Governor Rejects Democrats’ Budget Plan : Government: Wilson says their proposal to erase up to $14 billion of the deficit relies too heavily on tax increases and too lightly on cutbacks.

Hardening his position, Republican Gov. Pete Wilson Tuesday wasted no time in rejecting the latest Democratic plan to resolve the state’s massive budget shortfall.

In a private meeting with legislative leaders and during a news conference, Wilson said the proposal that emerged from a Democratic-dominated two-house conference committee was too long on tax increases and too short on long-term spending cuts.

“They are a long way from having finished the job,” Wilson told reporters after saying he was disappointed but not discouraged by the two-year Democratic budget plan to raise $14 billion through hefty increases in income, business and other taxes along with a series of onetime budget cuts.

Left out of the plan are budget reduction proposals Wilson badly wants: suspension of Proposition 98 financial aid guarantees to public schools and community colleges, an 8.8% reduction in basic welfare grants, permanent elimination of annual cost-of-living increases for welfare recipients and others who benefit from human service programs, a sharp reduction in the renter’s tax credit, and elimination of the homeless assistance plan.

The conference committee adopted the plan Monday on a partisan vote. The four Democrats who dominate the committee sent the budget plan to Wilson, calling the proposal “a workable solution to the budget crisis.” The two Republican members of the committee did not sign the letter.

Wilson and his budget advisers have been operating on the assumption that the state will have a $12.6-billion budget shortage over the next 14 months. But Finance Director Thomas W. Hayes and other Administration officials conceded Tuesday that the looming deficit will grow when the Department of Finance releases its final set of expenditure and revenue estimates for the new budget next week. The conference committee, anticipating the bad news, drew up its budget plan on the basis of a $14-billion deficit.

Wilson believes that at least $5 billion of the budget problem stems from built-in spending escalators that are driving up costs faster than taxes can be collected to pay for them. The governor is insisting that Democrats eliminate guaranteed cost-of-living increases.

“(Democrats) haven’t come to grips with the real reforms that are necessary--the permanent spending reforms. They’ve got to eliminate the kind of autopilot spending that has produced this situation,” Wilson said.

Wilson’s critical comments represented an escalation of rhetoric in what until now has been an unusually friendly relationship between the Republican governor and Democrats in the Legislature. The change in tone left at least one key Democrat puzzled and Republicans pleased.

Assemblyman John Vasconcellos (D-Santa Clara), chairman of the Assembly Ways and Means Committee and a conference committee member, said Democrats went along with about 80% of the governor’s original budget plan.

“We did $11.5 billion in cuts and tax increases just the way he wanted and he is disappointed? Our plan is not that far from his. I just don’t understand where he’s coming from,” Vasconcellos said.

The Democrats’ plan would raise about $1.8 billion by increasing business taxes and hiking personal income tax rates for individuals earning more than $100,000 or couples filing joint returns reporting income of $200,000 or more. The Democrats would like to raise the income tax rates for these taxpayers from 9.3% to as much as 11%, depending on final budget estimates. They also are considering reducing the top rate to 10% the following year if the budget crunch eases. At the same time, Democrats want to scale back Wilson’s proposed 1 1/4-cent sales tax increase by roughly a quarter-cent.

Vasconcellos said of Wilson’s continued opposition to the income tax: “I just don’t understand why everyone else in the state has to share in the pain of this budget plan except the rich.”

Assembly Speaker Willie Brown (D-San Francisco), who attended the closed-door session with Wilson, said he tried to revive a proposal that would have enacted a tax of up to 7% on legal, accounting and other services. Wilson rejected an earlier Brown proposal for a services tax, but the Speaker presented the governor with a scaled-down version that would initially impose the tax at a 2% level. Wilson did not comment on Brown’s proposal.

Senate President Pro Tem David A. Roberti (D-Los Angeles), another participant, said after the meeting: “We are not really close to agreement.”

Republicans were much happier with the remarks by Wilson, who took office in January and is in the process of fashioning his first budget. Republican lawmakers believe Democrats are deliberately testing Wilson. They expressed satisfaction with the decisive way he shot down the Democrats’ budget plan.

“I am learning about the new governor along with everyone else,” said Sen. Frank Hill (R-Whittier), a member of the conference committee. “He sees income taxes and bank and corporation taxes as too dangerous. So do I.”

Assembly Republican Leader Ross Johnson of La Habra used almost the same words as Wilson to describe what he saw as flaws in the Democrats’ plan. “They have a hell of a long way to go,” he said.