Davis’ Revised Budget Rises to $98.4 Billion

Estimating California’s surplus at $12.3 billion, Gov. Gray Davis on Monday offered a revised budget that has ballooned to $98.4 billion and emphasizes schools, transportation and tax rebates. It was met with a sharp reaction from top lawmakers.

In Davis’ proposed budget for the 2000-01 fiscal year, California would spend an average of $6,768 per public school student, a jump of more than $1,000 since 1998, an amount that Davis’ aides say pushes the state’s spending on schools above the national average. He proposes to spend $3.9 billion of the surplus on schools.

The governor’s proposed education spending would push the state’s share of the cost of public education to more than $30 billion, $1.1 billion above the minimum required by state law.

Although the budget surplus is at an all-time high, Davis’ Department of Finance estimates that more than half of the $12.3 billion came to Sacramento by way of a one-time windfall, largely due to taxes on massive stock market gains in 1999.

“It’s very important to recognize that 1999 was a special year,” Davis said. “It’s not likely to reoccur soon.”

Contending that the state cannot count on a dot-com bounty in the future, Davis proposes to spend the bulk of the surplus on one-time expenses, including $1.9 billion on a tax rebate for 12 million taxpayers and elderly people, $2 billion for freeway and mass transit projects, and smaller sums on programs ranging from parks and public safety to health care.

Altogether, the governor is proposing to spend almost $7 billion of the surplus on so-called one-time programs, and $5.3 billion on programs that will be ongoing. Davis rejected Republican demands for deep permanent tax cuts and Democratic calls to pump up spending in such areas as mental health care.

“I intend to resist the siren song of permanent expenditures, whether it comes from the left or the right,” Davis said.

Reaction from Republicans and Democrats ranged from tepid to outright anger, particularly at the governor and his chief spokesman’s reaction to their opposition to Davis’ idea of ending income taxes for public school teachers, at a cost of $545 million in the new fiscal year.

On Monday, Davis described eliminating state income taxes for public school teachers as a “big idea.”

“Sometimes,” he said, “it takes a while for a big idea to sink in.”

Davis’ comment followed one by his press secretary, Michael Bustamante, who brushed aside lawmakers’ criticisms voiced on Saturday by saying: “Perhaps this is a bigger idea than they’re accustomed to.”

Senate President Pro Tem John Burton blasted back: “Thinking big is doing something for the future of the largest and greatest state in the union. That’s thinking big. Giving people money ain’t thinking big.”

Even as Davis vowed to fight to eliminate state income taxes for teachers, he acknowledged for the first time publicly that the idea he proposed on Saturday might fail to win legislative approval.

“People may disagree,” Davis said. “It may not pass. But I’m standing up and fighting for this puppy, I can assure you.”

Assembly Republican Leader Scott Baugh of Huntington Beach warned that if Davis is serious about fighting to eliminate income taxes for teachers, “it’s going to be a long summer.” The idea is discriminatory, he said, adding, “You’d have every group screaming at you for a tax cut of their own.”

The jousting comes as negotiations begin to turn serious over the budget for the 2000-01 fiscal year. The state Constitution says that the Legislature must approve the budget by June 15, and that the governor must sign it by the July 1 start of the new fiscal year. There is no penalty for failing to meet the deadline.

The overall $98.4-billion spending package includes funds paid for specific taxes, such as the gasoline tax that funds freeway construction. The preliminary budget that Davis offered in January, before people paid their 1999 income taxes and the surplus swelled, was $88 billion.

Citing the record budget growth, Republicans called for permanent tax cuts. Assembly Republicans advocate a $2-billion tax cut, plus one-time tax reductions of another $2 billion.

“There is a lot of work to be done on the governor’s tax proposal,” said Sen. Charles Poochigian (R-Fresno), speaking on behalf of Senate Republicans. “We’re just not there. I don’t think we’re even close.”

Assembly Democrats, by contrast, said Davis’ tax cuts--totaling more than $2.5 billion--are too deep. “The big issues are tax policy--the amount and the policy,” said Assembly Speaker Bob Hertzberg (D-Sherman Oaks).

In addition to offering income tax rebates--in the form of $150 checks for 12 million people who paid 1999 income taxes--plus tax breaks for the elderly in a package totaling $1.9 billion, Davis is proposing two tax breaks for businesses aimed at helping high tech and start-up companies.

He also is proposing $18.5 million to help the film industry, including $15 million to reimburse local governments for the cost of allowing productions.

Among his other proposals, Davis called for boosting spending on community colleges by $202 million, and allocating another $13 million to speed the creation of a new University of California campus at Merced.

Davis, however, rejected Senate Republicans’ request that the state slash tuition at the UC and California State University systems.

Health care would receive a boost under the governor’s plan. Doctors who treat people covered by the state-funded Medi-Cal program would receive a 10% increase. Davis is calling for an extra $165 million to expand the Healthy Families program to cover children whose parents have no health insurance, and for low-income people whose jobs don’t offer health insurance.

Democrats generally lauded the increases in health care. But Davis’ proposals fell short of what they sought.

The governor, for example, is offering $50 million to increase funding for a program that seeks to bring mentally ill homeless people into treatment and offer them housing. He calls for another $50 million to treat parolees who are mentally ill. Burton and other lawmakers, however, have called for another $300 million to help the severely mentally ill.

“Disappointment,” Carla Jacobs, a board member of the National Alliance for the Mentally Ill, said of Davis’ proposal. “It’s not enough.”

Among his other proposals, Davis is calling for a cut in the fees for camping at state parks at a state cost of $36 million, and earmarking $83 million to restore the cemented Los Angeles River and develop other parks in the city.

In some of his other proposals, Davis is recommending:

* Another $50 million to speed the analysis of 18,000 DNA samples from unsolved rapes in an effort to find the perpetrators.

* The construction of a $96-million crime lab for Los Angeles city and county law enforcement.

* An 8.5% pay raise for judges next year, rather than the 5% Davis offered when he unveiled his initial budget in January. Superior Court judges make $117,912. The 8.5% raise would boost their pay by more than $10,000.

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Governor’s Proposal for the Surplus

California Gov. Gray Davis, in the revised budget he announced Monday, estimates an all-time-high surplus of $12.3 billion. In distributing the windfall, the governor has divided the money almost equally between ongoing expenses that will cost taxpayers for years to come and one-time expenditures to allow for economic ups and downs in the future. A breakdown of where the surplus will go, in millions:

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Expenditure Ongoing One-Time Total Education: Higher education $313 $210 $523 Cost of living/caseload/other $407 $407 Discretionary $1,840 $1,840 English language and $300 $300 literacy intensive program School Internet connections $400 $400 Performance bonus $500 $500 Personal income tax elimination $545 $545 Transportation $440 $1,500 $1,940 Tax relief $1,910 $1,910 Health care $797 $150 $947 Environment $375 $375 Public safety $256 $256 Housing $50 $450 $500 Reserve $530 $530 Local government $250 $250 Government on the Internet $10 $10 Other programs and $936 $150 $1,086 non-discretionary uses Totals $5,328 $6,991 $12,319

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Source: Governor’s office