Schools, Prisons to Be Fully Funded in Wilson Budget : Spending: The governor’s $60.2-billion proposal would cut health and welfare benefits for the poor as well as eliminate renters’ tax credit.

Gov. Pete Wilson on Thursday proposed a $60.2-billion state budget that he said would fully fund growth in public school enrollments and prison inmate populations while slashing health and welfare benefits for the poor and sharply increasing university fees.

Orange County residents could feel the pinch in many ways.

More than 87,000 welfare recipients would lose a chunk of their income. Outdoor enthusiasts could face shorter hours at parks from Bolsa Chica to San Onofre, local students would have to dig deeper to make their tuition payments, and county services would almost surely have to be trimmed even further to make up for missing state revenue.

Still, Wilson’s proposal could clear a crucial political test in Orange County: The spending plan does not call for raising general taxes to help erase an 18-month shortfall that the governor predicts will reach $5.2 billion. When Wilson raised sales taxes last year to help overcome a shortfall, he hit a firestorm of controversy, fueled largely by anti-tax advocates in the county.

Instead of a general tax hike, Wilson wants to eliminate the renters’ tax credit and cut welfare benefits to poor families by as much as 25%. Wilson also proposed eliminating a number of medical and dental services for poor adults that the federal government does not require the state to provide.

Without new general taxes for the fiscal year that begins July 1, Wilson’s spending plan would be slightly bigger than the current year’s budget but would fall far short of what it would take to pay for all current state services and their anticipated growth for another 12 months.

Wilson said he would maintain a state hiring freeze and continue to press for a 5% salary cut for state workers. The Legislature agreed to the payroll reductions in concept last summer but has not granted Wilson the authority he needs to make the cuts.

The Republican chief executive also advocated a handful of new programs consistent with his theme of “preventive government.” Most significant among these is a basic health insurance program for preschool children of the working poor.

“Budgets require choices,” Wilson said at a Capitol news conference. “Tough budgets require tough choices. This budget reflects our choice to invest in the future of California.”

Some Orange County observers challenged that, however, warning that the welfare cuts could take a long-term toll. The result, some officials warned, could be added strain on the county’s health-care services as people leave the shelter of their homes.

“We may save on the budget this year, but down the line we’re going to end up paying the price,” said Dave Levy, a member of the Orange County Housing Now! Coalition, an advocacy group supporting creation of more low-income housing.

Wilson’s proposal now goes to the Democratic-controlled Legislature, which will hold hearings, make changes and seek to adopt its own version by the June 15 deadline required by the state Constitution. Wilson asked the Legislature to adopt some of his proposed cuts by March 1, but, given the Democrats’ resistance, early action seems unlikely.

Legislative reaction was muted, in part, perhaps, because Wilson has put the Democrats in a political bind. If they want to avoid the welfare cuts he proposed, they must either suggest raising taxes or cutting public education funds, or both, which they are loath to do in an election year.

Democratic Senate Leader David A. Roberti of Los Angeles said parts of the budget were “confusing, odd and unfair.” He dubbed Wilson’s proposal to eliminate dental care for poor adults who are served by the state Medi-Cal program, “Lose your job, lose your teeth.”

“People who lose their jobs and are on Medi-Cal, on hard times, they need dental care,” he said.

But Republican budget writers praised Wilson’s plan. Assemblywoman Cathie Wright of Simi Valley said the governor was on the “right track.” State Sen. Frank Hill of Whittier said Wilson had “come back to his Republican base” a year after advocating more than $7 billion in tax increases.

Outside the Legislature, advocates for children criticized Wilson’s proposed welfare cut and suggested instead that he repeal or shrink several tax “loopholes,” among them provisions that allow businesses to deduct meal and entertainment expenses and permit owners of large boats to deduct the interest they pay on loans used to finance their purchases.

“The governor wants to cut services while continuing to subsidize the luxury living of the rich,” Gloria Blackwell, president of the California Parent Teacher Assn., said at a Marina del Rey news conference.

Wilson dismissed such criticism as “partisan twaddle” and urged lawmakers to suggest alternatives if they don’t like his proposals.

“It is not a spectator sport for the Legislature,” he said of the budget process. “They are going to have to deal with the same unpleasant and harsh realities that we have confronted.”

If the Legislature rejects Wilson’s welfare proposal and fails to cut the current year’s budget by March 1, lawmakers will need to find $1 billion in new revenue or additional reductions to balance next year’s budget.

Wilson’s $60.2-billion proposal for 1992-1993 includes $43.8 billion for general programs, $12.4 billion in special funds, mainly fees, and $3.9 billion in bond funds. Overall, the budget would grow by $2.5 billion, or 4.3%. But less than $100 million of that would be in the general fund, which pays for most state programs and services.

Finance Director Thomas W. Hayes predicted that the state’s economy would begin to turn around midway through 1992. Although his estimates for growth in the economy--on which the state’s tax revenues hinge--were within the range of forecasts by private economists, Hayes conceded that the projections were uncertain.

“We’re shooting at a moving target,” he said. “We are in uncharted waters.”

Partly because the Administration was overly optimistic about the 1991 economy, Hayes said, there will be a $5.2-billion shortfall over the next 18 months. That includes what is needed to pay off a projected $1.3-billion deficit in the current year’s budget, rebuild a $1.3-billion reserve and continue all existing services at current levels for another year.

Hayes projected that public schools and community colleges would receive an additional 217,914 students in the coming year while 4,735 students would be added to the rolls at the University of California and California State University campuses. He forecast net gains of 248,285 welfare recipients, 302,200 Medi-Cal users and 5,401 state prison inmates.

Because of these “caseload” increases, Wilson said, “the budget continues to grow even as we make cuts in programs.”

To help close the gap, Wilson proposed entering the next fiscal year with a reserve of just more than $100 million. He also suggested $3.25 billion in budget cuts and about $872 million in additional revenues and transfers from special funds to the state’s general fund.

Although he proposed no general tax increases, the governor suggested saving $376 million by eliminating the renters’ tax credit and $110 million by repealing a tax credit for businesses that provide health insurance to their workers. He also wants to shift $347 million in property taxes to the schools from special districts, which would force hundreds of water, waste, harbor and airport agencies to raise their fees or cut their budgets.

Under Wilson’s vision for the state, the public schools and the prisons would do best.

The schools would get an increase of about $1.8 billion, or 7.9%, to pay for higher enrollments, provide a 1.2% cost-of-living increase and pay for $100 million in special programs singled out by Wilson. Included among these would be $50 million more for preschool programs, $30 million for health and mental health programs for children, $10 million to revitalize low-performing schools and $10 million to provide up-to-date technology for health education programs.

The state prisons also would get an increase of $195 million, or 7.8%. More than half of the increase would go to open new prisons in Lancaster, Delano in Kern County and Calipatria in Imperial County. Wilson said he would reject any effort to curb spending on correctional programs.

“We simply cannot opt for the foolhardy and short-sighted budget savings that come from releasing criminals from prison early,” he said.

For the University of California, Wilson suggested a 4.5% increase to $2.8 billion. Much of the increase would be paid by increasing annual fees 24%, to $2,824. Similarly, he suggested 1.1% boost--to $2.1 billion--for the California State University system. He urged the CSU trustees to increase fees by 40% to $1,310.

The fee increases can be expected to hit hardest on middle-class families and their children who attend the universities. The wealthy are more able to afford the higher charges and the poor benefit from extensive financial aid that both systems provide.

Even with the fee increases, Wilson said, both higher education systems would remain “an incredible bargain” when compared to the cost of a public university education in other states.

The brunt of Wilson’s budget-balancing plan would be borne by the poor who are aided by the state’s health and welfare programs. He proposed cutting about $1.3 billion from these programs in 1992-1993.

Wilson’s welfare proposal, which he unveiled last month, would save $600 million by cutting grants 10%, reducing the monthly stipend for a family of three from $663 to $597. After six months, families with an able-bodied adult still on welfare would lose another 15%.

In addition, Wilson proposes to reward teen-age mothers who stay in school and penalize those who do not, eliminate benefit increases for women who have additional children while on aid and give smaller welfare stipends to new state residents. Wilson’s budget would eliminate another state program that grants welfare benefits to poor pregnant women who do not already have children. Under Wilson’s proposal, the women can apply for welfare after they deliver.

The governor also proposed cuts in health services for poor adults, suggesting that they no longer be allowed state-subsidized visits to dentists, psychologists, chiropractors, podiatrists, acupuncturists and other specialists. This would save about $100 million annually.

Wilson also proposed saving $60.8 million by limiting hospital stays under Medi-Cal to 60 days, except for children under the age of 6. He wants to reduce reimbursements to nursing homes by $28 million and shift $60 million from anti-tobacco programs to Medi-Cal services to pregnant women.

Even while he advocated these cuts, Wilson proposed a new, $20-million program to provide basic health insurance for children between the ages of 2 and 5 who lack private health coverage but are not poor enough to qualify for Medi-Cal.

Wilson also proposed a $6-million boost for family planning services and $5.9 million to fight lead poisoning in children and workers.

Times staff writers Carl Ingram and Jim Newton contributed to this report.

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The Governor’s Budget Plan

Gov. Pete Wilson has proposed a $60.2-billion state budget in a 1992-93 spending plan that includes: Welfare: 10% cut in welfare grants to offset a sharp rise in the number of recipients during the past two years. Schools: Increased funds for the public schools--7.9% more than last year and more than enough to offset an expected 3.5% increase in enrollment. Universities: Higher fees for students, 24% more on University of California campuses and 40% more in the California State University system. Prisons: An increase of 7.8% for the Department of Corrections to accommodate a rapidly rising prison and parolee population. Health: Selective improvements in health services for young poor children, while cutting a variety of medical benefits for adults. Deficit: Paying off a budget deficit of $1.3 billion from the current fiscal year.