Davis Boosts Budget to More Than $80 Billion

By DAN MORAIN

May 15, 1999 12 AM PT

TIMES STAFF WRITER

SACRAMENTO —

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.

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 California did the 21-prison construction spree of the 1980s and 1990s.

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.

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.

With the windfall, Davis finds himself in far a different situation than Republican Wilson. Wilson took office in 1991, when the economy crashed, and California faced a budget hole of $14.3 billion.

Wilson responded with deep budget cuts and massive tax increases. That led to many of the battles he waged against liberals and conservatives during his eight years in office.

Davis, by contrast, is able to use the money to reward his supporters. Although the governor would not say how much state workers’ pay would rise, he set aside $300 million in a fund to cover the cost of raises and settlements of lawsuits from past administrations. That could give the workers as much as 6%, on top of a 5.5% hike they received last month.

“This is a promising blueprint,” said Dennis Trujillo, spokesman for unions representing state lawyers, engineers and scientists. “What we are missing is his willingness to be a little more exact about what his intentions are.”

The extra money flowing to Sacramento has come largely from higher than expected personal income tax payments.

Times staff writer Dave Lesher contributed to this story.

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Where the Surplus May Go

With a $4.3-billion surplus boosting his first state budget to $80.8 billion, Gov. Gray Davis has plenty to spend. His proposal includes:

Education

Textbooks: $144 million

Maintenance: $143 million

School safety programs: $100 million

Teacher incentives: $100 million

Higher Education tuition and fee reduction: $59 million

Pre-school/after school programs: $58 million