Wilson Cites Need to Eliminate State’s ‘Taxpayer Squeeze’ : Finance: Business climate ‘stinks,’ he says, in part because of a growing gap between people paying taxes and those demanding services.

Gov. Pete Wilson, continuing to draw attention to financial problems facing California, said Friday that a “taxpayer squeeze”--the growing imbalance between the number of people demanding public services and those paying taxes--could lead to a $20-billion state budget gap by the turn of the century.

Even while admitting that the bleak scenario probably “can’t happen” because the problem will be corrected before it gets out of control, Wilson cited the new study by the state Finance Department to renew his call for legislative changes that would allow him to cut more deeply into health and welfare programs.

Speaking in Los Angeles at a luncheon of the Merchants and Manufacturers Assn., the Republican governor said California’s business climate “stinks” and was fueling an exodus of companies out of California.

Wilson blamed the exodus on the workers’ compensation system--which he said saddles employers with heavy overhead costs while contributing relatively small benefits to workers--burdensome regulatory requirements and inaction by the Legislature and Congress.

As he has before, Wilson also targeted California’s welfare system. He said the burden of paying high benefits, now the second highest in the nation, is pushing up taxes, which in turn is driving businesses out of the state. He also said it is turning the state into “a magnet to the nation’s needy.”

Wilson several times referred to a survey undertaken for the California Business Roundtable that shows that 23% of the 1,462 business leaders surveyed were considering moving all or part of their business operations out of the state. The survey blamed health care costs, liability laws and litigation, the cost of housing and labor costs.

The governor was introduced at the luncheon by Woody Godbold, president of Zero Corp., an electronics firm, which on Friday was in the midst of moving two of its companies from the San Fernando Valley to Utah. Godbold blamed the move on the high costs of the workers’ compensation insurance program.

The report by the state Department of Finance, released in Sacramento, said the “taxpayer squeeze” created by those paying taxes and those receiving services is mainly the result of rapid population growth among the young, fueled in part by a surge in foreign immigration.

“California is currently experiencing a serious and widening mismatch between explosive growth of its younger population, who are the primary users of government services, and slowdown in growth of its adult working-age population who pay for those services,” the report said.

If current trends continue, even assuming healthy economic growth for most of the decade, the state budget in 2000 would be far out of balance, the report said. Revenues in that year are projected to be $85 billion, but expenditures could be $105 billion.

Using census data and projections and current caseloads, the report warned that without policy changes, the number of people in schools and prisons, on welfare and receiving subsidized health services will swamp the number of people paying taxes.

Between 1990 and the turn of the century, the 5-to-17-year-old group is expected to grow by 40%, and kindergarten through 12th-grade enrollment could climb by as much as 48%, the report said.

By 2000, the caseload of the Aid to Families With Dependent Children program is expected to climb 141%. The number of people served by Medi-Cal, the state’s health program for the poor, is expected to surge 60%.

In contrast, the working-age adult population, typically those paying taxes and between the ages 18 and 64, is projected to grow by just 14%.

Shuit reported from Los Angeles and Weintraub from Sacramento.