Upbeat Wilson Seeks More School Spending

Gov. Pete Wilson, reveling in an unprecedented budget surplus, Thursday released a revised spending plan reflecting a $4.4-billion windfall, and called for more expenditures on schools, public works and social programs along with a deep cut in the “car tax.”

The proposal is a far cry from the budgets of Wilson’s first years in office, when the state was buffeted by the “hard, hard times” of the recession, and the Republican governor and a Democratic-controlled Legislature scrambled to make ends meet.

For the first time in his tenure, Wilson is proposing a cost-of-living raise in benefits to elderly, blind and disabled people. He also wants to spend more than $400 million on various environmental programs. And his revised plan offers $1 billion more for public schools, colleges and universities, plus the cut in the vehicle registration fee that would pare $995 million from government next year.

As he outlined his eighth and final budget, and continued to weigh another run for the White House, Wilson was relaxed and more than confident that he would get his way on the bulk of his proposals. He even offered a few jokes.

“Better schools, lower taxes, yada, yada, yada,” Wilson said, summing up his proposal, in a nod to the “Seinfeld” finale Thursday night.

The governor had offered a budget in January of $73.8 billion. That was a major jump from the $69-billion budget for the current year. Now, the spending plan for the 1998-1999 fiscal year that starts July 1 is estimated at $75.8 billion, fattened by tax receipts that are far greater than anticipated.

The budget is swollen, and Wilson was in good humor, because the state economy is booming.

Every major source of government revenue--taxes on sales, income, capital gains--rose beyond the predictions of state finance experts. The one exception was taxes on banking and business profits, which dipped slightly, possibly because of business tax cuts that the governor has won in recent years.

“This is a rocket in flight,” Wilson said of the economy, displaying a chart showing that California is outpacing national job growth in every sector except government.

Particularly telling is the state bonanza from capital gains taxes, taken from the sale primarily of stocks and homes. Those revenues rose 45% last year, on top of a 60% rise in 1996.

“Taxpayers did very well, and we got a share of it,” said Department of Finance Director Craig Brown.

The boost in the state share of payments to 1 million Californians who are aged, blind or disabled and must live off government checks is modest--2.8%. Democrats probably will push for a bigger increase. Wilson’s proposal would raise elderly and disabled pensioners’ monthly checks from $650 to $669. For the blind, checks would be $725 rather than $705.40.

The federal government pays the bulk of the money. The state share of the monthly check for elderly and disabled people would go from $156.40 to $166, at an annual cost of $60 million.

Wilson also added $10 million to guard against abuse of the elderly.

The new budget also contains $51 million added to money already earmarked for employee pay increases, allowing for an average raise of 4%. State employees have not had a raise in three years and still must negotiate a new contract.

There is $45 million proposed for prenatal care for illegal immigrants, the result of a suit requiring such payments. And Wilson is proposing another $58 million for the care of developmentally disabled people, including a 9.3% raise in state payments to group homes that care for them.

Thursday’s news serves to dim the memories of 1991, when Wilson, then in his first year in office, pushed lawmakers to close a $14-billion budget gap by slashing spending, borrowing and raising taxes. That 1991 tax package was designed to bring in an additional $7.5 billion. The recession deepened, however, and the increases brought in $5.8 billion.

The governor harked back to those early budgets several times during his hourlong news conference Thursday. Pressing for the cut in the vehicle fee, Wilson said: “The car tax was increased as an emergency in those bad times. It should be cut in good times.”

If the vehicle license fee is cut as much as he hopes--more than $3.6 billion when the reduction is fully phased in in 2002--Wilson would succeed in making his tax cuts during his tenure greater than his tax hikes, the Department of Finance estimates.

The constitutional deadline for having a balanced budget in place is July 1. But Wilson and lawmakers routinely blow that deadline. This year is shaping up to be no different.

While Republicans hailed Wilson’s spending plan, Democrats who control the Legislature were less than laudatory. They intend to push for more spending on education, the hottest issue of this election year, and attempt to block the cut in the vehicle fee.

Senate President Pro Tem John Burton of San Francisco said that even with additional money for schools, California will be 37th among all states in spending per pupil, worse than a decade ago, when it ranked 30th, and far worse than in the mid-1960s, when it was fifth.

In the Assembly, Speaker Antonio Villaraigosa (D-Los Angeles) predicted a “rough road” for Wilson’s proposed cut in the vehicle fee, and called for another $1 billion for public schools.

At least one business organization, the Silicon Valley Manufacturing Group, joined the fray. The group released a poll showing that 85% of Californians want more money spent on schools.

While Democratic leaders denounced Wilson’s proposed tax cut, other members of the party, particularly those facing tough reelection fights in November, left open the possibility they could support it, setting up the potential for a rift among Democrats.

Wilson had several spending proposals aimed at winning Democratic support, chief among them the extra $500 million for public schools beyond the legally required minimum, a step he said would help California build a “world class system of education.”

Altogether, public schools and colleges would get about $40 billion, $2.5 billion more in the 1998-1999 fiscal year than they get now. Under his plan, kindergarten through high school would be getting $31.2 billion in state funds. He estimates that state spending per pupil will rise to $5,728, from $4,433 when he took office.

An estimated $1.75 billion of the $4.4-billion surplus comes primarily from so-called one-time money, largely capital gains tax revenue. Wilson proposes to use most of that to pay for school construction and environmental projects, cover debts left from the recession and boost the emergency reserve by $1.3 billion to $1.6 billion.

The other $2.6 billion comes from ongoing tax revenue.

The governor dismissed Democratic leaders’ attempt to offer an alternative tax cut--an income tax credit for renters--instead of his vehicle fee reduction. “If someone offered you a weenie or a ham,” he asked, “which would you take?”