Wilson’s Debts May Jeopardize Tax Cut Drive

Gov. Pete Wilson’s last two campaigns have left him more than $1.5 million in debt, forcing him to reconsider his plan to champion a sweeping tax cut initiative on next year’s ballot.

Last spring, when the Legislature rejected Wilson’s call for a 15% cut in corporate and personal income tax rates, the governor vowed to take his case to the voters. But now, the governor’s staff is split about whether Wilson should follow through on his pledge because it may require more fund raising than a lame-duck governor can generate, especially since he leaned hard on GOP contributors for his 1994 reelection and his busted presidential campaign.

“Initiatives don’t grow on trees, they require resources and commitments upfront from a broad group of individuals just to qualify,” one Wilson adviser said. The tax cut “is a significant issue that is under consideration to determine what resources are available to commit to an initiative.”

In addition to his campaign debt, Wilson faces a number of other financial demands next year that could limit his ability to sponsor a campaign. He is committed to helping several 1996 GOP candidates raise money and he is supporting other ballot initiatives, such as a proposed measure to roll back affirmative action programs.

Wilson officials said the governor still supports the tax cut and if he is unable to sponsor the plan through an initiative, he will pursue it for a second year in the Legislature.

The governor’s staff believes that the chances for legislative approval have improved because state economists are predicting a cash surplus in the budget at the end of the fiscal year in June. Also, heading into an election year, Democratic leaders have said that they will reconsider the idea.

Still, if he did not have a campaign debt, a Wilson adviser said, the governor would try to maximize his effort by pursuing the issue in the Legislature and on the ballot simultaneously.

“If money were not an issue, I’m convinced the governor would have this on the ballot in a heartbeat,” the adviser said. “You may not be successful legislatively and the interest of the general populace in putting more money in their pockets is much stronger than [of] legislators who might be beholden to special interest groups.”

The tax cut proposal was a cornerstone of an ambitious agenda Wilson unveiled in January during the euphoria of his come-from-behind reelection and the gains made by Republicans nationwide. At the time, Wilson said a state task force headed by former Secretary of State George P. Shultz concluded that the tax cut was necessary to maintain California’s recovery from recession.

“If we are to create new jobs, we’ll have to do more than reject higher taxes,” Wilson said in his State of the State speech in January. “If we are to create jobs, we’ll have to cut taxes.”

The issue also became a prominent part of Wilson’s presidential campaign, providing a salve for conservative Republicans angered by the governor’s support for a tax increase in 1991. Last spring, when the state Senate rejected Wilson’s tax cut plan, the governor boasted on the presidential campaign trail that he would go around the Legislature.

“I’m fighting for an across-the-board cut of 15% for every individual and business in the state,” Wilson told a campaign audience in New Hampshire in September. “It passed our Republican-controlled Assembly but was killed in the Democratic-controlled Senate, so we’re going to take it straight to the people by way of a ballot initiative.”

Now, if Wilson scales back his push for the tax cut, critics say he will leave the impression that the issue was only important for his White House ambitions.

“The whole thing was the product of the presidential campaign and I don’t think it is of any political use to him now,” said Bill Carrick, a Democratic political consultant in Los Angeles.

Wilson advisers dismissed the complaint, saying that the governor’s commitment to a tax cut has not diminished. Instead, they said they are making strategic decisions based on the political conditions they expect to face next year.

One major factor, they said, is that the state’s business community is not enthusiastic about the tax cut plan partly because it has other, more important priorities on the ballot next year. Wilson advisers had hoped the business community would be the primary financial resource for their initiative campaign.

Steve Merksamer, a California Republican political adviser, said he hopes the tax cut passes, but he also realizes that the state’s business leaders are planning to spend more of their money on a series of tort reform ballot proposals.

“The problem is that the business community is also besieged with lots of things on the ballot,” he said. “On a priority list, they may have to spend some of their money [on those] as opposed to getting behind something like this.”

At the same time, Wilson advisers expect that opposition to the tax cut initiative would be heavily financed by the California Teachers Assn. because school funding would automatically be reduced if state revenues were cut.

They also said there are several other factors in the next year that are likely to dilute Wilson’s ability to finance his own issues. Namely, Wilson is already committed to helping raise money for a number of GOP candidates on next year’s ballot.

In the state Legislature, the governor’s political influence in the final two years of his term could depend greatly on the extent of his effort to help Republican gains in the next election. Wilson has also promised to help Senate Majority Leader Bob Dole collect GOP cash from California for his presidential campaign.

And in Massachusetts, Gov. William Weld is seeking a U.S. Senate seat next year and he expects pay back for his strong support of Wilson’s presidential campaign.

“There are more issues out there in the broader context than there appear to be ready resources for,” a Wilson adviser said.

In addition to candidates, the governor is also being drawn into a number of other ballot issues.

Wilson has promised his support for a measure to roll back affirmative action programs; its backers are now trying to qualify it for the ballot. Even though the campaign is reported to be struggling financially, Wilson officials said it is uncertain whether the governor will assist with fund raising.

The governor has also decided to drop another initiative that he suggested this year that would change the order of succession for a vacancy in the governor’s office. At the time, the issue of succession was a major problem for Wilson’s presidential campaign because Republicans complained that his election would elevate Democratic Lt. Gov. Gray Davis.

Now, Wilson advisers say there is no longer a need for an immediate change in the succession laws because the governor plans to fill his term. Also, they said a commission proposing revisions to the state Constitution is planning to recommend that the California governor and lieutenant governor be elected as a ticket.

Wilson’s office also tried this year in the Legislature to put another measure on the ballot that would make it easier for many state government functions to be operated by private companies. The legislative bill failed and Wilson’s office said earlier this year that it might support a petition drive to qualify an initiative. However, the governor recently scuttled the idea.

Despite all the financial demands, Wilson officials insisted that the governor will be able to pay off his campaign debts.

Wilson abandoned his presidential bid in September when his campaign said it was more than $1 million in debt. This week, officials said they expected the total presidential campaign debt to reach about $2.5 million. They estimated that about $1.6 million of that amount should be recovered through federal matching funds, leaving a total debt of just under $1 million. In addition, in exchange for Wilson’s endorsement of Dole for President, Dole agreed to help the governor reduce his campaign debt.

Officials also said the governor still owes more than $500,000 from his reelection campaign last year against Democrat Kathleen Brown.