Davis Lowers Sights in His First Budget

Gov. Gray Davis concluded a dizzying first week in office Friday by proposing a status-quo state budget of $77.5 billion, with a focus on schools, a 2% raise for state workers and cuts in several programs.

Acknowledging that he was disappointed by his opening proposals, Davis said he was forced to pare back his expectations because of an anticipated $2.3-billion shortfall--the result of rising costs for some state programs and what he believes is a slowing economic expansion in California.

“I’m disappointed that I do not have more resources to allocate to programs I want,” the Democratic governor said. “I have to bring this budget into balance. . . . I’m doing my best to compensate for the shortfall I inherited. Was I able to do everything I want? Not at all.”

The budget is the single most sweeping piece of state legislation in any year, defining the governor’s and Legislature’s priorities on everything from schools and colleges to flood control projects, health care, prisons and parks.

In the first Democratic budget plan in 16 years, Davis proposed 3% more spending than was approved under Republican Gov. Pete Wilson last year. Davis called for no tax increases, but he did propose a 10% hike in tuition for out-of-state students at California’s universities and colleges. Although Davis advocated a capital gains tax cut during his campaign, he offered no tax cuts Friday in the plan for fiscal 1999-2000.

The governor’s pledge to boost state workers’ pay fell significantly short of expectations. He proposes to spend $190 million more on pay next year--a raise of about 2% for 150,000 state employees. Workers were dismayed; most have not had a raise or a contract since 1995.

“Looks like we’re going to have to squeeze blood out of a turnip,” said Dennis Trujillo, a spokesman for state unions representing engineers, attorneys and others.

Davis focused instead on schools. Under his plan, expenditures on elementary and secondary schools, counting local, state and federal money, would be $43 billion, a 6.9% increase and more than half of all government spending in California.

The state’s share would be $25.7 billion, including payments for such costs as teacher retirement. That represents more than 42% of California’s general fund, from which most state programs get their money.

“For months and months, he has said education, education, education,” said Assembly Budget Committee Chairwoman Denise Moreno Ducheny (D-San Diego). “This budget says it quite clearly.”

Still, Davis--who promised to be an education governor--has simply met the legal requirements for school funding. Education advocates had been expecting him to exceed the legal minimum by at least $100 million.

“I was a little disappointed, although it may still happen,” said state Supt. of Public Instruction Delaine Eastin.

The spending outlined in the budget will be covered by--in addition to more than $60 billion from the general fund--$17.5 billion from such sources as the federal government, the lottery and special levies like the gas tax.

Davis had little time leading up to his inauguration Monday to shape the spending plan for the fiscal year that begins July 1.

“It required some very quick, instinctive decisions. He clearly could not have studied all the pieces,” said Barry Munitz, president of the J. Paul Getty Trust and the head of Davis’ transition team. “But it tells you that he cares about education. It tells you that he is not going to make extreme decisions.”

Many of Davis’ spending proposals are for programs begun by Wilson. Davis recommended, for example, continuing $100 million in state aid to local law enforcement, a program Wilson started three years ago.

Davis did say he wants to reshape the program so local governments will use the money to hire more police. His aides said the budget contains sufficient money to hire 700 more officers statewide.

The budget, headed for months of legislative hearings, will be revised significantly in May, after taxpayers file their income tax returns and state experts gain a better grasp of prospects for revenue.

“Schools and state employees will have very high claim on any additional funds,” Davis said Friday as he unveiled the budget.

The lowered expectations--from a governor whose inaugural speech stressed higher ones--result largely from slower economic growth and higher-than-foreseen demands for such state programs as Medi-Cal.

Additionally, Davis’ aides say spending late last year--some for pay raises Wilson granted to prison guards, highway patrol officers and others--ate up much of the $1.16-billion surplus that Wilson said he was leaving behind.

Apparent Dig at Wilson Irks GOP

Davis’ plans were further dampened by large tax cuts that lawmakers approved in recent years, including a $1.4-billion package of reductions that Wilson signed in August.

Republicans chastised Davis for seeming to blame Wilson for the $2.3-billion shortfall.

“It looks like they are trying to trash Pete Wilson’s legacy, which is offensive to me,” said state Sen. Jim Brulte (R-Rancho Cucamonga).

Brulte predicted a surplus by May. “Gray Davis is going to owe Pete Wilson an apology,” he said.

Senate Budget Committee Chairman Steve Peace (D-El Cajon) greeted the budget less than enthusiastically, saying it reflected a “continuing commitment of a higher level of funding for schools” at a time when forecasts are pointing toward an economic slowdown.

To make ends meet, Davis pared back spending on several programs, trimming $4.1 million from AIDS education and treatment, and $92 million that Wilson had wanted to send to local government in aid for flood control projects and the operations of county courts.

Davis, like his predecessor, is counting on federal aid to fill the gap--$430 million worth for health care programs and prisons. Wilson was repeatedly frustrated in his efforts to get such funds from the Clinton administration. Davis also is hoping that the state will get $560 million from the recent settlement of its lawsuit against the tobacco industry.

Additionally, Davis is deferring $225 million in spending on some building projects. Although there are no tax increases, the governor expects to increase income tax collections by boosting the number of state income tax auditors.

Davis’ reserve for emergencies is $400 million.

“It is fair to say this budget is essentially a workload budget,” Finance Director Tim Gage said. “There are modest increases for some initiatives, and we have also deferred. Essentially, we have tamped down the growth of spending in this budget in order to live within our means.”

State, Local Spending on Schools to Rise 4.7%

Here’s a look at some of the specific areas:

Public schools

The combined state and local share of costs for the classrooms, kindergarten through 12th grade, will be $32.8 billion, including $23 billion from Sacramento. That’s an increase of $1.5 billion from the current fiscal year, or 4.7%.

Davis says accountability on the part of students, teachers and parents is the “cornerstone” of his vision for schools. To turn that into reality, he must win the Legislature’s passage of several controversial measures, including proposals to give the state authority to seize control of poor-performing school districts and to impose a new test for high school graduation.

Davis gave the Education Department $2 million to craft such an exam, to be given for the first time in 2003. He wants the test to evaluate students on higher-level skills such as geometry and algebra. Those courses are not now required by the state for graduation.

“I think maybe he didn’t understand how that would work,” Eastin said. “We have to make sure it’s fair.”

Legislation by state Sen. Dede Alpert (D-Coronado) last year to require such high-level course work for graduation never reached the Senate floor.

Higher education

Davis proposes to spend $12.1 billion from all sources, including student fees, on the University of California, California State University and community college systems, a 3.7% boost from last year.

He is urging $9.9 million to help pay for a new UC campus at Merced and $13 million to help the university system create a new program to help public schoolteachers improve students’ reading.

Davis offers no new construction money for a new state university at Camarillo, saying such spending is premature.

Prisons and law enforcement

With the prison population reaching 164,000 and the number of parolees expected to hit 114,000 by June, spending--from all sources--on state prisons for adults and youths will reach $5 billion, a 3.5% increase.

Unlike Wilson, Davis proposes to construct no new prisons.

He is funding legislation approved last year to beef up investigations in the prison system, spending $1.6 million to hire 19 investigators and others. Davis also is proposing $5 million for improved training for guards.

Among the bigger winners is Atty. Gen. Bill Lockyer, who will receive almost $3 million more than his Republican predecessor, Dan Lungren, got last year, to hire attorneys to enforce laws against discrimination and consumer fraud, and to protect the elderly and the environment.

Health and welfare

The proposed health and welfare budget is $41.6 billion, with the state paying $16.4 billion and most of the rest coming from the federal government.

For welfare recipients, Davis offers about a 2.1% increase over the current year, the bare cost-of-living hike required by law. That brings the amount of the urban area grant for a family of three to $624 per month, up from $611.

Davis calls for an additional $8 million to improve farm worker housing.

Times staff writers Amy Pyle and Carl Ingram contributed to this story.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Budget Talk

Here is a detailed look at Gov. Gray Davis’ proposed 1999-2000 state budget.

PROPOSED GENERAL FUND SPENDING

Education: 42%

Health and welfare: 27%

Higher education: 13%

Prisons: 8%

Natural resources: 2%

Courts: 2%

Other: 7%

****

BUDGET GROWTH (Figures in billions of dollars)

1999-2000: $77.5 billion

****

Where the 1999-2000 Proposed Budget Money Comes From

Personal income tax: 40%

Sales tax: 29%

Bank and corporation taxes: 8%

Motor vehicle taxes: 7%

Highway user taxes: 4%

Insurance tax: 2%

Other: 10%

****

Categories of Spending: Education (K-12)

Former Gov. Wilson’s 1998-99 Budget (in billions): $23.5

Gov. Davis’ Proposed 1999-2000 Budget (in billions): $25.7

***

Categories of Spending: Health and welfare

Former Gov. Wilson’s 1998-99 Budget (in billions): $15.3

Gov. Davis’ Proposed 1999-2000 Budget (in billions): $16.4

***

Categories of Spending: Higher education

Former Gov. Wilson’s 1998-99 Budget (in billions): $7.6

Gov. Davis’ Proposed 1999-2000 Budget (in billions): $7.7

***

Categories of Spending: Prisons

Former Gov. Wilson’s 1998-99 Budget (in billions): $4.8

Gov. Davis’ Proposed 1999-2000 Budget (in billions): $4.6

***

Categories of Spending: Other*

Former Gov. Wilson’s 1998-99 Budget (in billions): $4.7

Gov. Davis’ Proposed 1999-2000 Budget (in billions): $4.1

***

Categories of Spending: Natural resources

Former Gov. Wilson’s 1998-99 Budget (in billions): $1.4

Gov. Davis’ Proposed 1999-2000 Budget (in billions): $1.0

***

Categories of Spending: Courts

Former Gov. Wilson’s 1998-99 Budget (in billions): $1.0

Gov. Davis’ Proposed 1999-2000 Budget (in billions): $1.1

* Other spending includes consumer services, business, transportation and housing and other government programs.