Brown Suggests Borrowing $3 Billion to Erase Deficit

State Treasurer Kathleen Brown on Tuesday proposed borrowing $3 billion to eliminate the state’s budget deficit over five years.

Brown, the leading Democratic candidate for governor, said borrowing the money by selling bonds to private investors and banks makes more sense than relying on an unlikely infusion of federal funds, which Gov. Pete Wilson has proposed.

Wilson has asked the Clinton Administration and Congress to give the state $3.1 billion in new money this year, most of it to cover the cost of services to illegal immigrants. That is 10 times the amount Congress allotted for California’s immigration costs last year and represents nearly 10% of the state’s general fund.

Clinton Administration officials and members of Congress have said California cannot expect anywhere near the amount Wilson has requested.

But the governor is expected to stick by his proposal when he releases a revised budget plan Friday.

Leading Democrats in the Legislature have said they would agree to a budget along those lines rather than vote to raise taxes or cut popular programs. The Assembly approved a budget framework Tuesday that includes the Wilson figure for federal funds.

Brown, however, said Wilson’s assumption that the federal government will rescue California is simply a ruse to roll over the state’s deficit for another year with no plan to eliminate it.

Under Brown’s proposal, the state would adopt a five-year plan in which each year’s tax revenues would equal or exceed the expected spending. The $3-billion deficit now on the books would be erased by selling bonds, which would be paid off from the state’s general fund over five years, with payments starting at about $700 million in the first year.

Brown said borrowing the money as part of a structured, five-year plan would be cheaper than borrowing it year after year in an unplanned fashion, as the state has been doing.

Assembly Republican Leader Jim Brulte of Rancho Cucamonga said Brown’s approach is sound economically but flawed as a political strategy. If California solves its fiscal problem on its own, he said, the federal government no longer will feel obligated to help out.