Wilson Studies Plan to Delay Deficit Payment

Gov. Pete Wilson said for the first time Tuesday that he would consider postponing repayment of the state’s multibillion-dollar budget deficit--a move that could make it much easier to balance the state’s spending plan for the fiscal year that begins July 1.

Wilson, speaking to reporters at the Capitol, said he is going to “take a look” at the concept--a distinct softening of his long-stated opposition to anything that resembles what he has called “Washington-style deficit spending.”

The Republican governor insisted that he has not abandoned his resistance to any budget that calls for the state to intentionally spend more money in a 12-month period than it expects to take in from taxes.

But he said what he has in mind is different because it would involve deferring repayment of some portion of the red ink already on the books--expected to reach about $3 billion by the time the fiscal year ends June 30.

“What I have condemned is deficit spending, conscious deficit spending where you are deliberately creating a situation where you have no expectation or hope of being able to pay the thing off and are simply deferring it into the future,” Wilson said. “That’s what has happened in Washington. I don’t intend to do that here.”

He added: “If there is the possibility of isolating a particular segment of a debt . . . if there is some way to extend that for a few months, I would take a look at that.”

The effect, however, would be the same for budget writers: more money available to keep the state’s programs going and less of a need for either cuts in services or tax increases to balance the budget.

Wilson’s disclosure was welcomed by Democratic leaders in the Legislature, who argued for a similar strategy a year ago but were rejected by the governor. They said that the state has been “rolling over” its deficits for years but has been doing it in a haphazard way to avoid the appearance of deliberate deficit spending.

Senate leader David A. Roberti, a Van Nuys Democrat, said he expects the next budget to include deficit spending whether Wilson acknowledges it or not, with the state using “the same pretext of the past three years and saying it is not happening.”

But Assembly Speaker Willie Brown (D-San Francisco) said it makes much more sense to acknowledge up front that the deficit is too large to retire in a single year.

“We keep doing this nonsense on an annual basis,” Brown said. “We get into this business of rolling it over and not doing it in a manageable fashion, not doing it in an intelligent fashion. I am pleased that he is in fact serious about that.”

Until now, Wilson had insisted that each year-end deficit had to be eliminated--at least on paper--in the following fiscal year’s spending plan. That meant that all of the red ink had to be deducted from anticipated tax revenues before any money could be earmarked for programs. In the coming fiscal year, for example, state analysts were expecting the state to collect almost $40 billion in taxes, but were counting on having only $37 billion left to spend after paying off the $3-billion deficit.

Any portion of that $3-billion debt that is deferred to another year would free more money for the Legislature and the governor to spend on services. The full $3 billion is about equivalent to the amount the state will spend this year on the entire prison system or on the University of California and California State University systems combined.

It was not clear from Wilson’s comments Tuesday exactly how far he would be willing to go. Although he spoke of extending some obligations for “a few months,” Wilson compared the idea to the state’s decision in 1992 to stretch over 10 years repayment of $600 million that courts ruled had been collected illegally in sales tax from federal aerospace contractors.

Neither the governor nor his aides pointed to a particular part of the deficit that was comparable to the aerospace situation, and an aide confirmed that Wilson was talking about the kind of multi-year budget plan proposed by lawmakers.

Dan Schnur, Wilson’s chief spokesman, said that Wilson is exploring the idea as an alternative to extending a half-cent portion of the sales tax that is due to expire June 30. Wilson remains steadfastly opposed to extending the tax even though most Democrats and some Republicans favor the notion.

Schnur said added impetus is coming from the fact that the federal government is expected to deliver $1 billion less in aid for services to immigrants than Wilson requested, and the Legislature has rejected nearly $1 billion in budget cuts that the governor proposed.

“The budget is getting more and more difficult to balance,” Schnur said. “We would discuss an extension of the deficit repayment schedule only in the context of a budget without tax increases and without deficit spending.”

Also on Tuesday, Wilson invited legislative leaders from both parties to meet with him in an effort to craft a consensus on a series of measures to spark job creation in California by lowering the cost of doing business in the state.

Wilson carried with him several reports filled with recommendations, dropping each on a table with a thud to illustrate his contention that the Legislature has done little despite widespread agreement about the scope of the problem.

“What we have not had is action,” Wilson said.

Speaker Brown accepted the invitation but criticized Wilson for failing to get involved much earlier. He noted that the Assembly has been producing bipartisan economic stimulus bills for weeks, including bipartisan approval of a major overhaul of the workers’ compensation insurance program.

“We have not waited for the governor to come back to Sacramento to start participating,” Brown said, noting that Wilson has been traveling the state talking about jobs but has not been engaged in the legislative process.

Brown said he intends to present Wilson an agenda of two dozen pieces of legislation that have bipartisan support and ask the governor to support them. In addition to workers’ compensation, the bills range from overhauling the way government regulates businesses to the financing of infrastructure improvements from both taxpayer and private funds.