Analyst Calls for State Spending Cut of $1 Billion

The Legislature’s nonpartisan analyst on Wednesday recommended nearly $1 billion in spending reductions to help erase the state’s budget shortfall, with most of the proposed savings coming out of the public schools.

Legislative Analyst Elizabeth Hill suggested cutting about $600 million from what Gov. Pete Wilson has proposed for the schools, including major reductions in special programs that fund teachers’ aides, textbooks, computers and smaller class sizes.

Hill, in her annual critique of the governor’s spending plan, also suggested that the Legislature explore linking Wilson’s proposed repeal of the renters’ tax credit to a similarly sized hit on homeowners.

Like Wilson, Hill said she believes California’s economy will plunge further before joining the rest of the nation in recovery. She said the state’s private sector probably will shed another 120,000 jobs in 1993.

The economic downturn already has resulted in huge state budget shortfalls the past two years as state tax revenues fell below projections and expenditures exceeded expectations. This year, the problem is exacerbated because a temporary half-cent sales tax enacted in 1991 is due to expire June 30, resulting in a $1.5-billion drop in revenues in the fiscal year that begins July 1.

The current shortfall is estimated at $8 billion.

Wilson in January proposed a $51.2-billion budget balanced on the hope of a $1.5-billion infusion of federal money and a $2.6-billion shift of property tax dollars from local government.

He proposed saving $800 million by repealing the renters’ tax credit, $1 billion by cutting health, welfare and higher education, and $540 million by forcing primary and secondary schools to engage in deficit spending by paying for current programs out of future revenues.

Hill said Wilson’s proposed budget includes a number of elements that may not be realistic. She cited his call for increased federal funding--even as President Clinton and Congress are trying to reduce the deficit--and his proposal that the Legislature make cuts in the current budget by March 1, a deadline that clearly will not be met.

Hill suggested $890 million in changes--almost all budget cuts--to help resolve the problem. Two-thirds of her total focused on education programs.

The bulk of Hill’s proposed education cuts would fall on special programs that do not serve the general student population. She proposed cutting $175 million budgeted for growth in those programs--which include such functions as education for the disabled and the gifted and bilingual instruction. Another $270 million, she said, could be saved by delaying purchase of textbooks and computers, hiring fewer instructional aides and allocating less money for reducing class sizes in English, history and science.

Hill said the savings could be redirected to general education or used to reduce the size of a $540-million loan Wilson has proposed the state extend to the schools.

Hill’s education proposals drew fire from Assemblywoman Delaine Eastin, a Union City Democrat and chairwoman of the Assembly Education Committee.

Eastin said the special programs make a difference in the quality of education.

“People are looking around for any place to cut,” said Eastin, who would prefer to leave the half-cent sales tax on the books. “Now they have got someone who will tell them this is the thing to do. Some people will wave this around like a flag.”

Some of Hill’s proposals seem likely to attract flak from Republicans.

On the renters’ credit, for instance, she said it makes sense to repeal the program, which allots $60 to low-income renters whether they pay taxes or not. But she said it also would be fair to eliminate the homeowners’ property tax exemption, which was created in tandem with the renters’ credit before Proposition 13 slashed property taxes in 1978.

The homeowners’ exemption, unlike the renters’ credit, is in the state Constitution and cannot be repealed by the Legislature. Hill suggested docking homeowners a similar amount by adjusting the tax deduction for home mortgage interest.

Hill also said the Legislature and the governor should pause before enacting any further shift in local government revenues. Last year, the state moved $1.1 billion from cities, counties and special districts to the schools. This year, Wilson wants to shift another $2.6 billion.

The property tax, a local revenue source, is best kept in the hands of local governments, Hill said. She suggested that an additional 1 cent of the sales tax be shifted to Sacramento control. This would provide the state with an additional $3 billion on top of the $14 billion it receives in sales taxes.