Wilson Unveils Harsh Budget, Bases Plan on More U.S. Funds : Spending: Governor’s $51.2-billion proposal slashes services for the poor, but spares prisons and public schools. Outlays to local governments are also reduced.

Gov. Pete Wilson proposed an austere, $51.2-billion state budget Friday that is balanced on the hope of a huge infusion of federal money but still would force deep cuts in almost every government service except prisons and public schools.

The recession-driven plan calls for an 11% drop in spending that could lead to a tripling of community college fees and large fee increases at state universities, a 19% reduction in welfare grants, the curtailing of a range of health services for the poor, and a dramatic cut in the budget of every city and county in California.

Wilson also called for a 15% reduction in state government administration and the elimination of several high-profile agencies, including the Franchise Tax Board, the Department of Savings and Loan, the California Energy Commission and the Agricultural Labor Relations Board. He suggested that the California Arts Council and county fairs be weaned of taxpayer money and forced to depend entirely on private revenues.

The only tax increase in the Republican governor’s plan would be on low-income tenants, who would lose the renters tax credit. Wilson’s budget would allow a half-cent temporary sales tax to expire on schedule June 30 and a business tax break that was suspended two years ago to return.

“This is a very, very difficult budget,” Wilson said as he unveiled the document at the Capitol. “It reflects the hard times California is facing.”

Wilson said California has lost more than 800,000 jobs since May, 1990, when the state’s economy peaked, and the governor and his finance director, Thomas Hayes, said they expect the state to lose another 100,000 jobs this year before growth begins in 1994.

“When people don’t work, they don’t pay taxes,” Hayes said.

The economic downturn, combined with the tax law changes scheduled to take effect July 1, have turned the state’s once robust general fund stagnant. Revenues in the next fiscal year are expected to total $39.9 billion, down 2.6% from the current year.

Demand for state-supported services, however, has not slackened.

Public schools expect 96,000 more students next year, and the state expects 50,000 more welfare recipients, 380,000 more people eligible for Medi-Cal, 6,300 more state prison inmates and nearly 13,000 more students seeking to enroll at University of California and California State University campuses.

As a result, budget analysts have said the state’s revenues will be more than $7 billion short of what it would take to serve this new demand for programs and pay off a $2-billion deficit in the current year’s budget. Wilson expects to make up most of that shortfall with spending cuts.

Wilson’s budget goes to the Legislature, which is required by the state Constitution to return it to the governor no later than June 15. Last year, a partisan deadlock delayed approval of the budget until Sept. 2, 64 days into the fiscal year.

Wilson also asked lawmakers to make reductions in the current fiscal year’s budget by March 1. If those cuts are not made, Wilson said, another $500 million will have to be shaved from next year’s spending.

Early reaction from Democratic leaders was cautious.

Senate President Pro Tem David A. Roberti of Van Nuys suggested that he would like to leave the sales tax at its current level and devise a two-year plan to spread some of the budget pain into 1995. But he pledged to work with Wilson and said he would seek early passage of the budget legislation.

Assemblyman John Vasconcellos, the Santa Clara Democrat who has chaired the Assembly’s Budget Committee for more than a decade, said the plan clashed with Wilson’s stated goal of turning the economy around.

“The devastation this budget would immediately wreak on kids, universities and local government services seems to contradict the governor’s message of economic recovery,” Vasconcellos said. “We need to find a better way to bridge immediate needs with long-term recovery. We can’t afford, morally or fiscally, to give up on either.”

Republicans were generally more supportive. Assemblyman Curt Pringle of Garden Grove said he was “concerned about the hit local governments will take,” but suggested that belt-tightening is necessary.

“I think it’s the first step to forcing government to live within its means,” Pringle said. “That’s what taxpayers across the state have been saying they want.”

Outside the Capitol, a group that has fought to raise taxes on the wealthy and businesses blasted Wilson for targeting his cuts at renters and the poor.

“Going after the renters tax credit while allowing millionaires to deduct taxes on vacation homes, mansions and yachts shows where the governor’s true sympathies and priorities lie,” said Lenny Goldberg, executive director of the California Tax Reform Assn.

Although Wilson said his budget dealt with the state’s problems in a “straightforward fashion,” it includes one major gamble: his proposal that the federal government provide $1.45 billion more to the state to cover the cost of health, welfare and prison programs for immigrants and their children.

If Congress and President-elect Bill Clinton do not forward the money by May 15, Wilson said, he will have to tear up his spending plan and start over.

“We are paying a great deal of money to provide services that should be paid for by the federal government,” Wilson said, describing the cost as an “extraordinary burden.”

Wilson threatened that if the money does not come through--and there is no indication that it will--he will take the money from higher education and health and welfare programs. Among his targets: assistance for the homeless, hearing aids and wheelchairs for the poor, and general health care for the working poor and their children.

Even if California does wrest the extra money from the federal government, Wilson’s proposed budget includes extending deep cuts that only last September were ordered for almost every sector of government.

A major exception would be the prison system, the fastest-growing part of state government, which would expand 6% in the coming year as the number of inmates soars to a record 119,000. Wilson wants to open three prisons--in the Antelope Valley and in Kern and Imperial counties.

The other major survivor would be the elementary through secondary public schools. It was a bitter battle over primary and secondary school funding that was at the heart of last year’s budget stalemate.

This year, Wilson proposed to make good on his pledge to keep school funding even at $4,187 per student. Although schools would still lose ground to inflation and would have to accept a loan from future, constitutionally guaranteed funds just to break even this year, they still would fare better than most other programs.

“It’s not a great budget; it’s an ugly one,” said Maureen DiMarco, Wilson’s secretary for child development and education. “But it’s the best we can do under the circumstances.”

Reaction from school officials was muted.

State schools Supt. Bill Honig said Wilson’s proposal to loan schools money from the future was a Rube Goldberg maneuver, and he complained about a proposal that would give local districts wide latitude to decide how to spend more than $3 billion in funds targeted for students with special needs.

“This is nothing like last year,” Honig said at a news conference. “It is much more within a range of discussion.”

Leticia Quezada, president of the Los Angeles Unified School Board, said the proposed budget might help the massive district prevent a threatened teachers strike. The teachers have taken a cumulative 12% pay cut and are vowing to walk off the job unless the district guarantees that their salaries will not shrink further next year.

“I think it’s a tremendous sign of progress that we’re going in the right direction,” Quezada said.

Wilson took care of the lower grades partly at the expense of community colleges, which his budget would cut by $301 million, or 11% below what they are expected to receive in the current year. Wilson said the colleges could make up for the lost revenue by raising fees from $10 to $30 a unit, or $720 a year for a full load of courses.

The governor also presented budgets for the UC and the Cal State systems that would almost certainly lead to hefty fee increases, and he said he would back whatever fee level the governing boards of the two systems proposed. His budget would cut taxpayer support of UC by 7.3%, and support of Cal State by 4.5%.

As the centerpiece of Wilson’s social services proposal, the governor said he will again propose almost the same welfare reduction plan that the Legislature and voters rejected last year. It would immediately reduce grants by 4.2% and impose another 15% reduction in six months for families that include an able-bodied adult.

Wilson proposed to nearly double the number of welfare recipients in the state’s employment and training program and to boost food stamps and child care stipends for welfare recipients who work their way out of the program.

The governor also wants the state to withdraw a 3% cost-of-living increase scheduled for Jan. 1, 1994, for the aged, blind and disabled.

In health services, Wilson again proposed eliminating dental services, psychology, chiropractic, speech therapy, podiatry and other services that the state offers poor adults as part of the Medi-Cal program. Wilson also wants to close one state hospital.

Other cuts in health and welfare services would almost certainly result from the governor’s plan to shift $2.6 billion in property tax money from local governments to schools. This cut would come on the heels of a $1.3-billion reduction for cities, counties and special districts that was part of last year’s budget deal.

The reduction for local governments represents an about-face for Wilson, who last year fought to limit a Democrat-backed proposal to reduce funding for local governments. Wilson said then that further cuts would jeopardize public safety.

He said Friday that he will resubmit a proposed constitutional amendment to the Legislature that would require local governments to spend money on public safety and fire protection before allocating funds for any other purpose.

Victor S. Pottorff, a lobbyist for the County Supervisors Assn. of California, said county programs would be “dramatically impacted and reduced” under Wilson’s plan, which he said would prompt open political warfare among the different agencies of local governments.

“It is pitting every city, county and special district in the state against each other,” he said.

Los Angeles City Council members said the budget would devastate the ailing city.

“It’s a disaster,” said Los Angeles Councilman Zev Yaroslavsky, chairman of the Budget and Finance Committee, who estimated that it could cost the city as much as $350 million. “I don’t see how we can get through such a budget without closing dozens of fire stations, cutting police officers and closing city departments. This budget is a neutron bomb on the cities of this state. It leaves the buildings standing but there will be nobody in them.”

Wilson noted that most California counties have the authority to ask their voters to increase the sales tax by up to a penny to pay for services threatened by his budget proposal. But he and Hayes said they did not believe that their spending plan would force local governments to raise the levy.

“I don’t think you’re forcing a local tax increase,” Hayes said. “What you’re doing is forcing the local governments to prioritize.”

Contributing to this story were Times staff writers Eric Bailey, Sandy Banks, Jerry Gillam, Larry Gordon, Carl Ingram and Marc Lacey.

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What the Governor’s Plan Would Do

Gov. Pete Wilson’s proposed $51.2-billion blueprint for state spending in 1993-94 includes:

SCHOOLS: Spending is maintained at $4,187 per pupil for kindergarten through grade 12. But community college fees are likely to rise.

UNIVERSITIES: Higher student fees again appear likely as tax support drops for the state university systems.

LOCAL GOVERNMENT: Cities, counties and special districts lose $2.6 billion in property taxes to schools. Local governments could ask voters for sales tax increases.

WELFARE: Grants could be cut 19.2%

TAXES: No new taxes, though renters would lose their tax-credit. Businesses would get several tax breaks.

How Budget Would Change Your Taxes

This is how Gov. Pete Wilson’s proposed 1993-94 state budget would affect state taxes:

Sales taxes: A temporary half-cent levy imposed in 1991 would be allowed to lapse after June 30. But hard-pressed local governments could ask voters for sales tax increases of that amount or more to make up for $2.7 billion in property taxes that they would lose under the governor’s spending plan.

Income and corporate taxes: No increase on individual earnings. More tax breaks for businesses, which could deduct past operating losses in profitable years. Special tax breaks are included for small business investment, and deductions are expanded for research and development.

Renter credit: The governor is asking the Legislature to eliminate the renter tax credit--costing renters $840 million for 1992 and 1993.

Other fees and taxes: Wilson calls for no new taxes except for increases already scheduled to go into effect, such as a one-cent-per-gallon gasoline tax increase next January, as required by voter-approved Proposition 111.

Budget Highlights

Gov. Pete Wilson on Friday proposed a $51.2-billion state budget for 1993-94. Some of the key points:

LOCAL GOVERNMENT: Among the biggest losers under Wilson’s budget are local governments. The governor wants to take away $2.6 billion in property tax revenues that would normally go to cities, counties and special districts and shift the money to the schools. The Wilson budget cuts would put county supervisors and city councils on the spot--forcing them either to cut services or seek tax increases.

PUBLIC SCHOOLS: Despite an overall 11% proposed cut in state spending, the governor has proposed a 2.6% increase in spending on primary and secondary schools. The $718-million increase allows schools to keep pace with increased enrollment, keeping spending at $4,187 per student. But the budget makes no allowance for salary increases or inflation.

COMMUNITY COLLEGES: Unlike the public schools, the state’s community colleges fared poorly under the governor’s budget proposal for next year. Under his plan, the community colleges would receive 6.4% less than the current year. But Wilson said he is prepared to support tripling fees, up to $30 per unit.

WELFARE: Wilson has repeatedly argued that welfare grant levels are simply too high in California, and he again is proposing substantial cuts in payment levels to those receiving Aid to Families With Dependent Children. Last year, the Legislature agreed to cut the basic grant by 5.8%. This year, Wilson would cut grants by as much as 19% more.

HEALTH CARE: As he did last year, the governor has proposed cutting the services available to low-income people receiving Medi-Cal. His plan calls for eliminating dental care for adults and other services that are optional under federal law, such as psychology, chiropractic, podiatry and medical supplies. Wilson built his budget on the assumption that the federal government will provide $1.45 billion in special aid for immigrants living in California. If that money doesn’t come, he will make more cuts.

PUBLIC SAFETY: At a time when state spending generally faces a sharp decline, Wilson has proposed an increase in spending on prisons, the youth authority, the Highway Patrol and the state Department of Justice. Anticipating an increase of 6,100 prison inmates, Wilson has called for a 6% increase in the Department of Corrections budget.

STATE GOVERNMENT: While the number of state employees is larger than it was a decade ago, recent years have been marked by hiring freezes and staff reductions. The state now ranks 49th out of the 50 states in state employees per capita. The governor wants to cut state operations even more--cutting funding to operate most state programs by 15%. He is also calling for 15% reductions in spending by the Legislature and the courts.