Wilson’s Budget Slashes Welfare, Backs New Prisons : Spending: Governor unveils $55.4-billion proposal. Some burdens would shift to the local level, but plan to fill $3-billion gap with federal funds is called ‘unrealistic.’

Gov. Pete Wilson proposed a $55.4-billion state budget Friday that would slash aid to the poor and shift new responsibilities for health and welfare programs from the state to local government.

Wilson said he wants to boost funding for prisons--to keep pace with the increasing number of inmates--and give the public schools enough money to keep up with enrollment, if not inflation. Community college and university students would face fee increases.

The budget would not raise taxes. It includes the modest tax breaks Wilson has proposed for new businesses and families earning less than $40,000 a year.

Despite a constitutional requirement that he present a balanced budget, Wilson’s spending plan has a $3-billion hole, which he hopes to fill with a massive, unprecedented infusion of aid from the federal government. Most of this is money Wilson says the state pays for services to illegal immigrants, which he argues is a federal obligation.

If that money does not materialize by June, Wilson will have to raise taxes or find spending cuts totaling nearly 8% of his general fund budget.

Tom Epstein, President Clinton’s liaison for California issues, said Clinton sympathizes with Wilson’s concerns. But Epstein said the Administration and Congress are constrained by a deficit-reduction law that requires every federal spending increase to be offset by a reduction elsewhere in the budget.

“Any expectation that there’s going to be large new amounts of money is pretty unrealistic in light of the tight federal limits we’re living under,” Epstein said.

Wilson said his spending plan reflected problems caused by the state’s “deepest, longest depression” since the 1930s. California, he said, has lost 870,000 jobs since May, 1990, and 170,000 in the past year. At the same time, school enrollments, prison population, and welfare rolls have been growing.

By relying so heavily on the uncertain prospect of federal assistance, the Republican governor, in an election year, in effect is pointing the finger at the Democrats who control Congress and the White House.

Wilson said he is counting on receiving about $600 million more in increased federal aid for welfare and Medi-Cal, the health program for the poor.

The governor also said he wants the federal government to reimburse the state for the cost of educating the 400,000 illegal immigrants he says are in the public schools, and for the cost of providing emergency medical care to the undocumented population and imprisoning illegal immigrants convicted of felonies in California. The total immigration tab would come to $2.3 billion, he said.

But the federal government has never acknowledged responsibility for those costs and, based on recent votes in Congress, seems unlikely to do so now. Wilson last year asked for $1.45 billion but the state received just $324 million.

Wilson’s argument that the money California spends on immigrants would be better spent on the state’s legal residents has been used in Washington to defeat his proposals for more federal money, Epstein noted.

“The way it was presented in the Congress last year is that you’re taking money away from programs for legal U.S. residents throughout the country to pay for illegal residents in a handful of states,” Epstein said. “That’s obviously not popular if you’re from Montana or Idaho.”

In effect, Wilson has postponed much of the state’s budget debate until May, when he will present a revised plan that considers more recent economic trends and reacts to any signals Washington sends about its intention to aid the state.

The state Constitution requires the Legislature to pass the budget by June 15. The fiscal year begins July 1.

Most legislative leaders, who have been trying to keep good relations with Wilson, ducked questions about his budget on Friday. Assemblyman John Vasconcellos, the Santa Clara Democrat who is the Assembly’s lead budget writer, said the governor was unrealistic in his reliance on federal money.

“I hope the fantasy flies,” Vasconcellos said. “I’ll do all I can to support it.”

Wilson, questioned by reporters, refused to say what he would propose if the federal government failed to come through with the money he says California deserves.

“We would have to make decisions that nobody wants to make,” he said.

The governor added: “The entire budget is dependent on getting immigration aid. We are making no bones about that fact. We are insisting on what is not just equity, it is a necessity.”

Wilson said he expects California to join a lawsuit that the state of Florida intends to file against the federal government.

If enacted as Wilson proposes it, the state’s general fund budget would decline from $39.3 billion this year to $38.8 billion next year, a 1.4% drop. But year-to-year comparisons are distorted by the proposed infusion of federal money and the shift of programs to local government. Both actions would show up on paper as reductions in state spending.

The real cost of the services Wilson is proposing--ignoring the funding shifts--is about 7% greater than what the state is spending this year, according to figures supplied by the Finance Department.

Outside the Capitol, business groups applauded Wilson’s budget while advocates for social programs criticized the spending plan.

Larry McCarthy, president of the business-backed California Taxpayers Assn., said Wilson’s budget is a good one.

“It proposes changes that are designed to improve the economy while increasing accountability for the delivery of essential government services,” he said.

Children Now, a group that lobbies for programs for the young, said Wilson’s proposal goes against his stated desire to stress preventive programs that will save the state money in the long run.

“The budget fails to sufficiently invest in programs that can lift children out of poverty and provide the foundation for them to become healthy, contributing members of society,” said James P. Steyer, the group’s president.

The biggest winner in Wilson’s budget is the state prison system, which would get a 10% increase--about $335 million--to handle a 7% jump in the number of inmates. Wilson wants to hire 3,215 more guards and support staff and open two new prisons in the San Joaquin Valley.

The governor also proposed a $2-billion prison bond measure, which would go to the voters either in June or November. The money would pay for the construction of six new state prisons.

That proposal drew opposition from Senate Republican Leader Ken Maddy of Fresno, usually a strong ally of the governor. He said his GOP colleagues believe the state has too much debt already.

“We are unanimously opposed to any bonds for any reason,” Maddy said. He proposed that the state rethink its policy of building prisons to house inmates one to a cell.

Wilson’s budget also includes funds for about 130 new Highway Patrol officers and training for the first of 500 CHP officers he wants to hire and assign to help local police in high-crime communities.

These new hires still would leave the state with far fewer officers than when Wilson took office in 1991, his Finance Department said. Because of unfilled vacancies, the number of CHP officers is expected to drop from about 6,140 in 1991 to 5,550 by the end of the current fiscal year June 30.

For schools, Wilson proposed enough money to keep spending from state and local tax dollars at the current level of about $4,220 per student. But the schools would lose ground to inflation.

Wilson’s budget calls for a 54% fee increase for community college students, from $13 to $20 per unit. California State University officials already were planning a 24% increase, from $1,440 a year to $1,782. The system’s chancellor has said that fee increase should stand even though Cal State would get less under Wilson’s budget--a 3.9% increase--than it had counted on.

University of California President Jack W. Peltason said Friday that he was “grateful” to Wilson for a 3.2% increase, although it was far short of the 8% he wanted.

To make up the difference, UC officials said they will ask the Board of Regents later this month to approve a $620 fee increase on all university students, who now pay an average of $3,727 a year. They will also ask approval for a $2,000 “differential” fee on students who will enroll next fall in professional schools for medicine, law, veterinary medicine, dentistry and business.

Wilson is also seeking a $1.6-billion bond measure to build elementary and secondary schools and a $900-million bond measure to finance construction of new university buildings.

In health and welfare programs, Wilson revived proposals the Legislature has rejected each of the past two years.

The governor proposed cutting welfare grants by 10% July 1 and another 15% six months later. He wants to stop giving more money to families that have additional children while already on welfare, and he would end payments to able-bodied adults after two years, a concept Clinton also is considering.

Wilson hopes to save about $460 million a year with these proposals.

The governor also recommended eliminating a host of health services to poor adults, including dental care, psychological counseling, podiatry, and chiropractic and acupuncture services. This would save the state $151 million annually.

Wilson also proposed to accelerate a shift in the relationship between state and local government. He said his proposal would give counties more incentives to save money on health and social programs by giving them more of a share of the fiscal responsibility.

Currently, the counties run the biggest welfare program--Aid to Families With Dependent Children--but pay for less than 5% of its cost. Wilson would increase that to nearly 25%. Similarly, in Medi-Cal, the health program for the poor, the county share would go from zero today to about 11%.

Wilson proposed giving the counties what he said would be enough additional money to pay for their increased share of these costs in the coming year. After that, the counties would face higher costs as the programs grew or save money if the programs shrunk.

Wilson also proposed repealing a key part of Proposition 117, the so-called Mountain Lion initiative passed by voters in 1990. Wilson said the $30 million annual fund for purchasing wildlife habitat was a drag on the budget the state can no longer afford.

Times staff writers Ralph Frammolino in Los Angeles and Carl Ingram in Sacramento contributed to this story.

How the Money Is Spent

Here is a detailed look at Gov. Pete Wilson’s proposed 1994-95 California budget.

1. Education (K-12 and Community Colleges). $18.8 billion.

There is enough money to allow elementary and secondary schools to keep up with expected increases in enrollment, but the funding would not allow school districts to keep pace with rising salaries and higher costs for books and materials. Community college students would see a 54% fee increase--from $13 per unit to $20.

2. Health and Welfare. $14.3 billion

Wilson has called for a variety of cuts in health and welfare programs. He wants to reduce welfare grants to poor families--cutting them by 10% July 1 and another 15% six months later. He also is trying to eliminate a number of services available under Medi-Cal, the state and federal program providing health care to the poor.

3. Higher Education. $4.6 billion

The Cal State system and the University of California campuses would get a slight increase in state funding. However, students and their families can expect sizable fee increases again next year as the universities try to find new sources of revenue.

4. Business, Transportation and Housing. $4.5 billion

There would be another year of small increases for this umbrella agency, which includes CalTrans, the department responsible for building and maintaining the state’s network of roads and freeways. Wilson is proposing a larger increase for the California Highway Patrol--adding officers to help local police.

5. Corrections. $3.9 billion

The governor is calling for a 6.6% increase in state funds for operating prisons and Youth Authority facilities. Wilson is also supporting the “three-strikes-and-you’re-out” proposal that would give life sentences to repeat, serious offenders. He is asking for a $2 billion bond measure to build new prisons.

6. Aid to Local Government. $3.1 billion

This amount includes a variety of taxes and fees collected by the state and passed on to local governments, such as a share of motor vehicle license fees. As a separate measure, Wilson wants to shift $1.1 billion in property taxes from schools to cities and counties for a variety of services.

7. Natural Resources. $1.8 billion

The governor is calling for an overall 3% increase for the agency that oversees parks, fish and game, conservation programs and water project operations. But not all programs fare as well as others. The parks and recreation budget, for example, would get a lesser amount next year under the Wilson proposal.

8. State and Consumer Services. $729 million

A moderate increase is proposed to run a variety of state licensing and consumer protection programs. Also included is the budget for the state Department of Veterans Affairs and the Department of General Services, which manages public office buildings and vehicle fleets.

9. Environmental Protection. $577 million

The California Environmental Protection Agency faces an overall 9% fund cut under the governor’s plan. The agency is responsible for the regulation of pesticides, cleanup of toxic dumps and reduction in air and water pollution.

10. Tax Relief. $438 million

Last year, the governor and Legislature agreed to eliminate renters tax credits--cash refunds for low-income taxpayers who live in rental units. But a variety of programs remain in place, such as the property tax exemption for homeowners.

Proposed Spending

1. 33.9%

2. 25.8%

3. 8.4%

4. 8.1%

5. 6.6%

6. 5.5%

7. 3.2%

8. 1.3%

9. 1.0%

10. 0.8%

11. 4.9%

Where the Money Comes From

Personal Income Tax: 33.9%

Sales Tax: 28.9%

Bank and Corporation Taxes: 9.3%

Motor Vehicle Fees: 8.5%

Highway Users Taxes: 4.8%

Insurance Tax: 2.2%

Tobacco Taxes: 1.2%

Estate Taxes: 0.9%

Liquor Taxes: 0.5%

Horse Racing Fees: 0.2%

Other Fees, Minor Taxes: 9.5%

Budget Growth

1994-95: $55.4 billion (proposed)

NOTE: Other spending includes a variety of smaller state agencies, including Trade and Commerce Agency, which operates programs to promote tourism, trade and economic development.