Revised State Budget Includes Deficit Spending

Offering a revised fiscal plan that would balance the state budget by the end of his first term, Gov. Pete Wilson on Thursday proposed $1.1 billion in deficit spending, deep cuts in health and welfare services for the poor and a major tax break for companies that buy manufacturing equipment.

Wilson’s new budget proposal, like the one he released in January, gives top priority to state prisons and to education programs for children in kindergarten through the 12th grade. The schools’ gains would come at the expense of other local government services, which stand to lose $2.6 billion in property tax revenues.

Wilson made it clear that he does not intend to retreat from his insistence that a temporary half-cent portion of the sales tax expire on schedule June 30. But he called a statewide special election for November at which individual county governments can ask their voters to reimpose the half-cent levy and, in many counties, add another half cent as well.

“We’re going to give the power to the people to make the choice,” Wilson said.

It was not clear Thursday how far Wilson’s proposal will go toward preventing another long budget stalemate like the 63-day deadlock last summer that forced the state to pay some bills with IOUs and postpone some obligations entirely until the budget was signed Sept. 2.

The governor’s embrace of deficit spending probably will go over well with the Democrats who control the Legislature. It also appears the plan will have sufficient support from Republicans for passage. If approved, the proposal to spread out repayment of the state’s $2.7-billion year-end deficit over 18 months would give the state $1.1 billion more to spend in the coming year than otherwise would be available.

But Wilson’s proposed local government tax shift and the cuts he is seeking in aid to the aged, blind and disabled face opposition from both sides of the aisle.

Wilson said Thursday he still wants to cut welfare grants 4.2% immediately and another 15% in six months for families with an able-bodied adult still on the rolls. But he added a new wrinkle: remove from welfare entirely any able-bodied adult still on assistance after five years.

Under the new proposal, which could not be enacted without federal approval, a family of three that had been on welfare for five years or more would see its monthly grant drop from $624 to $409 over the next year and a half. These figures do not include food stamps, which would increase slightly. When Wilson took office, the monthly grant was $694.

“Welfare was intended to be a temporary program for families in need,” Wilson said. “We must make it that again.”

But Casey McKeever, an attorney for the Western Center on Law and Poverty, said Wilson was ignoring the will of the voters, who rejected his welfare reduction proposal last year, and the Legislature, where just Wednesday a key committee turned down his January proposal and substituted one of its own, which would not reduce grants.

“This is sort of a new level of ruthlessness,” McKeever said. “His program has been rejected repeatedly by the Legislature and the voters, and now he’s turned around and made it even harsher. I would think he would have gotten the message that grant cuts are not welfare reform.”

Wilson also proposed Thursday to cut aid to the aged or disabled by $17 a month, or 2.7%, and grants to the blind by $31 monthly, or 4.4%. And he has proposed elimination of dental, chiropractic and other health services for the poor.

“These are really difficult cuts, no question about it,” said Health and Welfare Secretary Russ Gould.

In his local government proposal, Wilson is calling for a revolutionary transfer of power and responsibility to city and county governments. To keep his commitment to education without using state money, he wants to shift to the schools nearly 25% of the property tax revenues now going to cities, counties, special districts and redevelopment agencies.

To soften that blow on local governments, Wilson proposes to free them from every state requirement except those relating to public safety. Presumably, that would cover everything from help for the homeless and the mentally ill to environmental laws on water quality and air pollution.

But Wilson acknowledges that removing the state requirements would not end the political and moral imperative that local officials are under to provide many of those services. So he proposes that they go to their voters and make the case for higher sales taxes, which would be controlled at the local level.

“If a county board of supervisors thinks it needs more money,” Wilson said, “the board should simply put that question to the voters.”

Opponents, however, assert that the result would be a patchwork of taxes and services markedly different from county to county.

“The generous counties are going to look forward to an influx of immigration for general (welfare) assistance and health coverage,” said state Senate President Pro Tem David A. Roberti (D-Van Nuys). “People living in non-providing counties will just move. These questions have to be handled on a statewide basis.”

Los Angeles County Supervisor Mike Antonovich, a Republican, denounced Wilson’s budget message. He said Wilson, a former mayor of San Diego, “has abandoned his own local roots and is holding a gun to the head of the taxpayer instead of cleaning up the state’s financial mess.”

Another part of the plan that drew fire Thursday was Wilson’s proposal to make even deeper cuts than necessary so he can set aside $457 million to pay for a tax break that would exempt purchases of manufacturing equipment from the sales tax. Wilson said the tax cut would help create jobs.

“It’s totally unconscionable to even discuss tax breaks for manufacturers when it appears to be paid for by cutting back on the supplemental security income of old folks,” Roberti said.

Wilson blamed much of the state’s problem on the Legislature and on the Clinton Administration for failing to comply with demands he made in January, when he proposed his original budget plan for the fiscal year that begins July 1.

In that plan, Wilson sought $739 million in immediate budget cuts through repeal of the renters tax credit and reduced health and welfare services to the poor. He also asked for $1.45 billion from the federal government to reimburse the state for the cost of services to immigrants and their families. The Clinton Administration has promised $564 million so far.

“The Clinton Administration is forcing us to cut about $900 million deeper into other state programs,” Wilson said. “By welshing on its obligations, the federal government is forcing California citizens to pay for services (to immigrants) and to suffer cuts in essential services for our own citizens.”

But California Democratic Party Chairman Bill Press was waiting outside the news conference with a ready reply.

“Pete Wilson is playing the blame game,” Press said. “He was elected to lead, not to pass the buck.”

Wilson said he was leading by updating his budget plan and laying it on the table for lawmakers to consider and debate. He said he saw no need for a repeat of last summer’s long budget deadlock.

“The Legislature now has my revised budget,” he said. “As soon as they pass it, I am ready, willing and even impatient to sign it.”

Times staff writers Jerry Gillam, Carl Ingram and Hector Tobar contributed to this report.

Wilson’s Budget Plan

Gov. Pete Wilson on Thursday released a revised $38.2-billion general fund budget proposal for the 1993-94 fiscal year and outlined a budget for the 1994-95 fiscal year. Here are the highlights of his announcement:

TAXES The governor proposes to repeal the $60 renters tax credit, allow a temporary, half-cent sales tax to expire on schedule June 30 and set aside $457 million to pay for a tax break that would exempt the purchase of certain manufacturing equipment from the sales tax.

DEFICIT ROLLOVER He wants to spread repayment of the $2.7-billion year-end deficit over 18 months, which would give the state about $1.1 billion more to spend in the fiscal year that begins July 1 than otherwise would be available.

LOCAL GOVERNMENT Wilson stands by his proposal to shift $2.6 billion in property tax revenues from local government and calls for repeal of every state requirement on local government except those related to public safety.

HEALTH AND WELFARE Wilson proposes cutting aid to the aged, blind and disabled by up to 4.4% and proposes ending welfare grants to able-bodied adults on the rolls for five years or more. The governor also stands by his January proposal to reduce welfare grants by 4.2% immediately and another 15% for those still on the rolls after 18 months.

PUBLIC SCHOOLS The governor holds to his commitment to keep spending on kindergarten through 12th grade at $4,185 per student in 1993-94 and proposes that it be $4,200 per student the following year.

HIGHER EDUCATION Wilson makes few changes from the budget he proposed in January. His revised plan would still reduce state spending on higher education by $208 million, or 5.5%, in 1993-94. Wilson endorses fee increases that would triple the cost of a community college education and would result in fee hikes of 33% at the University of California and 36% at the California State University system.

PRISONS Wilson proposes to increase spending on state prisons by $253 million, or 8.4%, in 1993-94, and another $249 million, or 7.6%, in 1994-95. The governor expects the prison population to climb from the current 113,769 to 122,317 at the end of the next fiscal year and 130,058 by the end of the following year.