Money Grab Bag

There is something for everyone in the new $76-billion state budget, says Senate President Pro Tem John Burton (D-San Francisco). That is both its strength and its weakness. The pluses include a big boost in state aid to public school programs that will help California catch up to the national average in per pupil spending. But a major drawback is that the budget focuses more on election-year political constituencies than on a strategic vision of the state’s long-range needs.

Burton’s comment reflects the political reality of writing a budget that can win the required two-thirds majority in both the Senate and Assembly. Majority Democrats must spread around the goodies in order to win Republican votes and avert vetoes by GOP Gov. Pete Wilson.

Seeing education as their strongest election campaign issue, Democrats pushed for and won a major boost in aid to schools, $818 million above the minimum state allocation required by Proposition 98 and $300 million more than Wilson proposed. This is a wise investment for the future, so long as it produces accountable results.

For his part, Wilson extracted a $1-billion reduction next year in the state vehicle license fee, the so-called car tax, growing in steps to $3.2 billion by the year 2004. But only the first $1 billion is certain. The additional $1.8 billion will go into effect only if the state economy continues to grow faster than Wilson’s forecasters expect. But that’s enough for Wilson to claim a tax-reduction legacy that would help him in a run for the presidency in 2000.

The budget, to be enacted early next week--six weeks late--also contains $400 million in other tax cuts, $250 million of it benefiting businesses such as horse racing, aerospace manufacturing, Silicon Valley and Hollywood.

Still uncertain was just how much of the $4.4-billion state budget surplus would go to aid local governments and to invest in resource projects and construction and rehabilitation of state facilities, from university campuses to state parks. And there is no additional money for state employee pay raises, an issue that is stalemated over Wilson’s insistence on changing some basic Civil Service protections for workers.

Another defect in the plan that went before the Legislature Thursday is its reserve of only $231 million to buffer the state against economic emergencies. That is dangerously small, considering the potential volatility of the economy. Most economists say a prudent reserve for a budget of this size would be at least $2 billion. The Legislature still has time to add to the reserve and should do so.

The biggest problem is that this budget was built around a multibillion-dollar tax cut for which there was no great public clamor. Wilson wanted it as his legacy and threatened to hold up approval of a budget until he got it. It’s unfortunate that his concept of a legacy was not broader than that. The additional school aid, for instance, should provide California with far greater future dividends.

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Budgetary Prosperity

California’s state budgets in the 1990s show the stagnant period of recession and then a vigorous rebound.

Fiscal year: ‘98-’99*: $76 billion*

* Estimate

Source: Calif. Dept. of Finance