State Deficit May Reach $14 Billion, Davis Says

Gov. Gray Davis acknowledged publicly for the first time Wednesday that California could face a budget deficit as large as $14 billion.

Davis revealed new details on the size of the anticipated shortfall, which he said could range from $8 billion to $14 billion, after he briefed the Legislature’s Republican and Democratic leaders on the state’s budget woes. He said the estimate does not include the roughly $6 billion borrowed from the general fund to pay for energy purchases.

So far, Davis has largely dealt with California’s financial slump by proposing spending cuts. But on Wednesday, lawmakers started to stake out their positions, with Republicans saying that they want to preserve funding for education and law enforcement, and that they oppose tax hikes.

Senate Leader John Burton, a San Francisco Democrat, suggested that Republicans instead consider suspending existing tax cuts to help the state through its troubles. One example, he said, is the $3.5 billion the state pays cities and counties to cover a reduction in the vehicle license fees paid by motorists.

“It would be impossible to cut this much money out of the budget without hitting law enforcement and without hitting education, and they know it,” Burton said of the Republicans. “If they’re responsible, maybe there would be a suspension of some of the tax cuts they’ve been so busy supporting.”

Senate Republican Leader Jim Brulte of Rancho Cucamonga described tax hikes as “unacceptable.”

“I would not cut education or law enforcement,” added Assembly Republican Leader Dave Cox of Fair Oaks.

Davis had ordered state agencies to prepare for 15% budget cuts in the 2002-03 fiscal year, and earlier this week he imposed a state hiring freeze and called for $150 million in spending trims in the current fiscal year.

The governor is also set to convene an economic summit of California politicians and business leaders on Nov. 2 at Disney movie studios in Burbank. Davis suggested Wednesday that the state could offer incentives to encourage Hollywood to film more movies in California, noting that many actors are hesitant to travel after the Sept. 11 attacks.

The governor said speeding transportation projects could create jobs and indicated the state may lean on local governments.

“We have a lot of money we have given to local governments to repair and maintain local roads,” Davis said. “We could give them incentives or disincentives to see that money spent sooner rather than later.”

Davis said he had expressed by phone to Sen. Dianne Feinstein (D-Calif.) a sentiment shared by state lawmakers that any economic stimulus package passed in Washington should include money to reimburse states for increased security and public health costs incurred since the terrorist attacks. He estimated the state’s costs for such services at $300,000 to $1 million a day.

Davis, who is up for reelection next year, has come under fire from Republicans for his handling of a recent downturn in state revenue.

Brulte called on Davis to convene an immediate special legislative session to begin tackling the state’s fiscal woes. Brulte said Democrats indicated they are open to considering a special session if working groups are able to come up with specific cuts and a clear plan of action.

“I think we need to act, and we need to act now,” he said.

Brulte also went out of his way to contrast the current fiscal crisis with the one former Gov. Pete Wilson tackled a decade ago.

Wilson faced a $14-billion deficit in a roughly $42-billion general fund after several years of slowing growth, Brulte recalled. The recent shortfall comes as general fund expenditures hover at $78 billion, which Brulte attributed to too much government growth.

Davis spokesman Steve Maviglio circulated information Wednesday that indicates that spending increased faster under previous California governors.