Wilson Deepens Budget Cutbacks : Finances: Governor proposes $1 billion in deficit spending. He concedes that federal government can’t be counted on to reimburse state costs of illegal immigration.

Conceding for the first time that the federal government cannot be counted on to bail California out of its fiscal mess, Gov. Pete Wilson offered a revised budget Monday that calls for deeper cuts in health, welfare and higher education programs.

Wilson’s spending plan, released just two days before the Legislature’s deadline for enacting a new budget, also proposes more than $1 billion in deficit spending. This is the second consecutive year Wilson has endorsed the tactic he once decried as irresponsible.

The governor flatly ruled out a tax increase but also abandoned hope for his proposed middle-income tax cut and a tax credit for companies that create new jobs.

More than anything else, Wilson’s new plan delays most of the difficult budget decisions until next year, when the governor will be safely reelected or out of office. Without changes in state and federal law, the governor or his successor in January will be staring at another potential deficit of at least $3 billion.

Still, Wilson characterized his proposal as a bare-bones offering made necessary by Washington’s refusal to pay its share of immigration costs imposed on California.

“This year, California will collect enough revenue to cover all of its own bills,” Wilson said. “But we cannot afford to pay the federal government’s bills as well without reducing services for the legal residents of California. And that is exactly what we are being . . . forced to do.”

Wilson’s plan now goes to the Legislature, where Democratic lawmakers are expected to push for fewer cuts and more deficit spending.

Assemblyman John Vasconcellos, the Santa Clara Democrat who is chairman of the budget-writing Ways and Means Committee, criticized Wilson for boosting spending on the Corrections Department while proposing deeper cuts in services for the poor.

“It’s a budget for the prisons and the privileged,” Vasconcellos said.

The governor’s Democratic rival, state Treasurer Kathleen Brown, also criticized the proposal.

“Pete Wilson’s June (revision) is more of the same--more lies, more finger pointing, more playing politics,” said Brown’s press secretary, John Whitehurst. “Instead of facing up to the fiscal truths, he’s punting, putting off until tomorrow what we must face up to today.”

The key to Wilson’s plan is his concession that the federal government will not give California $1.7 billion that the governor says it costs to educate illegal immigrants in the public schools, as mandated by federal law.

Even so, Wilson still is counting on more aid from Washington than is generally considered possible.

His budget relies on $356 million from the federal government for incarcerating illegal immigrants convicted of felonies, but the Clinton Administration has proposed only $350 million for this purpose nationwide.

And Wilson’s budget projects that Congress will fully reimburse the state for the $400-million annual cost of providing emergency health care to illegal immigrants, an unlikely prospect.

In addition, the governor’s two-year budget recovery plan assumes that the federal government will come through with the full $2.5 billion in federal reimbursements in the 1995-96 fiscal year.

Even with these rosy assumptions, the governor is proposing $1.3 billion in reductions in a roughly $40-billion general fund budget.

About half of Wilson’s cuts are those he earlier proposed in health and welfare programs. These include his proposal to cut welfare grants 10% immediately and another 15% after six months for able-bodied recipients still in the program. The governor also is still pushing for the elimination of certain Medi-Cal benefits, including dental care for adults. The Legislature repeatedly has rejected these proposals.

New cuts were also proposed Monday in services for the poor. Wilson said he wants to shift $285 million in county health care funds to the state, putting pressure on public hospitals to cut services.

Los Angeles County Chief Administrative Officer Sally Reed said the state budget proposal would cost Los Angeles at least $200 million in revenue in the coming budget year, and could cost as much as $350 million.

“It would mean a dramatic reconsideration of our budget proposal,” Reed said. “We could well be revisiting everything we had proposed,” with new across-the-board cuts.

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Already, Los Angeles County is facing a $186-million deficit, despite cuts to many departments, including libraries, parks, museums and the assessor’s office. In a new round of cuts, the sheriff’s, district attorney’s, probation, health and welfare departments would also suffer.

Wilson also proposed ending health and welfare services for legal immigrants who have been here less than five years and who entered the country on grounds that a sponsor, either an individual or private charity, would look after their needs. This could affect more than 15,000 immigrants.

The governor suggested trimming the cost of pharmaceuticals in the Medi-Cal program by reducing the dispensing fee paid to pharmacists by 25% and by limiting to six the number of prescriptions that doctors can write each month without obtaining approval in advance from the state.

“These are cuts I don’t think anyone wants to make,” Wilson said.

Although Wilson proposed reducing a planned budget boost for higher education, he stuck to his pledge not to cut funding for kindergarten through 12th grade, which is calculated per student. That practice allows schools to keep pace with enrollment, but they still lose ground to inflation.

Wilson proposed $1 billion in deficit spending. He would stretch repayment of the state’s debt over two budget years, rather than paying it off all at once.

Rolling the state’s debt over into the next fiscal year is something that Wilson adamantly opposed until last year. He now says the tactic is permissible as long as the state does not plan to spend more than it takes in for a 12-month period.

“The rollover is something you do as a last resort,” Wilson said. “It is a tolerable expedient . . . to avoid deeper cuts than anyone wants to see.”

Under Wilson’s plan, the state would pay back, by the spring of 1996, the $1 billion he proposes to borrow.

If the full federal funds for immigration do not materialize by then, a Wilson aide said, the debt--which is in the form of notes sold to private investors--would be paid off by borrowing from independent, internal state funds.

Wilson did not rule out increasing the size of the rollover, an action that would reduce the need for program reductions. But he said he was not eager to do so.

“You can only go so far with it,” he said. “I don’t think you can roll over very much without totally blowing your credit and your credibility.”

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Times staff writer Frederick Muir in Los Angeles contributed to this story.

Proposed Cuts

Here is a summary of the spending cuts Gov. Pete Wilson proposed Monday, when he acknowledged that the federal government will not meet his demand for $2.5 billion to pay for the cost of services for illegal immigrants:

* Welfare--Cut grants 10% immediately and another 15% for able-bodied adults still on the rolls in six months. End additional payments to women who have children after they are on welfare.

* Medi-Cal--Eliminate certain health care services provided to the poor, including dental care for adults.

* Immigrants--Eliminate prenatal care for pregnant illegal immigrants. Births still would be covered under Medi-Cal, as required by federal law. Eliminate welfare and health services to “sponsored” legal immigrants for their first five years in the country.

* Disability--Deny supplemental Social Security grants and general assistance welfare payments to convicted drug offenders. This applies to recipients of aid for the aged, blind and disabled.

* Fraud--Permanently disqualify for all public assistance programs those found to have committed welfare fraud. Current law disqualifies recipients after their third offense and only within the program they defrauded.

* Colleges--Reduce growth in University of California and California State University budgets, which could increase pressure on those institutions to raise fees.