Wilson Budget Boosts Schools, Cuts Welfare

Gov. Pete Wilson proposed a $56.3-billion budget Tuesday that offers the initial installment of a 15% income tax cut, the first funding boost for education in four years, dramatic slashes to welfare and possible layoffs of state workers.

Reflecting his view that California’s recession is over, Wilson’s budget proposes individual and corporate tax cuts amounting to $225 million starting next January, and totaling $7.6 billion over the next four years.

The governor proclaimed that his budget will “allow 18 million taxpaying Californians to share in the success of our economic recovery by achieving some deserved tax relief through an across-the-board tax reduction.

“We have the means and the opportunity, and quite clearly a mandate from the people, to significantly reform the way state government operates,” said Wilson, riding high because of his reelection victory and an improving economy.

The governor proposed giving California schoolchildren the first increase since the 1991-1992 budget, raising per pupil spending by 2.2% to $4,292 a year.

He also promised increased spending on California’s public universities and colleges, and outlined a spending plan for universities that covers the next four years, including spending for more classrooms. However, he also expects increased tuition.

Wilson’s budget anticipates that the state will receive $732 million from the federal government to cover costs of illegal immigration, and he said chances are better this year because the new Republican Congress will be sympathetic to the state’s demands.

He also intends to press the state’s lawsuit against the federal government seeking more than $2 billion to defray costs of illegal immigration in education, prisons, health care and welfare.

“We’re going to sue their butts off,” Wilson declared at Tuesday’s news conference.

The state prison system will get an increase, as it has every year for the past decade. The governor announced plans to push for $2.2 billion in spending to construct new prisons. The money would be raised by legislatively approved lease revenue bonds, which are repaid over 20 years. The spending would be a partial payment to accommodate the anticipated flood of felons sentenced under the new “three strikes” sentencing law.

One surprise loser is the Department of Transportation. The budget raises the possibility of layoffs in Caltrans’s 19,500-employee work force, calling for a reduction of 1,200 workers.

For at least the third year running, the state’s 58 counties also will take a hit, losing $241 million. In exchange, Wilson and his aides say they intend to remove many of the state requirements that make local government costly, including that it pay general assistance welfare.

The biggest losers will be welfare recipients. Wilson proposed slashing health and welfare programs for the poor by $1.3 billion, roughly the equivalent of the sum he wants held in reserve for unexpected emergencies.

Among others, he targeted families with an adult capable of working, unwed teen-age mothers, the aged, blind and disabled, indigent senior citizens who receive Medi-Cal health care and “disabled” drug addicts.

A mother with two children now receives $607, but that will go to $594 because of past cuts. The new plan would be to cut another 7.7% to $547. After six months on welfare, Wilson proposes, the grant would fall 15% to $465 a month. After two years, the mother would receive no money. The state would, however, pay $375 a month to support the two children.

“We are required to propose major changes in this area, because the system demands major changes, structural changes,” Wilson said. “We simply cannot continue to support runaway entitlement spending.”

Senate President Pro Tem Bill Lockyer (D-Hayward) attacked Wilson’s proposed tax cut as favoring millionaires over the middle class and the poor.

Contending that the governor’s budget provided “too little for schools, too much for prisons,” the Democratic leader served notice that Wilson could expect resistance to many of his budget proposals, including the tax cuts and increases in college fees.

“It is essentially a negative message full of punishment for people that do not fit his world view rather than an uplifting effort to move California forward, to provide a positive program for California’s future,” Lockyer said.

The Legislature will hold hearings on the governor’s proposed budget in the coming months. It has often missed the June 15 constitutional deadline for approving a budget.

In the divided Assembly, Democratic Leader Willie Brown and Republican Leader Jim Brulte had little comment on the budget as they continued their leadership fight. Wilson referred to the two-month budget standoff three years ago, and said he hoped the Legislature would approve the budget on time.

“The Legislature loses, the governor loses and much more importantly, the public loses, and you wind up doing in September what you would have done in June,” Wilson said.

The total budget of $56.3 billion, including special funds--money raised by gas taxes and other fees--rises only a little from last year’s $55.1-billion budget. It is slightly less than the record 1992-1993 budget of $56.4 billion.

The proposed general fund, which is the largest portion of the budget and funded primarily by income and sales taxes, is $41.73 billion. That is virtually the same as last year’s--$41.69 billion--prompting the governor to proclaim that the state continues to live within its means.

What follows is a look at the main components of Wilson’s proposed budget for the fiscal year starting July 1:

Tax Cuts

Wilson threatened to go over the Legislature’s head and ask voters to approve the tax cut if lawmakers balk, saying: “I’m perfectly willing to take it to the people.”

Wilson’s call for tax cuts is in sharp contrast to a deal he struck upon taking office in 1991 to raise taxes by more than $7 billion. The cuts he is offering would reduce taxes by $7.6 billion by 1999.

In the first year, individual taxpayers would save a combined $105 million. Corporations and banks would save $120 million in taxes.

The tax reduction would begin on Jan. 1, 1996. The 15% tax reduction spread over three years would be for all income taxpayers, banks and corporations.

For a family of four earning $40,000, the tax cut would amount to a savings of $34 a year. For a family of four earning $100,000, the savings would be $275 a year.

As part of the governor’s tax increase four years ago, he agreed that the richest Californians, those earning $200,000 and above, should pay more. That increase was due to expire this year--and Democrats were preparing to fight to keep it in place.

Wilson’s new tax package keeps the higher rates in place for now, but ensures that people who make $200,000 to $400,000 will be better off after three years of tax cuts than they are now. Taxes for the highest earners, those making $400,000 or more, will end up being about where they were prior to the 1991 tax increase.

Lenny Goldberg, of the liberal California Tax Reform Assn., blasted the tax cut as a “cover for lowering taxes for a few.” Goldberg estimated the tax cuts will give 9,000 millionaires in California a combined $330-million tax break over the next four years.

Corrections

The Department of Corrections budget would increase to $3.5 billion, as two new prisons open this year, and a third opens in 1996. The number of corrections workers would increase to 39,000, a jump of 3,700. Overall, Corrections would consume 9% of the budget.

“In the short term, we’re probably going to aggravate the problem,” Wilson said of spending on prisons. “But I’m convinced that over the long term, it will make for a safer and more civilized state.”

The governor’s budget calls for construction of six additional prisons at a cost of $2 billion. He made a similar proposal last year, but the idea was killed by the Legislature.

In addition to the six new prisons, the governor is calling for $235 million to be spent to add 20,000 “emergency beds” to the 29 existing prisons.

The emergency proposal includes building 30 dormitories at existing prisons and placing more beds in any available spaces. There are now about 130,000 inmates.

Welfare

Wilson said he believed the Legislature would endorse the welfare overhaul, but again vowed to put the proposal directly to the voters in an initiative if lawmakers balk.

Wilson proposed reducing by up to 10% the state’s share of public aid provided by Social Security to more than 1 million aged, blind and disabled Californians. The savings would total $424.7 million next year.

Wilson asked for repeal of State Supplemental Payments (SSP) to 31,000 Californians he said receive disability aid as a consequence of drug addiction or alcoholism. Defenders of the payments argue that alcoholism and drug addiction are sicknesses and should be dealt with as disabling ailments.

“It’s troubling to see the governor go back to pandering to the old political scapegoats rather than focus on real solutions, which are meaningful jobs, quality child care, higher education and transportation to get to jobs,” said Steve C. Barrow of the Center for Public Interest Law.

The governor is proposing cuts on health care for Californians who qualify for Medi-Cal by $142 million by eliminating dental care, psychological care, chiropractic care, acupuncture, podiatry, and medical supplies.

The governor proposes cutting prenatal care for pregnant women who are illegal immigrants, even though their babies would be U.S. citizens if they are born in the United States. That would save $80 million.

Education

The state plans to spend $16.2 billion on kindergarten through 12th grade, the largest single item in the spending plan. Supt. of Schools Delaine Eastin praised the education spending, but noted it was the first increase in several years.

“This upturn is a very positive show of support by the governor,” Eastin said.

California’s colleges and universities would get an average 3% increase in their budgets, to $9.19 billion from $8.92 billion.

The University of California and California State University systems each would receive a 2% increase in operating funds--far less than what they had requested.

But officials were pleased that Wilson made funding commitments for the next three years, adding predictability to their budget planning. Altogether, the Wilson budget also anticipates that both systems will receive budget increases averaging 4% a year during the next three years.

State University Chancellor Barry Munitz praised the multiyear approach to budgeting, but said “this year will be the toughest of the next few years.”

UC Vice President Bill Baker called the commitment “unprecedented in my experience” and said the university will now be able to predict for students how much their fees will go up in coming years. Exactly how much the tuition increases will be is not known. UC regents and the State University trustees must arrive at a number later. Wilson pledged to support their fee request.

Layoffs

The governor’s budget calls for Caltrans to cut its work force by nearly 1,200 workers to save about $140 million for highway construction projects. About $1.9 billion of the agency’s $6.1-billion budget is slated for highway construction.

State transportation officials said the agency needed to downsize its engineering staff because sluggish gas tax revenues and voter rejection of two statewide bond measures in recent years have drained funding for future highway construction projects.

“We have to size Caltrans to the workload,” said James W. van Loben Sels, the agency’s director. “We now find ourselves with a declining workload, and it will be declining for the foreseeable future.”

Van Loben Sels said most of the layoffs would come toward the middle of 1996 and that it is unlikely there would be an employee buyout. Officials also said that the layoffs are in line with the governor’s call for increased contracting out of engineering work at Caltrans.

Contributing to this story were Carl Ingram, Richard Colvin, Eric Bailey, Jerry Gillam and Paul Jacobs.

* WELCOME RELIEF: Educators pleased, but hikes would not be panacea. A12

* RELATED STORIES, CHARTS: A12, D1

* VALLEY IMPACT: Proposal reduces allocations for parklands agency and an earthquake safety study. B4

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How the Money is Spent

Here is a detailed look at Gov. Pete Wilson’s proposed 1995-96 California budget.

PROPOSED SPENDING

Category Percent Amount in billions Education (K-12) 29.2% $16.2 Health and Welfare 27.1% $15 Higher Education 10.6% $5.9 Prisons 6.7% $3.7 Business, Transportation and Housing 7.9% $4.4 Aid to Local Governments 5.6% $3.1 Water, Parks, Forestry, Fish & Game 1.3% $1.3 Consumer Affairs, Govt. Services 2.4% $0.72 Tax Relief 0.8% $0.45 Other 7.1% $3.9

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BUDGET GROWTH 1994-95: $55.1 billion 1995-96: $56.3 billion (proposed)

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Where the Money Comes From Personal Income Tax: 34.8% Sales Tax: 31.1% Bank and Corporation Taxes: 8.6% Motor Vehicle Fees: 8.5% Highway Users Taxes: 4.9% Insurance Tax: 2.2% Tobacco Taxes: 1.1% Estate Taxes: 1.0% Liquor Taxes: 0.5% Horse Racing Fees: 0.2% Other Fees, Minor Taxes: 7.1% NOTE: Other spending includes a variety of smaller state agencies, including the Trade and Commerce Agency, which operates programs to promote tourism, trade and economic development.