Wilson Budget Reflects Rising State Economy

TIMES STAFF WRITER

Benefiting from swelling state coffers, Gov. Pete Wilson unveiled his proposed $66.6-billion state budget Thursday, detailing plans to cut welfare, boost education spending and give businesses and banks a new tax cut.

Calling for some of the most significant welfare changes in a generation, Wilson is proposing to go even further than required by recent federal law in overhauling a system he says has failed.

Among other things, the governor wants to force people off welfare rolls and into jobs, while combating teenage pregnancies and trying to ensure that fathers take responsibility for their children.

"We must end a welfare system that undermines the work ethic, that trapped generations in dependency," Wilson said as he released his seventh state budget.

In the budget for the next fiscal year starting July 1, Wilson would trim the cost of the main welfare program for families from $5.1 billion to $4.6 billion, reflecting in part a 15% reduction in monthly welfare checks and a smaller number of people receiving aid.

At the same time, the governor is offering an array of programs to help needy families find work: $80 million for one employment program and $53 million so community colleges can train welfare recipients for jobs, plus a $9.4-million increase for child care starting when a baby is 12 weeks old and grants for minor car repairs deemed necessary for recipients to reach their new jobs.

"The starting job for most people in life is not chairman of the board," Wilson said. "Any entry-level job is an acceptable way to begin in a work force. What we are doing is encouraging people to better themselves."

The governor called welfare overhaul the most important challenge facing the state. If he and the Legislature fail to reach an accord, Wilson said, the state not only will face federal penalties but "will miss the opportunity to really reform a system that is failing a great many people."

"It is the children, in particular, of the persistent welfare recipients about whom we have the greatest concern," Wilson said.

As he proposed historic changes in welfare, Wilson offered a significant boost for education spending.

Under his plan, the state would spend an average of $5,010 a year per public school pupil, with the total from all sources reaching $5,989 per student by the end of the next fiscal year in 1998.

Among his more far-reaching education proposals, Wilson is calling for $1.26 billion to fund a popular program to lower class size to 20 students in kindergarten through third grade. The state is spending $771 million to lower class sizes this year.

The governor's school spending proposal complies with requirements of Proposition 98. Approved by voters in 1988, Proposition 98 requires that the state spend roughly 60 cents of every new dollar of tax revenue on local schools. In all, public schools will receive nearly $21 billion, a $1.9-billion jump from last year.

California's colleges and universities will receive $6.5 billion, and for the third consecutive year fees will not be increased at California's public universities and colleges.

The total spending plan of $66.6 billion represents a 4% increase from the current budget. The state's General Fund, which pays for most state programs and is filled primarily by state income and sales taxes, will be $50.3 billion, an increase of 4.7%. The reserve for emergencies is $553 million.

The governor's budget is a far different document than it was during the recession, when he was forced to propose cuts in many programs and faced tough fights in the Legislature. This year, legislative leaders were less than strident in their criticism of Wilson's overall spending proposal.

"As a rule, the governor wins 90% of the fights," Senate President Pro Tem Bill Lockyer (D-Hayward) said.

Indeed, Assembly Speaker Cruz Bustamante (D-Fresno) appeared supportive of much of the governor's welfare blueprint.

"Nobody disagrees with [moving] people into jobs," Bustamante said. "And I think we're going to move forward on the welfare issue."

But many Democrats questioned Wilson's rigid time limits for ending welfare grants, such as the one-year cap for new recipients. Following federal law, the state would impose a five-year lifetime limit on receiving benefits.

"All you have is welfare abdication. You don't have reform," said Assemblyman Antonio Villaraigosa (D-Los Angeles). "We have to transition 1 million people now on welfare into jobs in . . . two years if the governor has his way. The real issue is, where is the money going to come from?"

In his new budget, Wilson has scrapped his proposal to cut state personal income taxes, something he championed for two years but failed to get through the Legislature. But while he is offering no overall tax cut, the governor once again is proposing to cut taxes on the profits of banks and corporations.

In his new budget, Wilson is calling for a two-year, 10% cut in California's bank and corporate taxes. The new tax rate would be 7.96%. Banks and corporations received a 5% tax cut starting Jan. 1.

The tax cuts, if approved by the Legislature, would be worth $150 million in 1997-98. That sum would grow to $600 million by 1999.

Wilson's budget envisions that California's economy will continue to expand, generating 330,000 new jobs in 1997 and 1998. As more people find work and pay taxes, revenue to the state will grow.

Wilson's proposal is a first step--and one that is sure to change as negotiations continue between the governor and legislators.

The shape of the budget becomes more firm in May, after taxpayers pay their income taxes and the Department of Finance updates its estimate of revenue available for various programs.

The Legislature, which must approve the document by a two-thirds vote, will open hearings on the budget next month, going through the two-inch-thick document line by line.

By law, the state must have a new budget in place by the July 1 start of the fiscal year. If the past is any gauge, serious negotiations do not begin until the middle of that month. Last year, the budget was not signed into law until July 15.

Here's a look at some specifics in the budget:

Taxes

Although there are no general tax increases, the governor is asking for an increase in some fees at the Department of Motor Vehicles totaling $50 million. Fees for new driver's licenses could be increased.

For the sixth consecutive year, Wilson also has made no provision to reinstate the renters' $60 tax credit, a move that would give lower-income renters in California roughly $520 million.

Education

Wilson is proposing a ballot measure asking voters to approve a $2-billion bond. The money would pay for new classrooms and construction. As part of the plan, the state would pay for half the construction costs of new schools.

To make it easier for local districts to come up with the other half, Wilson is asking voters to change the state Constitution and allow voters in school districts to approve school bonds by a simple majority rather than the current two-thirds majority.

Wilson is proposing nearly $100 million in salary increases at the University of California, including a 2% cost-of-living increase for all university employees and a 5% increase for faculty.

He said the faculty pay raises are necessary to keep professors from leaving UC schools for jobs in other states. At the California State University system, the governor is offering a 3.8% pay increase.

Prisons

Altogether, the budget for adult and youth prisons will be $4.3 billion, an increase of almost 6%. The budget includes funds to hire 587 people for a new prison at Corcoran in the Central Valley that would house drug abusers.

After failing for three years to win legislative approval for money to build prisons, Wilson is taking a different approach; he has dropped his call for more than $2 billion to build six prisons.

Instead, he is asking the Legislature to approve $334 million in bonds to help build two prisons. He also is counting on federal money to build a third, and wants money to start planning three others.

Health and Welfare

In Wilson's proposed budget, the cost of providing health care and welfare benefits to the poorest Californians is $14.6 billion.

With new cuts in effect as of Jan. 1, a welfare family of three now receives $565 a month in urban counties, and $538 a month in some rural counties. The governor proposes to cut that check 15% after six months if the recipient has not found a job, which would leave a family in Los Angeles County with about $481 a month.

The governor proposes to spend $113 million to combat teenage pregnancy, increase funding for childhood immunization by $15.3 million, spend $3.4 million to fight infectious diseases and spend almost $3 million to house tuberculosis patients who refuse to take their prescribed drugs.

Wilson's budget envisions completing the closure of Camarillo State Hospital, which houses 160 mentally ill people and had housed 450 mentally retarded people. The move will save the state $69 million and result in a loss of nearly 1,500 jobs.

Environment

Wilson proposes to spend $700 million from the general fund on environmental programs. Although that is a slight decrease from what he offered last year, Wilson is planning to spend $130 million to help buy the Headwaters Forest, a stand of virgin redwood, from the Pacific Lumber Co.

The governor also is proposing to spend $13 million to buy property for habitat protection, and $5 million for coastal access and beach restoration.

The budget proposal calls on the state parks department to charge more for park concessions and to impose fees on school groups.

Times staff writers Carl Ingram and Max Vanzi contributed to this story.

The Proposed Budget

Gov. Pete Wilson's key budget proposals--and their prospects in the Legislature:

PROPOSAL / Welfare: Move recipients to jobs, cut time on rolls, establish paternity of welfare children.

PROSPECTS: The fight of the year.

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PROPOSAL / Local Government: Relieve counties of having to pay General Relief welfare assistance.

PROSPECTS: With Democrats controlling both houses, approval is doubtful.

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PROPOSAL / Taxes: 10% tax cut for businesses, including banks.

PROSPECTS: Continues momentum from last year, when Wilson requested 15% cut and Legislature approved 5%.

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PROPOSAL / Class Size Reduction: Add $488 million to reduce class sizes in kindergarten through third grade.

PROSPECTS: Almost everyone loves the concept.

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PROPOSAL / Prison Construction: Seeks $334.5 million.

PROSPECTS: Wilson has lost three years running; fourth time may be a charm.

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Where the Money Comes From

Personal Income Tax: 37%

Sales Tax: 30%

Bank and Corp. Taxes: 9%

Moter Vehicle Fees: 8%

Highway User Taxes: 5%

Insurance Tax: 2%

Tobacco Taxes: 1%

Estate Taxes: 1%

Liquor Taxes: 0.4%

Horse Racing Fees: 0.1%

Other Fees, Minor Taxes: 6.4%

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Proposed General Fund Expenditures

The general fund pays for most programs provided by the state. Proposed expenditures for 1997-98 show an increase of 16.2% over 1991-92 levels, with revenues for the same period increasing 20.7%. Expenditures in inflation-adjusted dollars in the proposed 1997-98 budget are 1.4% above 1991-92 levels.

K-12 Education: 41.6%

Health and Welfare: 29%

Higher Education: 13%

Prisons: 9%

Resources: 1%

* Other: 7%

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Figures in billions of dollars

1996-97: $48.4 billion

1997-98: $50.3 billion

* Other spending includes a variety of smaller state expenditures.

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