Davis Fires 1st Salvo at Deficit

Gov. Gray Davis ordered state agencies and departments Tuesday to freeze or cut spending for “nonessential” travel, equipment and outside consulting, the first of many fiscal remedies to follow as California confronts a projected budget shortfall of more than $21 billion.

Davis also directed the agencies and departments to cancel contracts for “nonessential goods and services” wherever possible.

The governor called on the Legislature and the judiciary to match the measures.

Expected savings will probably be less than the $150 million saved by a similar directive last year, said Davis Press Secretary Steven Maviglio.

The steps are the first slice of $5 billion in cuts and other savings that the governor will ask the Legislature to consider in a Dec. 9 special session on the budget, Maviglio said.

“It sends a serious message in getting the maximum amount of savings this year,” he said.

The order excludes highway projects -- which are financed by the special-fund portion of the state budget -- and “essential” services, including protection of public safety and protection of state revenues and assets.

After a discussion with legislative leaders last week, Davis warned that the state’s budget difficulties will be even worse than the $21.1-billion shortfall for 2003-04 projected by nonpartisan Legislative Analyst Elizabeth Hill earlier this month.

That includes a projected deficit of more than $6 billion in the current 2002-03 budget. Davis signed the budget Sept. 5, more than two months late, after a dispute with Republicans over whether to raise taxes to fill a $24-billion budget hole.

A reprise of that conflict is looming as California confronts another enormous gap between tax collections and spending in the coming year.

“California, like most other states across the nation, is facing an unprecedented drop in revenues,” Davis said in a statement Tuesday. “Putting the brakes on authorized spending is an important step toward meeting this fiscal challenge.”

Republicans, however, chided Davis for not taking the steps sooner.

“It would have been nicer if we had done it earlier, but every dollar helps,” said Senate Republican Leader Jim Brulte of Rancho Cucamonga.

A spokesman for Assembly Republican Leader Dave Cox questioned whether Davis would strictly enforce the freeze.

“The governor announced last year that he would impose a hiring freeze, yet did not live up to that promise,” said Peter DeMarco, spokesman for Cox. “We hope he is more sincere this time in enacting these directives.”

Assembly Speaker Herb Wesson (D-Culver City) said Davis had taken a necessary first step.

“This is how you begin stopping the bleeding,” said Wesson. “We still have a long way to go.”

Davis and his advisors have been meeting with education officials, business leaders and others to solicit ideas as the administration prepares a package of cuts and savings for the special legislative session. Davis must also give the Legislature a balanced 2003-04 budget proposal by Jan. 10, four days after he begins his second term.

One Davis advisor said the message being given to interest groups in the discussions was “pick your poison.”

California isn’t alone in its budget difficulties: The struggling national economy has spawned “the worst fiscal crisis states have had since the Second World War,” said Raymond Scheppach, executive director of the National Governors Assn.

About 35 states probably will cut health benefits for lower-income residents. Many will lay off state employees, raise university tuition fees and even consider cutting funding for elementary and secondary education, he said.

“Most every state has been hit by a dramatic falloff in revenue,” Scheppach said.

California Republicans have sworn off tax increases as part of the solution to the Golden State’s fiscal hole, but Scheppach said many states can’t avoid higher taxes.

“There are going to have to be some tax increases,” he said. “They’ve done everything already that is moderately difficult to even more difficult, so from here on it’s going to be very, very tough.”