January, the governor was saying California was enjoying its greatest prosperity. But when it comes to raising taxes to provide vitally needed services, he says we can’t afford it. If we can’t afford it at a time of our greatest prosperity, when are we going to do it?”

Sen. Barry Keene (D-Benicia), the Senate Democratic leader, said that if Deukmejian is willing “to make his share of concessions,” Democrats would be willing to compromise. “But he has got to indicate a willingness to negotiate. Speeches like the rhetorically hot one he gave are not the stuff of which compromises generally are made.”