NEWS ANALYSIS : State Budget Mess Likely to Be Waiting for Wilson

Since his victory on Nov. 6, governor-elect Pete Wilson has deftly ducked questions about the state’s growing fiscal mess, preferring to have Gov. George Deukmejian and the Legislature deal with the budget gap before Deukmejian leaves office.

But in all likelihood Wilson--not the lame-duck Deukmejian--will be forced to resolve the crisis after he comes to power on Jan 7.

The Democratic-controlled Legislature seems in no mood to accept the $1-billion austerity plan Deukmejian proposed on Thursday, one that would include suspending voter-approved guarantees for school funding, cutting all state budgets except higher education by 1% and reducing the renter’s tax credit.

Instead, lawmakers probably will wait until Wilson takes office and then try to strike a bargain--possibly including higher taxes--that they could not hope to get from Deukmejian.

Wilson, who sat through a three-hour budget briefing by Deukmejian aides on Thursday, has yet to name a finance director and so far has spoken only in general terms about the budget. Aides to the two Republican leaders choreographed separate news conferences late Thursday so that Wilson could speak briefly with reporters and then be whisked from the Capitol before Deukmejian dropped his billion-dollar bombshell.

In his remarks, Wilson said he was “not pleased” by a reported $250-million drop in October tax revenues, and he noted that budget cuts probably will be needed because the state Constitution requires the Legislature and the governor to balance the budget. Unlike Deukmejian, Wilson did not rule out a tax increase.

“It may be it is necessary to take some additional actions to see to it that we don’t wind up in a deficit situation,” Wilson said, stating what has been clear to legislative insiders for months. Although during the campaign Wilson proposed suspending or repealing the guaranteed funding for schools, his aides declined Friday to say whether the governor-elect would take a position on the Deukmejian proposal.

Wilson can avoid the tough questions for only so long. In less than two months, just three days after taking office, he will have to propose a budget for the next fiscal year that says exactly which programs he wants to cut and what taxes, if any, he is willing to raise. At the same time, unless the Legislature accepts Deukmejian’s proposal, Wilson also will have to deal with the potential deficit in the current budget year.

State budget analysts believe that under current law, tax revenues for the next fiscal year will climb by about 5%. But it would take a 12% increase in the state budget to meet the demand for everything from schools to prisons and welfare payments brought on by a growing population and a declining economy. The bottom line: The state may be $2 billion short of what it needs to maintain current services for another year, with no new programs.

How Wilson handles the shortfall will provide early clues of what kind of governor he intends to be.

“This is his first major test,” said Republican state Sen. John Seymour of Anaheim, a close Wilson ally. “It will be the first political test of wills between Wilson and the Legislature.”

Seymour, vice chairman of the Senate Budget Committee, said he expects the Democratic majority in the Legislature to brush off Deukmejian’s proposal and instead force Wilson to confront the entire problem in January. Senate Republican Leader Ken Maddy of Fresno offered a similar assessment.

Asked if he thought the Democrats would go along with Deukmejian, taking some of the heat off the incoming governor, Maddy replied: “Candidly, no. I don’t see any incentive for them to do it.”

Indeed, Assemblyman John Vasconcellos, the Democratic chairman of the budget-writing Ways and Means Committee, on Friday flatly rejected Deukmejian’s proposal to suspend Proposition 98, the voter-approved constitutional amendment guaranteeing schools about 40% of the budget. Another key Democrat, Assemblyman Bruce Bronzan of Fresno, predicted that the Legislature would ignore Deukmejian’s plan, partly because of the bad blood caused by the lengthy stalemate over the budget last summer.

Bronzan, chairman of the Health Committee, said it makes little sense for policy-makers to undertake major fiscal decisions with Wilson waiting silently in the wings.

“Here’s an opportunity for a new governor to come in and sit down with legislative leaders and say, ‘Look, we’re all in this together, we have a big problem, let’s pool our minds and our resources and our energy and figure out how to deal with it,’ ” Bronzan said. “He should take charge of the issue instead of ducking it.”

Assemblyman Robert J. Campbell, a Richmond Democrat and an expert in education finance, said it would be “crazy” for the Legislature to deal with Deukmejian.

“This guy ought to just let the new governor take over and see if he can hammer something out,” Campbell said. “Wilson is a different person, a different personality. Maybe he can get something done.”

During the campaign, Wilson repeatedly said that resolving the state’s budget crisis would be his first priority as governor. Until the budget issue is settled, it will be difficult for him to carry through on campaign promises that would cost money, including expanding pre-natal care for poor pregnant women and boosting funding for the Coastal Commission.

If the Legislature accepts Deukmejian’s proposal, this fiscal year’s books would be balanced and Wilson would be free to start next year out of the red. Wilson, according to Deukmejian, believes it is “prudent” for the current Administration and the Legislature to take action now to prevent a shortfall.

Still, several lawmakers speculated Friday that the governor-elect did not ask Deukmejian to do his dirty work for him. Rather, they said, Deukmejian’s proposal represents his last effort to avoid leaving state finances in the same woeful shape he found them in when he took office in 1983. Deukmejian then faced a $1.5-billion deficit. Deukmejian has for years boasted that he took the state from “I.O.U. to A-OK.”

“I think this came from (Deukmejian’s) very firm desire to leave the state in the black, because I don’t think Wilson has had a real chance to examine the complexity of the issue and see where all this is coming from,” Maddy said.