Gubernatorial Candidate Bill Simon Calls for 10% Cut in State Budget

Painting a starkly grim picture of California’s finances, GOP gubernatorial hopeful Bill Simon Jr. called Wednesday for immediate spending cuts and a reduction of the state’s tax on capital gains.

In assailing Gov. Gray Davis, Simon predicted a deficit of $13 billion to $22 billion by next summer--far worse than the assumption of leading budget experts in Sacramento.

Speaking at the Richard M. Nixon presidential library in Yorba Linda, Simon offered only vague suggestions on how he proposed to balance the budget. He called for eliminating $400 million in “phantom government employees,” elimination of $100 million in “pork projects” and reducing $700 million “in new and expanded government programs that might be nice, but we just can’t afford.”

Simon also called for an immediate 10% cut in the state’s operating budget--something Davis is already considering--and urged a reduction in the state’s tax on capital gains, or profits from the sale of investments. Currently, the state tax on capital gains ranges up to 9%, depending on a person’s income bracket.

“This is our only way to jump-start our economy, foster job creation and balance the budget,” said Simon, who heads a Los Angeles-based investment banking firm. His call for cuts would exclude public safety-related agencies.

Budget experts recently predicted the state could face an estimated $4-billion shortfall next summer, a figure that swells to more than $9 billion counting the cost of electricity purchases financed from the general fund.

Davis and the Legislature hope to repay the treasury for the power purchases through a $12.5-billion bond issue, but the sale has stalled in a fight with the state Public Utilities Commission.

The Department of Finance, at Davis’ request, has asked that state agencies and departments submit budgets that reflect a 10% spending reduction. In recent weeks, Davis also has vetoed numerous bills that would have boosted state spending by millions of dollars.

Simon, however, accused Davis of abdicating leadership on the budget and took a generalized swipe at the size and scope of California government.

“We have to stop looking to the government to solve every problem in our state,” he said.

At another point, Simon suggested that state agencies could easily afford a 10% cut in their operating budgets. “Surely there is waste and fat in these programs,’ he said.

His prepared text included another line--”After all, they’re government programs”--which was dropped when Simon delivered his speech. But a spokesman said the candidate stood by that sentiment.

The criticism reflected long-standing Republican suspicion of state-run programs, yet it came as polls show a dramatic post-Sept. 11 surge in public support for government and its programs.

“There’s an appropriate role for government and things the government ought to be involved in,” said Sal Russo, a strategist for the Simon campaign.

But he pointed to the government’s involvement in the state electricity crunch as an example of overreaching.

“Clearly, the government intervention made it a lot worse, and it’s going to cost taxpayers and ratepayers for decades,” Russo said.