The Budget Battle That Promises Only Losers : California: When UC can’t get any respect, and when legislators think about dumping the Prop. 13 bailout, you know there’s trouble.

Welcome to California’s 1992 budget lottery: Everyone is guaranteed to be a loser. Because the prize money has run out.

Last year, Gov. Pete Wilson and the state Legislature closed a $14.3-billion budget gap by coupling program cuts to tax hikes. Luckily, 1991 was not an election year.

This year is--one of the most angry and least predictable on record. And Sacramento budget-writers face a $11-billion deficit. Which sets up a classic lose-lose situation, in which Wilson and the Legislature have little room to maneuver.

Wilson and many legislators have sought refuge in a “no-new-taxes” pledge. But California’s recession-weakened economy isn’t cooperating--stagnation never makes budget-balancing and program-promising easier. The state’s population, particularly groups who rely on state-funded services, continues to grow. Economics, politics and demographics have reached critical mass in California. And everybody is reeling.

Democratic legislators face a choice of curtailing state programs that benefit their traditional constituencies--the education community, poor and minorities--or risking the wrath of middle-class voters by raising taxes to pay for them. So Democrats have embraced other alternatives: rolling over at least a portion of the deficit to next year’s budget and tightening tax loopholes. But a rollover only postpones the inevitable.

In any case, why should anyone think voters trust legislators enough to let them play around with deficit financing?

Legislative shenanigans could stir up support for Wilson’s Taxpayers’ Protection Act, which will be on the November ballot. The initiative would, among other things, grant the governor unprecedented budget authority. The more foolish the Legislature looks, the more desperate the fiscal situation becomes, the better Wilson’s chances may be to make a case for giving him new powers.

Perhaps this explains why he’s gone around drawing lines in the sand--no rollover, no “business-bashing” taxes, no spending-cut reprieve for the education Establishment--that virtually guarantee a protracted battle over state finances.

But California voters aren’t stupid; they perceive both the governor and the Legislature as parts of the problem and don’t believe either can solve the budget crisis. That might put careers at risk.

In 1990, state and federal budget fiascoes contributed to passage of a legislative term-limit initiative. Congressional term limits are on the ballot this November. So are state legislators running in redrawn districts and for new offices.

Wilson isn’t on the ballot, but his political stock for 1994 could tumble if voters shove his initiative back into his face. And, just as Gov. Jim Florio’s unpopular budget moves backfired against Democratic Sen. Bill Bradley in New Jersey, fiscal chaos in California could hurt John Seymour, Wilson’s appointed successor, in November.

If politicians face the unpleasant fallout of recession economics, their constituencies face the equally painful outcomes of recession politics. Dramatic power shifts are under way. The state’s most sacred cows are being sacrificed. A good example is the University of California.

There was a time when UC talked and everybody in the Capitol listened. Even as student fees climbed to meet increasing fiscal demands, the university’s special status shielded it from Draconian budget cuts. No more.

California’s entire higher education system faces cuts that could require faculty layoffs, class cancellations, enrollment lids, even campus closures.

Why has UC’s political clout eroded?

Part of the answer is economics. No money means no protection. And agri-business and high-tech industries, among UC’s biggest boosters, are having economic problems themselves. Downsizing has thinned UC’s defensive ranks.

Another part of the answer may lie in the university’s changing demographics. As UC has moved to diversify its student body, enrollment figures show a significant decline in Anglo students. Meanwhile, there has been a shift in electoral clout from urban and rural areas to the suburbs. What has happened is that the children and the grandchildren of the Californians who vote and pay taxes, and who vote on raising taxes, are not the students who attend the University. This has weakened UC’s political base.

Republican support for the university is at risk in a political year when attacks on the “cultural elite,” a category into which California conservatives have long dumped UC, serve as GOP battle cries.

Meanwhile, Democrats representing urban and liberal districts, who have encouraged UC’s diversity, have been turned off by a growing perception that the university and its administration are “arrogant” and out of touch with ordinary Californians. This perception has been fed by the financial windfall the UC Board of Regents voted retiring UC President David P. Gardner. The decision was made behind closed doors and not long after the regents raised student fees by 22% and froze faculty salaries. Legislators got mad and plotted getting even.

But signs are that, after the machinations play out and all the oxen are gored, Sacramento will again pass the buck when it comes to making hard budget choices. That would literally happen under a plan that would cut state aid to local governments, shift the money to schools and perhaps grant cities and counties the authority to raise taxes to replace it.

In the wake of the recent U.S. Supreme Court decision upholding Proposition 13, Sacramento is proposing to reverse the state bailout that helped local governments survive the property-tax cuts mandated by the initiative. If enacted, the plan would turn the budget-making clock back to pre-1978. Local governments would no longer be in thrall to Sacramento for needed funding.

The plan’s attractions aren’t elusive. Skyrocketing health and welfare costs would be taken off state books, and hard social choices off Sacramento’s back. Schools would be better protected, and local elected officials would face the heat for raising taxes or slashing services.

But in today’s political and economic climate, local resources won’t reach pre-Prop. 13 levels. One result could be wars between cities and counties over state crumbs. Another could be higher and higher taxes and fees for local residents enjoying fewer and fewer services.

Didn’t that help trigger Prop. 13 in the first place?

In this confusing budget year, only one thing is certain: California is broke. If and when and how --and on whose backs--our political leaders decide to resolve the crisis will go a long way toward determining whether this state can be fixed.