Budgetary Caution, Please

Democrats and Republicans in the Legislature are threatening to overdose on the nectar of a big state budget surplus and may be careening toward an election-year budget deadlock. Each side thinks it has a winning issue to put before voters. Each side may be tempted to drag out the budget process in hopes the other will be blamed as obstructionist by the voters.

Sound state fiscal policy could be the real loser. Prudence should be the first priority in compiling a 1998-99 state budget--that and negotiating a successful budget in the Legislature before the end of the fiscal year June 30.

Democrats are counting on their commitment to public education to win votes, pledging to boost basic school aid by more than $1 billion over Republican Gov. Pete Wilson’s budget plan. They also are proposing major increases in social spending, a state worker pay increase and cuts in higher education student fees.

Republicans want to spend the money on repeal of the state’s vehicle license fee, a form of property tax that extracts $185 from the average motorist at registration time each year. The GOP sees this as a sure-fire political winner after Republicans used the issue to win the Virginia governorship last year.

Elizabeth G. Hill, the Legislature’s nonpartisan fiscal analyst, tends to come down on the side of prudence: First, don’t plan on budget surpluses to last forever; they may dry up in the next few years. Second, retain a good chunk of the money as a state budget reserve against emergencies. And third, don’t plunge a one-time budget surplus into ongoing programs or tax cuts; instead invest it in one-time projects such as the purchase of textbooks or building maintenance. Both parties could learn something by listening to Hill.

Each side argues that the state must make up for unpalatable actions dictated by the recession of the early 1990s, a Faustian mix of tax increases and budget cuts.

Republicans contend that it’s only fair to working men and women to grant them a $3.6-billion car tax cut even though Republicans won successive tax cuts of about $1 billion in each of the past two years. Hill says full repeal of the car tax would eat up all of the surplus projected for the next several years and force the state back into a budget deficit--the last thing the state needs.

Democrats have a strong argument when it comes to public schools, since California’s spending per pupil still ranks as low as 37th nationally. But they are not altogether rejecting the concept of tax cuts, either. They set aside roughly $500 million for restoration of the renters’ tax credit, suspended during the recession. This appears to be the opening gambit in a negotiated settlement of the tax issue.

Each house passed its version of the $78-billion budget Thursday. A two-house conference committee will begin negotiating a final version June 8.

Before the budget rhetoric gets louder, lawmakers should examine the state’s most critical needs and decide how to get the most impact for every budget dollar. Planning for the future ought to take priority over election-year politics.