Davis Faces a Fight With Legislators on Budget Cuts

Top legislators vowed Monday to blunt Gov. Gray Davis’ proposed cuts to health and welfare spending, while some legislators and lobbyists discussed putting measures on the ballot to raise taxes or protect specific programs.

Legislators convened briefly Monday to begin considering Davis’ proposed budget cuts. State officials say they face a $21-billion deficit over the next 18 months -- $6 billion in the remainder of the current fiscal year and $15 billion deficit for the fiscal year that begins in June.

Davis so far has proposed measures to reduce that deficit by $10.2 billion, including $3.2 billion from public schools and universities, and $2 billion from health and welfare programs primarily for the poor, elderly and infirm. Detailed hearings will not begin until next week.

But even before those hearings begin, some Democrats began their campaign to fight for programs, while Republicans, relying on the requirement that a two-thirds vote in both houses is necessary to raise taxes, vowed to make any tax increases difficult. Noting that Republican leaders are opposing tax increases, Senate President Pro Tem John Burton (D-San Francisco) criticized Davis’ proposed health and welfare cuts, and raised the possibility of an initiative or Legislature-sponsored ballot measure seeking voters’ approval for specific aspects of the budget. Several others have suggested seeking voters’ approval for some sort of tax increase to forestall budget cuts.

“At some point, we may do well to go to the ballot with a package of restorations,” Burton said.

From the other side of the aisle, Assembly Republican Leader Dave Cox of Fair Oaks said he remains firm in his opposition to tax increases, adding that he and other Republicans are exploring ways to get around the state constitutional prohibition against carrying more than $300,000 in debt from year to year, except in extreme circumstances. Such a concept could be combined with a cap on state spending. It too might require a ballot measure.

“The question is what can you do with the deficit. Can you roll it over?” Cox asked. “Give the economy the opportunity to catch up and then put a cap in place [on spending]. There are lots of things that can be discussed.”

Representatives of public employees’ unions have floated a similar idea, and are considering placing such a measure on a ballot, perhaps aimed at a special election next year.

While most Republicans say they oppose tax increases, the Republican caucus is not completely unified on that issue. Earlier this month, for example, Assemblyman Keith Richman (R-Northridge), the Legislature’s lone physician, introduced a bill, AB 30, to create a special fund for health care, paid for by “new revenue sources,” code for taxes.

Among the ideas being contemplated by Democrats and Republicans are higher taxes on alcohol and cigarettes and a new tax on health-care insurance policies. Also being weighed are higher income taxes on the wealthiest Californians -- a notion that draws support mainly from Democratic liberals -- an increase in the annual tax that motorists must pay to register their vehicles, and extending the sales tax, which now is limited to consumer goods other than food.

Under the latter proposal, the overall sales tax rate could be reduced, but sales taxes would be extended to include services such as car repair, dry cleaning, and perhaps accounting and legal services.

The idea of asking voters to approve new taxes is not without precedent. Gov. Pete Wilson and the Legislature won voters’ approval in 1993 to extend a half-percent sales tax increase to pay for police and firefighting services. Earlier, voters approved a sales tax increase to help pay for repairs to freeways and bridges damaged in the 1989 Loma Prieta earthquake.

Other measures have failed, including one in 1990 to raise taxes by a nickel per drink on beer, wine and spirits. A measure to raise income taxes on wealthy Californians failed in 1996.

Legislators and some lobbying groups say the public may be willing to approve some tax measures, given the depth of the current budget problem and the magnitude of cuts proposed to education and health-care spending. Los Angeles County voters’ approval last month of Measure B, which raises property taxes to pay for the county health-care system, has helped fuel that belief. “Health care is on everybody’s mind right now,” Assembly Health Committee Chairman Dario Frommer (D-Los Angeles) said. “This may be the issue that we build a coalition around, do a revenue increase, and address policy.”

In part, the tax debate is spurred by the magnitude of the cuts being contemplated.

Davis is suggesting paring education spending by more than $3 billion in a move that in the extreme could force layoffs or a shortened school year. The governor also called for a cut of 10% in state Medi-Cal payments to physicians, nursing homes and others who provide care to elderly and disabled Californians who cannot afford private insurance.

He has also proposed legislation to shift $1 billion in sales taxes on gasoline from transportation projects to general government operations, a move that would crimp state transportation efforts but would help ease the strain on other programs.

“We’re obviously not accepting the cuts,” Frommer said. “These may not be the cuts we decide to make. We may decide to cut somewhere else.”

Davis is urging legislators to act on the cuts by the end of January.

But legislators don’t plan to start holding hearings until next week.

Burton and Assembly Speaker Herb Wesson (D-Culver City) said serious discussion will not begin until Jan. 10, when Davis releases his full spending plan for the 2003-04 fiscal year.

“The only way we’re going to solve this problem is on a bipartisan basis,” Davis said after meeting with legislative leaders Monday. “We cannot do justice to the people of this state unless we rid ourselves of politics and rigid ideology.”

Davis’ preliminary plan presented Friday includes no tax increases, and even if the Legislature adopted all his proposals, it still would leave the state with a shortfall of $10 billion or more over the next 18 months.

Burton said he could not support deep reductions in social services and education without a plan for closing the ongoing budget gap.

He said some programs were largely spared in the Davis proposal, most notably tax breaks for businesses and major raises for corrections officers.

“If nobody is safe at the bottom, nothing is safe at the top,” Burton said.

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Times staff writers Carl Ingram, Gregg Jones and Nancy Vogel contributed to this report.