Budget Veto on Health, Welfare Issues Vowed

As the Legislature missed its deadline for passing a new spending plan, Gov. George Deukmejian dug in his heels Friday, declaring that he “will simply have to veto the whole budget” unless majority-party Democrats agree to freeze health and welfare benefits.

The Republican governor vowed to “hold fast” to his insistence that the Legislature agree to a suspension of laws and legal requirements that he says are driving up the costs of budget programs faster than the state can pay for them.

On a more philosophical note, Deukmejian added more fuel to the budget controversy by attributing part of the rising costs of welfare programs to a new generation of Californians who don’t feel the “stigma” historically attached to receiving government handouts.

Deukmejian, a first generation Armenian-American, told a group of reporters: “When my parents came to this country . . . it would be frowned upon to have to go and seek assistance from the government.”

Deukmejian wants the Legislature to draft legislation that will give governors and lawmakers more flexibility to deal with budget problems. He wants a bill that would allow the temporary suspension of laws that drive up budget costs in years like this one, when the tax system cannot produce enough revenues to keep up.

For example, Deukmejian points to requirements that cost-of-living increases be given every year to welfare recipients and aged, blind and disabled people receiving government assistance. He has argued that with these obligations, the state will be forced to pay bills beyond the ability of revenues to cover them.

Friday marked the passing of one of the Legislature’s most celebrated--and routinely ignored--deadlines: the requirement in the California Constitution that it send a budget to the governor by June 15. This marks the fourth straight year that the Legislature has missed it.

Legally, the most crucial deadline is July 1, which marks the start of the new budget year. After that, if the state does not have a budget in place, the controller will have no authority to issue checks for state services not protected by the Constitution.

However, the budget problem this year already has led to a halt in Medi-Cal payments to doctors, hospitals and nursing homes. The Franchise Tax Board also has run out of money to pay tax refund and renter’s credit checks to more than 300,000 Californians.

The payments will resume when a new budget is in place, or if the Legislature passes an emergency appropriations bill covering the last weeks of the current fiscal year.

But, for now, the budget and the appropriations bill are bogged down in the Legislature.

Progress on the budget was stopped Friday when Republicans refused to vote for a preliminary $56.4-billion version of the spending plan. GOP lawmakers in the Assembly balked at approving a budget that cannot be implemented without a major tax increase, something they are unwilling to support.

Another vote is scheduled Monday, but there may be further delays. Last year at this time, in a dispute over school funding, Republicans and a small group of Democrats held up passage of the budget in the Assembly for eight days.

The problem confronting the governor and Legislature is that the state is $3.6 billion short of what it will need to provide its current level of services and rebuild the depleted budget reserve fund that is used for emergencies.

Democrats are pressing for a $2-billion-plus tax increase, while Republicans are insisting that most, if not all, of the shortfall be made up through cuts.

Deukmejian, during Friday’s interview, said he still believes all the necessary work on the budget can be accomplished in time for the start of the new fiscal year on July 1.

He said he is still opposed to a tax increase, although he has indicated a willingness to listen to certain tax-increase proposals. Many Democrats believe a tax increase is necessary to solve the budget problem, because tax revenues are estimated to rise by only 7% next year, not enough to meet expense demands estimated to go up by 11%.

A tax increase, Deukmejian said, “is not going to solve the problem” because of the laws that keep driving up state costs.

Deukmejian again suggested suspending the provisions of Proposition 98, the landmark school funding initiative approved by voters in 1988, as an alternative to deeper cuts in the health and welfare budgets. Proposition 98, which the Legislature can waive for one year with a two-thirds vote in both houses, guarantees that schools receive at least 40% of the state general operating revenues and school funding from legislative budget cuts.

On Friday, Senate President Pro Tem David A. Roberti (D-Los Angeles) indicated that lawmakers still are unwilling to subject schools to the cuts faced by other state programs.

“The people voted for Proposition 98. . . . I think it’s a mistake philosophically as well as pragmatically not to abide by their strong wishes,” Roberti said.