NEWS ANALYSIS : Wilson’s Priorities Dictated Budget : Finances: The wealthy and the middle class are protected and the poor are pinched. But harsh cuts fail to avert growing reliance on borrowing to make ends meet.

The state budget that Gov. Pete Wilson is expected to sign today bears more of his imprint than any other spending plan enacted since Wilson became governor in 1991.

The Republican chief executive dictated the terms of this budget, and the Democrats who control the Legislature--lacking the two-thirds majority needed to overrule him--capitulated.

Any budget is a statement of the values of those who write it, and Wilson, dogged by a consistently repressed economy, wrote this one. It protects the pocketbooks of the wealthy and limits damage to programs valued by the middle class--at the expense of services that the poorest Californians depend upon for survival.

But even the tough-talking Wilson could not stomach the still deeper spending cuts that would have been required to balance the budget. Instead, to soften the blow, the governor won approval of the kind of deficit spending he once warned would lead the state down a path toward fiscal disaster.

For that reason, Democrats and Republicans alike warn that this budget will not pull the state government out of its fiscal quagmire. They expect to return after the November elections and face yet another in a string of deficits.

Wilson, in a conciliatory statement released by his office, said the budget that passed the state Senate on July 4 was the product of give and take from both sides of the aisle.

“This budget,” he said, “contains items forged in compromise.”

But Democratic legislators say there was little in the budget to satisfy their constituents. In a few areas, they got Wilson to settle for smaller reductions in spending on programs than he had proposed. But the overall direction of the plan remained his.

Wilson was able to get his way by working smoothly with the Republicans in the Legislature. Even though they are the minority party in both the Assembly and the Senate, the Republicans have enough votes to block the Democrats from building the two-thirds majority required to enact a spending plan.

“When you operate with the tyranny of the minority, you can come close to getting everything you want,” said Assembly Speaker Willie Brown (D-San Francisco).

Wilson has made crime, illegal immigration and economic recovery the main themes of his reelection campaign, and there is something in the budget that fits with all three.

It boosts prison funding by more than 9%, including enough to pay for the increasing number of inmates expected to result from the passage earlier this year of the “three strikes” sentencing measure. Wilson fought off Democratic attempts to trim the size of the increase for prisons, insisting that any significant cut would force the state to release dangerous felons early.

And while it was not his idea, Wilson can take credit for signing a bill that provides $30 million to battle domestic violence and provide shelters for battered women.

The budget addresses illegal immigration by stripping funds from a program that provided prenatal care to pregnant women who are here illegally. It also denies health and welfare benefits to certain legal immigrants for five years. And it provides money for Wilson’s deployment of California National Guard troops at the border to back up federal immigration agents.

Finally, the budget holds the line on taxes. Although Wilson earlier in his term advocated and signed the largest tax increase in the state’s history, he has now taken the position that higher taxes would hinder California’s economic recovery.

Wilson turned back the Democrats’ effort to extend an income tax surcharge on the wealthy that is due to expire at the end of 1995.

Wilson proposed--and the Legislature approved--enough money to allow kindergarten through 12th-grade schools to keep up with enrollment and offered small increases for the state universities and community colleges. In one of his few defeats, Wilson had to abandon a proposal to increase community college fees by 50%.

The poor, as they have for the past several years, came out on the short end.

The budget reduces welfare grants for the fourth year in a row, this time by 2.3%. The $593 per month that a parent with two children will now receive is the minimum allowed by federal law.

Related legislation will nudge welfare recipients toward work after two years on the rolls and will deny additional benefits to women who conceive children after they go on public assistance.

The grants still are higher than Wilson says he would like. But without the cuts and freezes instituted since he became governor, the monthly grant would now be $813--37% higher than it will be under the new budget.

The budget also cuts aid to the aged, blind and disabled and reduces funding for county hospitals that care for the poor.

Despite its harsher elements, the budget is more clearly unbalanced than any spending plan Wilson has signed since 1991. Unlike previous budgets, which relied on hopes of an economic recovery to erase the state’s deficit, this one does not even go that far.

Instead, it is part of a two-year plan that depends on a highly unlikely $2.8-billion bailout from the federal government the year after next. Without it, the state will be flat broke in 1996 unless the economy recovers with a vigor that almost no one expects to see.

So bleak are the state’s revenue prospects that the Wall Street investors who have been propping up the government with loans for the past several years balked this time. The state had to pay Bank of America and a consortium of international lenders $30 million just to co-sign on a record $4 billion in borrowing needed to keep the state afloat.

In exchange, the banks demanded and received a standby measure that could trigger automatic, across-the-board reductions in all programs except education if the state’s fiscal condition worsens over the next two years.

Wilson’s Democratic opponent, state Treasurer Kathleen Brown, has indicated that she will try to make the budget an issue in her campaign.

“Pete Wilson’s legacy will be additional hardships for most of us,” said John Whitehurst, Brown’s press secretary. “But Wilson’s friends, who are relaxing at their country clubs, won’t feel any of the pain. The mind-set that created these priorities is simply out of touch with the way most of us live.”

It remains to be seen whether this populist rhetoric--reminiscent of Bill Clinton’s 1992 campaign--will work here in 1994. California voters have shown little interest in state fiscal policy, except perhaps during the 63-day stalemate that forced the state to pay its bills with IOUs throughout the summer of 1992.

Furthermore, Brown’s own state budget proposal is an echo of Wilson’s. Like him, she called for deep cuts in welfare grants, and she endorsed the governor’s prison budget. Though she has criticized him for shorting education, she proposed not a penny more for the schools.

The major difference between the two was that Brown called for slightly more taxes and more deficit spending--not the sort of twin pillars on which candidates normally get elected to the state’s highest office.