Brown, Garamendi Outline Economic Recovery Plans : Politics: Democratic gubernatorial candidates accuse Wilson of allowing state to remain mired in recession.

Democrats Kathleen Brown and John Garamendi, accusing Republican Gov. Pete Wilson of allowing California to languish in recession, outlined activist economic programs Wednesday that are expected to keynote their campaigns to unseat Wilson in the fall election.

In separate luncheon speeches--Brown in San Francisco and Garamendi in Hollywood--both recalled their deep California family roots and called on Californians to rekindle the state’s community spirit and optimism.

Both offered revitalization programs that they said would give California the trained, skilled and broad-based economy the state will need to compete in the global business environment of the 21st Century.

Garamendi, the first-term state insurance commissioner, focused on the reconstruction of the Los Angeles area’s infrastructure after the Jan. 17 earthquake.

“We need to fix things now,” he declared in a luncheon address to the Hollywood Chamber of Commerce. “The very spirit of California is at stake. The very future of the economy depends on it.”

Garamendi said California under Wilson lacks the entrepreneurial spirit and intensity that has enabled Californians to become “a dynamic and successful breed.”

Brown, the first-term state treasurer, offered a broader, “business-friendly” economic plan in her noon speech to the Commonwealth Club, a prestigious collection of San Francisco business and professional leaders. Her plan includes a tax moratorium for start-up businesses and tax credits for firms that create jobs.

She said that Californians looking to Sacramento for leadership, confidence and action during a period of difficult economic transition have encountered a governor whose actions told them: “You get what you deserve.”

“Now, I don’t believe it is enough to be optimistic, to be bullish,” Brown added. “But we have a governor who apparently does not believe California is a special place or that Californians are a special people.”

Both Brown and Garamendi proposed setting up funds that would provide investment capital for California entrepreneurs--Brown’s by using state funds to leverage private contributions, and Garamendi’s from savings provided by reform of health, auto and workers’ compensation insurance programs.

“We simply cannot afford four more years of inaction and indecision,” Brown said, referring specifically to the governor’s office. “To create new jobs, to move the economy into high gear and to put California first, we need a strategy and a plan.”

Both candidates, who will compete against each other in the June 7 Democratic primary, were sharply critical of Wilson, who became governor in January, 1991, just as the state was sinking into the depths of its worst recession in decades, with unemployment rising to the 10% range and the state budget plunging into deficits of unprecedented magnitude.

The Democrats said their approach to the California economy would differ markedly from Wilson’s. They proposed a more vigorous role for the governor and state government, with emphasis on investment in programs, such as education, that would help invigorate the economy.

Wilson has insisted that California cannot afford major new spending programs until the economy recovers. Only then, he says, will the state have the new revenues--from job growth and not from new taxes--that will enable it to expand programs or restore cuts made during the lean years.

Wilson also has refused so far to endorse any tax increase or bond issue to finance California’s share of earthquake reconstruction until it is clear just what the repairs will cost and how much the federal government will pay.

Both Brown and Garamendi have proposed programs in the past several days that would put up some California money now. Brown called for the use of $1.3 billion in unsold bond funds and loans from existing state programs to help schools and public agencies rebuild. Garamendi said Wednesday that the state must be prepared to raise sales and gasoline taxes for a maximum of one year to finance specific freeway reconstruction projects and other repairs.

In San Francisco, Brown said it is ironic that a Democrat must offer to make California government more friendly to business, but she commented: “Let’s face it, the executive branch of California government is out of touch with business and its needs. . . . This has to become a state with a reputation for being business-friendly. Ironically, that has not happened under 11 consecutive years of Republican governors.”

And she chastised Wilson for waiting until late 1993 and January of 1994 to travel out of the state or the country to promote California’s business climate and attractions.

The highlights of Brown’s program:

* A tax moratorium for new businesses, exempting them from paying business income taxes in the first year, 50% of the tax bill in the second year and 25% in the third year. The full tax rate would kick in the fourth year.

* A job-creation tax credit that would pay up to 25% of the first-year salary of each new job. Full-time jobs paying salaries of between $17,600 and $60,000 would be eligible.

* Creation of a California Performance Review to cull waste from state government. Such a review in Texas has saved state government more than $5 billion, Brown said.

* Creation of a Golden State Growth Fund “to promote grass-roots capitalism by leveraging existing state funds to expand access to capital.” One feature of this concept is to give California companies an advantage in bidding for major public project contracts, she said.

All the candidates have talked about simplifying the regulatory process, particularly by streamlining the maze that new businesses must negotiate to obtain necessary governmental permits. Brown pledged to do so Wednesday; Wilson already has announced the opening of two centers for that purpose, with four more being established.

In her speech, Brown talked more about her approach to the economy than details of her proposals, which in some cases resembled those already made by Wilson. In his 1994 State of the State address, Wilson proposed a $1,000 job creation tax credit similar to the one Brown outlined Wednesday. Brown’s tax break could go up to $10,000 per job.

Wilson spokesman Dan Schnur said Brown’s tax moratorium would provide little help for new businesses because they usually lose money in the first year or so. Any such losses could be deducted from future tax bills under one of the 1993 tax changes, he added.

“If you look closely at both of their speeches, neither John Garamendi nor Kathleen Brown offered any constructive alternative in terms of a course Pete Wilson should have taken,” Schnur said.

The governor has been fighting for three years to bring jobs back to California and the effort is finally paying off, he said.

Garamendi focused on the need of the state to respond quickly in rebuilding earthquake damage. Otherwise, he said, California will not have the public works facilities essential to future economic growth.

Garamendi said that both sales taxes and gasoline taxes probably will have to be increased to finance the state’s share of earthquake damage, even though the Clinton Administration has pledged to send California more than $7 billion in disaster assistance.

Garamendi also said the federal government should create a national disaster insurance program to cover all sorts of calamities, including earthquakes. Otherwise, California should create an earthquake reconstruction fund to aid future earthquake victims, he said.