Treasurer Calls Wilson’s Budget Unrealistic : Finance: Kathleen Brown says the governor’s proposal could further hurt the state’s credit rating. She is accused of failing to provide solutions.

Referring to herself as a “skunk at a garden party,” state Treasurer Kathleen Brown chided Gov. Pete Wilson Tuesday for proposing what she described as a budget balanced on rosy economic and political projections with an emergency reserve so tiny that it is neither prudent nor realistic.

Brown said Wilson’s proposal is almost certain to result in further downgrading of the state’s credit rating.

But Brown, who opposes new taxes, refused to suggest program cuts that could be used to produce a better budget and rebuild the reserve. To do so, she said, would jeopardize her status as an “independent” watchdog for the state.

After her press conference, Brown was sharply criticized by a fellow Democrat who said Brown, and not Republican Wilson, represents the biggest threat to the state’s credit rating.

Instead of calling press conferences to advance her political career, Brown should be in New York negotiating a deal to extract California from its fiscal problem and then working behind the scenes in Sacramento to get it through the Legislature, said Assemblyman Steve Peace of La Mesa, chairman of the Assembly’s bonded indebtedness committee.

Brown said the governor’s reserve is so small--$105 million in a proposed budget of $60.2 billion--that it is virtually certain California will face yet another unbalanced budget at the end of the next fiscal year, which begins July 1.

“This budget does not provide a prudent reserve,” she said. “It could be wiped out by one earthquake or one forest fire or by weak tax receipts.”

Brown said the small reserve was even more worrisome because of what she called the Administration’s optimistic revenue projections. She noted that while Wilson’s economists expect Californians’ personal income to climb 4.9% in 1992, they predict that state tax revenues will increase by 9.3%. She said this is unrealistic.

She also questioned Wilson’s judgment for balancing the budget on the premise that the Democratic-controlled Legislature will adopt his entire proposal to cut health and welfare benefits by March 1.

“I feel a little bit like a skunk at a garden party,” Brown said. “But that’s my job. My job is to give them the facts, to deal with economic and fiscal realities.”

With one credit rating bureau already dropping California’s bonds from AAA to AA and two others poised to act soon, Brown said she would find it difficult to defend the state’s fiscal health without some signal that the Legislature and the governor are willing to cut deeper into the budget. A lowered credit rating usually forces the state to pay higher interest rates when it sells bonds.

“This is a budget that spells downgrade ,” she said. “I urge the governor to go back to the drawing board.”

Finance Director Thomas W. Hayes said he would like a larger reserve but believes $105 million is “prudent under the circumstances.” Hayes also defended the revenue projections, and figures show that it is not unusual for the state’s coffers to experience double-digit growth even as personal income is climbing only 5% or 6% a year.

But a harsher response to Brown’s rhetoric came from Peace, who lashed out at the treasurer for talking too much about the state’s fiscal problem while failing to do anything about it. Peace invoked the memory of the late Jesse Unruh, the longtime Assembly Speaker who as treasurer in 1983 helped craft a compromise package that kept the state going through a fiscal crisis brought on by recession.

“This woman does not know what her job is,” Peace said. “If that’s what she perceives the job of treasurer to be--a skunk--she’s doing a helluva job of it. And that’s all she’s doing, being a skunk.”

Peace, who last summer advocated that the state substitute short-term financing for some of the $7.6 billion in new taxes backed by Wilson, said Brown had forfeited her role as champion of the state’s fiscal condition.

“Her job is to take the work product, to be a part of the process, to sell the package of the state, the very best she can,” he said. “Today, because she adopted a political stance, made a political speech against the governor, she has disqualified herself from being able to represent the state. She chose politics instead of choosing to deal with her position as treasurer.”

Brown said she wasn’t telling the media anything that the credit rating agencies didn’t already know. “The rating agencies don’t live in caves,” she said. “They get the budget, they get the cash flows, they look at it.”