State Seeks New Cuts in Budget : Spending: Administration says $5.7 billion more must be eliminated. Democratic lawmakers say Wilson is trying to dodge the problem by not offering a plan.

In its final assessment of the state’s fiscal condition before the deadline for the Legislature to enact a new budget, the Wilson Administration on Wednesday described the situation as “grave” and said Gov. Pete Wilson’s $60.2-billion spending plan must be cut by $5.7 billion beyond the level he proposed in January.

The Administration ruled out a tax increase, but the Republican chief executive refused to offer a plan to balance the budget, drawing heated criticism from Democrats who said Wilson is ducking his obligation as governor.

With Californians’ annual personal income falling for the first time since 1938 and the loss of jobs worse than in any recession since the end of World War II, plummeting tax revenues will leave the state nearly $11 billion short of what would be necessary to pay off this year’s projected deficit, rebuild a reserve and meet the needs of more students, prison inmates and poor people without reducing services, according to the Finance Department.

In January, Wilson suggested narrowing that gap by going into the new fiscal year with only a bare-bones reserve, slashing health and welfare programs and reducing the salaries of state workers. But the Legislature has not passed his proposals.

But even if lawmakers accept those Wilson proposals, which include his call for a cut of up to 25% in welfare grants, another $5.7 billion in cuts or taxes would be needed to balance the budget for the fiscal year that begins July 1, the Administration said.

One scenario for balancing the budget without a tax increase would require the Legislature to cut school funding by $2.3 billion and reduce state support for almost all other programs by 14.7% beyond what Wilson proposed in January.

Although the state has confronted grim budgets before, the governor and the Legislature this year face not merely trimming the growth in spending, as they have in the past, but reducing spending in actual dollars from one year to the next. By the end of the current fiscal year June 30, the state is expected to spend about $44 billion from its general fund. In the year beginning July 1, only $38 billion will be available, the Administration estimates.

“The fiscal condition of the state of California is grave,” Deputy Finance Director Steven Olsen told an Assembly-Senate conference committee. “This clearly is a very serious situation.”

But Olsen said Wilson would break with tradition and decline to spell out in public his revised plan for balancing the budget. To do so, Olsen said, probably would cause such an uproar that it would ruin any chance he has of reaching agreement with the Legislature by the June 15 deadline for passage of a new budget.

Wilson’s strategy drew criticism from Democrats, who called on the governor to present a detailed plan or stop maintaining that one can be drafted. Many contend that the governor has been silent because he does not know how to extract the state from its predicament.

“He ought to be leading rather than dodging,” said Assembly Ways and Means Committee Chairman John Vasconcellos (D-Santa Clara). “He is supposed to give us a balanced budget.”

Rather than go public with a plan, Wilson has been meeting privately with legislative leaders of both parties in hopes of building a consensus that they can sell to two-thirds of the members of each house of the Legislature. In addition, he has published a series of scenarios that broadly describe the options he believes lawmakers have to choose from.

The scenarios differ depending on what the Legislature decides to do with funding for public education, which could be cut about $2.3 billion below Wilson’s January proposal without violating Proposition 98, the voter-approved constitutional amendment that protects school funding.

If the full schools cut is adopted, giving the schools less money to spend next year even though officials expect 200,000 more students, the remainder of the state budget not protected by the Constitution would have to be cut 23.4%, the Administration said. If schools get what Wilson proposed in January, the rest of the budget would have to be cut 32.5%.

But these scenarios assume that there is no tax increase and that the entire $3.8-billion deficit expected at the end of the current year is paid off in the year beginning July 1.

State Supt. of Public Instruction Bill Honig, in an interview Wednesday, became the latest Democrat to call for a two-year plan to pay off the deficit, which would reduce the need for budget cuts in the next fiscal year. Assembly Speaker Willie Brown, Treasurer Kathleen Brown and Controller Gray Davis also have suggested that approach. Wilson has resisted the idea.

Honig said the alternative is to devastate the schools or other state-supported programs, neither of which is desirable. The maximum school cut under consideration, he said, would result in a reduction of $500 per student.

“That will cripple education in this state for the next decade,” Honig said. “You would be making a devastating decision for the state that I don’t think will be acceptable to most people in California.”

Another option, Honig said, is to “close tax loopholes”--the Capitol euphemism for a narrowly targeted tax increase. Reducing the deduction for business meals and entertainment from 80% to 50%, for example, would generate an additional $230 million annually for the state.

But so far, except for Wilson’s proposal to repeal the renters’ tax credit, the governor and the lawmakers with whom he is conferring have sworn off new tax revenue and have not begun to talk seriously about adopting a two-year plan for balancing the budget.

In another development, the California State Employees Assn. announced Wednesday that two of its bargaining units have reached tentative agreements with the Wilson Administration, heading off the governor’s call for a 5% pay cut.

Instead, the clerical and custodial workers agreed to work one day a month without pay for the next 18 months. The days would be counted as vacation that could be taken later at the discretion of management. The pact, which still must be approved by the rank-and-file workers and the Legislature, also calls for a raise of up to 10% during the three-year life of the contract and a freeze in the state’s contribution to workers’ health care plans.