The Sea of Red Ink : The States look for moorings after being cut adrift by the federal government’s retrenchments. : Fiscal Distress Swamps California

Two years ago, while contemplating a run for governor, Sen. Pete Wilson met with Republican eminence grise Stuart K. Spencer. As Wilson strategist George Gorton explained it, “Stu made a strong pitch that the state of California was headed for disaster and Pete didn’t want to be behind the wheel.”

Now, Gov. Pete Wilson may wish he had heeded Spencer’s advice. Barely three months into his administration, Wilson could find his policy goals clobbered in a multi-car pile-up.

Wilson knew going in that he faced a budget crisis--a legacy of George Deukmejian’s no-new-taxes philosophy, and of a federal deficit-reduction package that increased states’ program responsibilities while siphoning off revenue sources. But his people underestimated the wallop that packed. And they overestimated revenues available to blunt it.

Indications are the state’s budget deficit may reach $13 billion over the next 16 months--that’s more than 20% of its current outlay. According to Legislative Analyst Elizabeth Hill, if we closed down the entire University of California system, shuttered all 20 California State University campuses, opened the doors of all the state’s prisons and rubbed out CalTrans, we still couldn’t make up that deficit.

In January, Wilson proposed to deal with the crisis by putting the budget on a fast track, suggesting deadlines for legislative action on several sales tax increases and a reduction in welfare benefits. Guess what? The deadlines haven’t been met. Why?

Until recently, Gulf War coverage denied the governor the opportunity he wants and needs to sell his programs. Wilson has a lot of ground to make up. He still has time to do it. In Sacramento, deadlines are made, it seems, to be broken. The modern history of state budget politics is one of flagrant disregard for ticking clocks--real or political.

Even Wilson’s moderate allies in the Legislature figure the time to deal with the fiscal crisis is in May, when the budget is revised. That’s when the hard decisions are forced. Why hurry unpleasant political tasks?

The pace of Wilson’s budget proposals will be slowed, too--by liberal Democrats who will fight to protect social welfare and education programs important to their constituencies. They’ll want to raise some taxes to pay for them.

Dissenters in his own party have muddied Wilson’s fast track even more. He’s yet to find a way around conservative Republicans who view their no-new-taxes stand as nothing less than a holy war.

And now the governor is on a clear collision course with the California Teachers Assn. The CTA has vowed to block Wilson’s attempt to suspend Prop. 98, the school-funding guarantee enacted by California voters in 1988, and has launched a multimillion-dollar media campaign to sway public opinion. Wilson called the teachers’ opposition “repugnant” and threatened cuts in social welfare and health programs to make up the difference--neatly dividing key Democratic constituencies.

Politically, it is important to understand that Wilson has no love lost for teachers’ unions; his education initiatives reflect that. California teachers have long provided crucial support to Democrats and are far more likely to endorse that party’s candidates.

So the state’s educators have begun calling on their Democratic allies to save Prop. 98, claiming chits owed from years of political help and contributions. As a result, Democratic legislators who might have agreed to open Prop. 98 to negotiation this year have been forced--for now--to dig in against Wilson.

The escalation of rhetoric can only portend full-scale warfare, despite the fact that everybody knows California’s fiscal problems are so severe that Prop. 98 will never survive unscathed.

Budget politics always revolve around education because school funding is always a big-ticket item. This year the stakes are particularly high. Wilson’s proposals for long-term budget reform turn on his ability to convince Californians that the stranglehold of ballot-box budgeting--which gave us Prop. 98--must be broken, that the Legislature and governor can again be trusted to determine fiscal priorities. The suspension of Prop. 98 is critical to that strategy.

Budget progress is also hampered by fallout from Prop. 140. The term-limit initiative passed by California’s voters last November also drastically cut the Legislature’s budget.

The impact of Prop. 140 on morale and productivity in Sacramento is obvious--and mostly negative. For some denizens, the state Capitol has taken on the aspect of a bunker--a place to hide from the cold realities of governing until Prop. 140 is defeated in the courts. Or until the first legislators are cashiered out. That won’t solve California’s budget problems.

More than 600 legislative staff members have left to avoid the massive lay-offs required to meet the initiative’s budget cuts. And it was in large part the policy experts, not the political types, who left. In critical budget areas such as finance, taxation and education, much of the policy staff has been decimated. The GOP Ways and Means staff has been so crippled that the Assembly Republicans had to borrow a fiscal expert from the private sector to help them through the budget maze.

Legislators are also waiting to see how the governor disposes of still more cuts in two important watchdog agencies before signing off on any of his budget requests. The legislative analyst’s office, which critiques the governor’s budget, and the auditor general’s office, which investigates specific programs, have been a part of the Legislature’s budget and independent of the Administration. Now, to meet Prop. 140 budget figures, plans are afoot to cut them back drastically or shift their costs to the executive branch.

Budget progress has also been hampered by Wilson’s slowness in filling Administration jobs. As of mid-March, the governor had appointed only 13 of his 63 agency directors, each responsible for massive government departments and their budgets.

Most troubling has been Wilson’s delay in filling the post of secretary of health and welfare. Health care and welfare spending are massive budget items--and hot political issues. Yet for almost three months, the agency mandated to lead the fight for some of Wilson’s key proposals has had no one in charge.

Compounding all this is a high-stakes battle for control of California’s Legislature and its congressional delegation. With reapportionment coming, it may be difficult for anyone other than map makers to get lawmakers’ attention. Many will be far more preoccupied with saving their seats than with any policy issue.

Some observers argue that this preoccupation could actually help Wilson keep fiscal reform on a fast track. There is sentiment among legislators for getting the budget done on time, so they can get back to what’s really important: their political careers.

So far, the Wilson Era of state government has brought little progress toward solving the state’s over-arching fiscal problems. That is partly the fault of war--military and political--and the economy. Now it’s time for the governor--who promised to lead--and the Legislature--whose members once said they were willing to let him try--to act.

What’s next? President George Bush hit it right in his Gulf War victory speech to Congress. “Peacemaking,” he said, “requires compromise.”

California’s leaders and its people need to recognize that’s as true for domestic policy as it is for diplomacy. Compromise is vital not only to the stability of the community of nations; it is essential to the future of this state.