Rise in Local Authority Welcomed : Government: Despite recession and shortfall in support, supervisors across the state applaud Wilson’s transfer of health, welfare programs to county level.

Despite recession troubles and budget problems, county supervisors still support Gov. Pete Wilson’s historic shift of $2.2 billion in health and welfare programs from the state to counties, local officials said Wednesday.

Even though the government restructuring program has been a money-losing proposition for counties, local officials gave Wilson an enthusiastic show of support when he spoke to about 450 of them at the annual convention of the California Supervisors Assn. of California.

The reaction by the traditionally cash-starved county officials was somewhat surprising in light of the acknowledgement by Wilson that they will not receive the full $2.2 billion in extra tax revenue set aside to pay for the 19 programs that were handed over to them this year.

Counties are estimating that recession-related declines in the sales tax and motor vehicle license fees will leave them short by a minimum of $110 million, and perhaps much more. At the same time, the demand for services is on the rise, caused by such factors as the unemployed going on general welfare once their unemployment benefits run out.

But supervisors figure that when the recession ends, tax collections may go up as fast as they came down.

In Sacramento on Wednesday, Wilson Administration officials released another gloomy assessment of California’s economy and the recession’s effect on the state budget.

Finance Director Thomas W. Hayes said in a report that the recession is “deeper than originally thought and the economy is not showing signs of improving.”

Hayes noted that sales of new homes and the number of new construction permits remained at “recession levels” despite reductions in interest rates to 18-year lows. Private sector employment, already 300,000 jobs below pre-recession levels, continued to fall in October, he said.

For the first four months of the fiscal year, which began July 1, state tax revenues fell $528 million, or 4.7%, below projections. Revenue from personal income tax, sales and use taxes, and bank and corporation taxes all were below what Hayes had expected.

In Monterey, Wilson offered the county officials no new money but said he would continue to try to give them more freedom to operate free of state control.

What county officials said they like about Wilson is that he agreed to set aside one-half cent of the 1.25-cent sales tax increase, or $1.4 billion, plus an estimated $769 million a year in new motor vehicle license fees to go along with the assortment of mental health, senior citizen, and child welfare programs the state turned over to them this year. Wilson also agreed to give individual counties the flexibility they said they needed to administer the programs correctly.

“What we are going to have to do is say that we simply can’t continue doing business as we have in the past, not at the federal level, not at the state level and not at the local level, where in fact the people live and most of the good ideas about solving problems come from,” said Wilson, a former San Diego mayor who often speaks in the nonpartisan language of local government officials.

Said Supervisor Mary King of Alameda County: “It’s nice to know that someone in the Statehouse understands.”

King and other county officials said that even though they were not ready to ask Wilson to take the programs back, they believe the downturn in tax collections poses serious problems for counties and could disrupt services.

King said “there simply is not enough money to keep providing services in the old ways. We still have a greater need than we have dollars.”

Supervisor Leon Williams of San Diego County said his county’s budget is $50 million short. He said that various ways of dealing with the problem are being studied but that he will fight further service reductions. “We’ve already cut services drastically, including closing a mental health hospital,” he said.

Williams said the shift in programs from the state to the counties is worthwhile despite the problems because counties have a measure of control over the programs they did not have before. In the past, counties were ordered to administer and partially pay for the programs but had little control over them. The current setup is better, Williams said, because counties do not have “Assembly people in Sacramento make decisions about our budgets.”

Los Angeles County officials said they had hoped to receive $733 million from the state under the restructuring program and fear they may receive 15% less than they were expecting to receive.

Wilson, beset by a seemingly endless stream of political problems and natural disasters during his first 10 months in office, said during his speech that he was “cheered and buoyed” by the support.

Times staff writer Daniel M. Weintraub contributed to this report.