Let’s Not Be Hasty in Spending Windfall : State faces too many uncertainties to make a quick decision

For the first time in years, the California government is flush. Many may be tempted to spend the $676 million in unexpected surplus revenues on a tax rebate rather than addressing the state’s pressing needs, but such a move would be premature, indeed foolish.

California faces too many uncertainties, the most problematic now developing in Washington. It is far from clear what new funding shortages the state will face should congressional Republicans succeed in slashing federal spending on various state programs.

The last time the state enjoyed such an increase in surplus revenues was in 1987. Then-Gov. George Deukmejian decided to rebate to taxpayers $1 billion of the $1.4-billion surplus that had accrued for the full fiscal year. The next year, state revenues unexpectedly fell $1 billion short, and in retrospect Deukmejian’s decision looked irresponsible.

We are just four months into a state fiscal year that ends in June. It is too early to draw definitive forecasts on spending needs. Certainly no nonessential spending should occur until the budget cloud clears in Washington.

Even if the federal budgetary outcome is favorable to California, priorities and obligations will loom large in terms of how and when to use the extra revenue, which was produced by sales taxes and levies on personal and corporate incomes.

California schools would automatically receive a substantial amount because of funding requirements that voters approved in Proposition 98, which guarantees public schools and community colleges 39% of state revenues and a part of any surplus, in this case yet to be determined.

Under the current state budget, Sacramento was committed to allocating more money to trial courts, but it has fallen short, causing funding problems in the Superior Court system of Los Angeles County and elsewhere.

The state also will have to examine whether it must reimburse the billions of dollars it borrowed from a number of special funds whose assets are legally restricted to narrow purposes. Look ahead as well. Should California build up its contingency fund? The track record suggests that might be smart.

The public cannot be fooled after more than five years of state budget problems. A tax rebate or cut might be politically expedient but not necessary fiscally prudent. Getting California back into fiscal shape is Sacramento’s responsibility. The private sector can take care of itself. Continuing problems in the state’s aerospace and housing industries, for instance, are being offset by robust growth in entertainment, trade and electronics.

The job outlook, meanwhile, is better. A new survey of California executives suggests the business climate is improving, and nearly half plan to hire more workers in the year ahead. The resurgence is especially sharp in small and medium-size firms, according to the annual survey by the California Business Roundtable.

The state revenue surplus may reflect a rebound, but California is hardly out of the woods. And when it does reach a clearing, time must be taken to put the fiscal house in order. That $676-million surplus should be dispensed wisely, measure for measure.

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Tax Surplus

Bank and corporation taxes: $182 million

Personal income taxes: $261 million

Sales and use taxes: $151 million

Micellaneous receipts, including alcohol, tobacco and horse racing: $82 million

Sources: State Department of Finance Monthly Bulletin