Davis Boosts Budget to More Than $80 Billion

Releasing a revised state budget that now tops $80 billion, Gov. Gray Davis on Friday displayed his customary caution by offering a modest business tax cut, a nonspecific pledge to raise state workers’ wages and a promise to cut college tuition 5%.

With California’s economy still strong and a bulging budget surplus of $4.3 billion, Democrat Davis finds himself in the happy position of having more than enough money to spread around.

Orange County stands to get $21 million of it in flood control money that will help complete the Santa Ana River Flood Control Project. The funding had been omitted from Davis’ original budget.

While Republicans called for tax cuts of as much as $1.5 billion, Davis answered with minor proposals: a $28-million elimination of the tax new businesses pay when they incorporate, and a $50-million reduction by lowering a tax on profits in certain instances from the sale of stock in small companies.

Davis did not specify how much he would raise state workers’ pay. His proposed tuition relief will total $59 million.

Davis also hopes the surplus will help him put his stamp on the courts, providing money to pay for a dozen new Court of Appeal justices and 20 more trial court judges--all of whom Davis would appoint. The full-year cost of the new judges would be $22 million.

The expenditures proposed Friday are in addition to others announced earlier this week. The governor said he wants to build the state’s emergency reserve to almost $1 billion and earmark $1 billion for public works projects in a pay-as-he-goes manner. He wants to spend $335 million for a new maximum security prison in Delano, rather than finance it with bond debt.

As he presented the revised budget, Davis used such words as “prudent” to describe his vision. But he also recalled the major school, water and highway projects built during the tenure of one of his predecessors, Gov. Edmund G. “Pat” Brown Sr., in the 1960s.

“For 20 or 30 years, we’ve lived off the investment that Pat Brown made,” Davis said, “and I’m trying to make a major commitment to improving roads, parks, schools--the underpinnings of our prosperity.”

Davis’ initial spending plan for the 1999-2000 fiscal year, issued in January, was for a $77.5-billion budget. With April tax payments far higher than anticipated, the budget has ballooned to $80.8 billion, a jump of more than 14% in just the last two years.

The budget reflects Davis’ main priority: education. The state will spend $26.4 billion on schools in the 1999-2000 fiscal year, an increase of $700 million over his preliminary budget in January. That works out to $5,990 per student, a 4.5% raise from last year.

The governor also proposes to boost a variety of health, welfare and education programs. But in several instances, his proposals fell short of what Democrats and Republicans alike had hoped for.

Davis’ proposed 5% cut in tuition at state universities and colleges is half the sum advocated by Senate Republicans.

“We’re disappointed it’s not the full 10% cut that we proposed, but it’s a start,” said Sen. Jim Brulte (R-Rancho Cucamonga), a Budget Committee member.

Davis’ proposals also fell short of some Democrats’ expectations. They are pushing for more spending on health care for children of parents who have no health insurance, financial aid for college students and the purchase of more park space.

“Obviously this is a first phase,” said Assembly Speaker Antonio Villaraigosa (D-Los Angeles).

Davis cast aside Republican requests to accelerate a “car tax” cut scheduled to take effect in 2000-01, although he did squirrel away $250 million on the assumption that motorists will receive that additional reduction after the turn of the century.

“The trade-off,” Davis said, “is between needed investments in safer schools, better parks, better local roads and more tax relief. I have provided tax relief that I think is prudent and will spur economic growth.”

Local government stands to gain in a variety of ways. Davis calls for $61 million in one-time grants to local law enforcement. He proposes to double to $96 million the sum he is willing to pay for the operation of trial courts, a cost currently borne by counties.

In addition to the restoration of state flood control payments to Orange County, the revised budget also restored $1.2 million in trial court funding.

“We’re happy about it,” said Gary Burton, the county’s assistant chief financial officer. “Those were two big issues that got resolved for us.”

Two Orange County wetlands projects may be in line for a chunk of the $5.7 million added to the state budget, a State Coastal Conservancy official said.

On the list for consideration: funding to buy up private property at the historic Santa Ana River mouth and at Bolsa Chica to restore as wetlands, said Steve Horn, deputy executive officer of the conservancy.

An already good year for transportation funding could get better if Orange County is awarded a portion of the $425 million in state money put into an “infrastructure bank” by the governor, said Steve Standiford of the Orange County Transportation Authority.

“It makes financing of major projects easier,” Standiford said.

The Legislature’s budget committees will review the revised budget in detail. Davis and the Democrat-controlled Legislature have promised a budget by the July 1 start of the new fiscal year.

This year’s $4.3-billion surplus follows the $4.2-billion windfall that former Gov. Pete Wilson enjoyed last year. Two years ago, the surplus was $2.2 billion, and in 1996, $2.6 billion in tax revenue beyond expectations flowed to Sacramento.

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Times staff writers Nancy Hill-Holtzman and Dave Lesher contributed to this report.