Wilson’s Budget Proposal Avoids Suggested Cutbacks : Deficit: Governor resists calls for eliminating Arts Council, state architect and changing Medi-Cal rules.

When Gov. Pete Wilson proposed raising taxes by a record $6.7 billion, he said he had already considered every possible reduction in state spending that could humanely and wisely be made.

Further cuts, Wilson said, would mean releasing convicted felons before the end of their terms, denying prescription drugs to impoverished children, and eliminating research and care for Alzheimer’s disease.

But Wilson’s proposed $55.7-billion budget would preserve the state’s $16-million Arts Council, leave intact $24 million in acupuncture, podiatry and chiropractic services covered by Medi-Cal, and ignore hundreds of millions of dollars in potential savings proposed by the nonpartisan legislative analyst.

Although these programs, too, have their staunch defenders, they are among billions of dollars in potential spending cuts put forward by legislators and taxpayers groups. They were rejected by the Republican governor, who, using the same political judgment that got him elected governor, chose a more pragmatic road than some of his more conservative friends and allies might have preferred.

Some of these advocates for deeper cuts have embraced dramatic reductions in public employee pensions or radical changes in public schools that have no chance of passage in the Democratic-controlled Legislature.

But there remain hundreds of millions of dollars in proposed cuts--from eliminating free cars for legislators to closing the office of the state architect--that might be acceptable to the political mainstream but were turned aside by Wilson before he proposed raising taxes as a “last resort.”

Legislative analyst Elizabeth Hill and her team of more than 60 analysts have prepared a 1,400-page study of Wilson’s budget that cites $438 million in non-essential spending.

The California Taxpayers Assn., an outside organization that probably keeps the closest watch on state spending, asserts that more than a billion dollars could be saved by changes in the state retirement system.

Administration officials insist that Wilson has trimmed all the fat from his proposed spending plan.

“We’ve put together a responsible budget that still provides services,” said Finance Director Thomas W. Hayes. “The next cuts to save any substantial amount of money would be very difficult.”

Assemblyman Tom McClintock, the Legislature’s foremost critic of new taxes, disagrees. McClintock, a Republican from Thousand Oaks, has prepared a list of cuts proposed by himself and others that total more than $14 billion. He insists that it is realistic to propose balancing the budget without raising taxes.

“There’s a huge variety of spending reductions that could be used to balance the state budget without a tax increase and still provide basic levels of service,” McClintock said.

Some of McClintock’s favorite examples fail to withstand serious scrutiny. For instance, he counts $143 million that could be saved by merging two state tax agencies--the State Board of Equalization and Franchise Tax Board. But there is no way these savings could be obtained this year because the action would require a voter-approved constitutional amendment.

Similarly, many voters might agree with McClintock’s assertion that taxpayers need not spend $5 million each year regulating barbers and hair stylists. But taxpayers are not spending the money; it comes from fees paid by the barbers.

The largest reductions advocated by the maverick lawmaker probably have no chance of being enacted because they are politically extreme. For example, he contends that $3.8 billion could be saved by giving every California pupil a $4,000 scholarship to spend at the public or private school of their choice. McClintock figures the state now spends about $5,300 a year for every student in the general school population.

Still, a healthy portion of McClintock’s proposals appear to represent more realistic potential savings.

The lawmaker wonders why the state needs a $16-million Arts Council when it is raising taxes and cutting services. He has proposed eliminating the office of state architect and cutting back the State Fire Marshal’s Office and instead letting local governments handle the inspections and plan checking for state buildings, as they do for the private sector. Together, he says, these cuts would save $130 million. He would capture another $94 million by eliminating the non-regulatory functions of the state Energy Commission.

McClintock has also taken aim at some of the money state officials spend on themselves. He suggests that the budget be scaled back to reflect a $50-million cut in the Legislature’s operating expenses required by voter-approved Proposition 140, better known for its provision that limits terms. McClintock argues that the governor could save $2.7 million by accepting a similar reduction in his office staff.

A smaller amount--$3 million--could be saved by rolling back legislators’ salaries to last year’s levels and eliminating cars leased for each state lawmaker.

No ally of organized labor, McClintock has proposed legislation that would force the state to adhere to the federal “prevailing wage” standards, which are lower than guidelines the state uses to control the pay for workers on state-funded projects.

The lawmaker points out that the state wage schedule requires traffic controllers on road repair jobs to be paid more than $25 an hour in wages and benefits--the same amount paid to laborers and window cleaners. McClintock’s bill, which he calculated would save about $180 million, died last week in the Assembly Labor Committee.

Democratic Assemblyman Terry B. Friedman of Los Angeles, the Labor Committee chairman, said the higher wage standard must be maintained as a “fundamental protection” for all workers. If state-financed projects began paying lower, non-union scale wages, it could spark a downward spiral that would harm workers throughout the state, he said.

Likewise, arts enthusiasts would argue that support for the Arts Council is a basic responsibility of government while those who consider energy independence of national importance would insist that California needs to beef up, not scale back, its Energy Commission. The arguments are much the same for nearly every proposal put forward by those demanding cuts in government spending.

While McClintock is something of a loner in the Legislature and his ideas are dismissed by many colleagues, other, more mainstream figures also have proposed spending reductions.

Wilson embraced a portion of the $438 million in cuts recommended by legislative analyst Hill when the governor revised his budget in April. So far, he has ignored about $300 million in potential savings.

Hill’s staff found $6.9 million in the Children’s Services Fund that will not be spent by the end of the year and could be used for general purposes; $4.6 million left unspent in the Disaster Relief Fund and six positions budgeted by the Department of Housing and Community Development to administer grants that the department will not be receiving.

The analyst also recommended $17 million in savings in the Department of Mental Health and said the state could save $19 million by changing the staffing ratios in various child-care programs it runs for the poor.

Rebecca Taylor, an analyst at the California Taxpayers Assn., has recommended tapping into two funds created in the 1980s to give bonuses to retired employees whose pensions are not keeping up with inflation. The accounts, which are financed by part of the investment earnings on the pension funds, now total more than $2 billion and apparently could be tapped for general government purposes. The Wilson Administration is studying the proposal.

Others have suggested borrowing from various special funds under the state’s control, a move that would provide onetime revenues that would have to be repaid in future years. Lewis Uhler, a major player behind the term-limits initiative, recommends using these funds to rebuild the state’s emergency reserve.

Finance Director Hayes said the Administration is reviewing every budget-cut plan put forward and is “combing the budget” for reductions that might have been missed.

Hayes said the optional Medi-Cal services such as acupuncture and podiatry might be vulnerable if the Legislature rejects other parts of the Administration’s proposal. For now, he said, these services will remain in the budget.

“I’m not a doctor,” Hayes said. “The medical people tell you these are all legitimate.”

Hayes also said the Arts Council--a favorite target of budget-cutters-- might yet fall, although the governor’s press secretary, Bill Livingstone, defended it.

“California prides itself on being a center of art,” Livingstone said.

Hayes and Livingstone contend that the budget cannot be balanced with the kind of modest cuts suggested by the Administration’s critics.

“To solve a $12.6-billion problem, you’re dealing in hundreds-of-millions or billion-dollar programs,” Hayes said. “The smaller ones certainly merit scrutiny. But they’re not going to go a long way toward solving the problem.”

STATE BUDGET: HYPOTHETICAL SOLUTION

The following represents a Times compilation of proposals that, taken together, theoretically could eliminate the state’s $12.6-billion budget gap without a general increase in the income or sales tax. The ideas were advanced separately by Gov. Pete Wilson, legislators from both parties, the nonpartisan legislative analyst, the California Taxpayers Assn. and the No Tax Increase Task Force: Category and Savings

SPENDING CUTS

* Reductions already proposed by Gov. Wilson (including welfare rollback, freeze of other health and social benefits, education cuts and 4% cut in other programs): $4.788 billion

* Prison reductions (including eliminating parole supervision for nonviolent offenders and increasing inmate/staff ratios): $500 million

* Legislative analyst recommendations (eliminate double-budgeting, premature funding, non-essential spending): $300 million

* General government reductions (including eliminating state architect, cutting duplication in State Fire Marshal’s Office, eliminating Arts Council): $300 million

* Eliminate acupuncture, podiatry, chiropractic, optometry from benefits available to Medi-Cal recipients: $24 million

* Reduce state employee health and pension benefits, including:

--limit teachers retirement cost-of-living increase: $183 million

--recapture pension fund investment earnings: $1.5 billion

--reduce health benefit contribution: $72 million

* Additional 2% reduction in all programs: $320 million

* Implement Prop. 140 cuts in Legislature’s budget: $50 million

* Privatize operation of developmentally disabled centers: $55 million

* Legislative options for cuts in higher education: $300 million

* Conform prevailing wage law to federal standard: $179 million

* Emergency reserve of $1 billion instead of $1.4 billion: $400 million

* Begin privatizing local government operations for emergency medical services, street lighting, street repairs, public transit, solid waste, others: $120 million

PROGRAM TRANSFERS

* Shift mental health and public health to local government and give counties increased revenues from higher alcohol tax and vehicle license fees: $938 million

BOOKKEEPING CHANGES

* Medi-Cal accounting change proposed by Wilson: $800 million

* Other bookkeeping transfers proposed by Wilson: $500 million

Category and Revenue

OTHER REVENUE

* Eliminate sales tax exemptions for newspapers, candy, snack foods, bottled water, motion picture productions, others: $649 million

* Reduce business meal deduction from 80% to 50%: $300 million

* Conform state tax code to federal law: $330 million

TOTAL: $12.608 BILLION