GOP Offers Rival Budget Plan

Senate Republicans unveiled their own plan to close the state’s multibillion-dollar budget hole Wednesday -- absent any tax increases -- by making across-the-board cuts in government programs and borrowing billions to roll a large chunk of California’s debt over to 2005.

Republicans drafted the plan amid criticism that they had offered no viable solution to the state’s fiscal problems while railing against proposals by Democrats and Gov. Gray Davis that would balance the budget with the help of billions of dollars in new taxes.

While legislative Democrats disagreed with much of the Republicans’ plan, they welcomed it as a concrete proposal that will further budget negotiations.

“I’m thrilled,” said Assemblywoman Jackie Goldberg (D-Los Angeles). “When you have a plan on both sides, then the areas where you have agreement on you can move on quickly.”

The Republican proposal calls for reducing annual spending by more than $5 billion in addition to what Davis has already suggested. Nearly every state program would see its revenue cut by 7%. Once that is accomplished, a spending freeze would be enacted to keep the state from running a deficit.

Part of the state’s projected budget gap of up to $35 billion would be eliminated next year and then the state would borrow money to cover the rest until it could be paid off the following year.

“The numbers balance in the out years and make a lot more sense and put California on firm financial footing for the future,” said Senate Republican Leader Jim Brulte of Rancho Cucamonga.

The plan would possibly require changes in the California Constitution, which prohibits the state from carrying a year-to-year deficit.

“The problem,” Goldberg said, “will be they want to make cuts in things we think will cause people to die, or become much more seriously ill and in the long run will cost us.”

Goldberg and others warned that across-the-board reductions would cripple many programs and force hundreds of thousands more Californians to lose their medical benefits and welfare checks than are already at risk under the governor’s budget.

The Davis plan calls for about $17 billion in cuts to government services over the next 17 months, but the reductions are balanced out with more than $8 billion in new taxes.

Republicans are calling for $5 billion in additional cuts.

“We think you can get $5 billion if you’re willing to sit down today and work,” Brulte said. “If you’re willing to cancel vacations, not wait for the problem to get bigger.”

While some economists welcomed the idea of paying off the deficit over two years, they expressed concern about cutting too much from the state budget.

“It took a number of years to get into this situation and it is both humane and good policy to take a number of years to get out of it,” said Stephen Levy, director of the Center for Continuing Study of the California Economy in Palo Alto.

“Republicans appear to be the first ones who have seriously opened up this discussion and it is a positive step forward.”

But Levy warned that trying to balance the budget without any tax increases would result in program and infrastructure reductions so steep that they would make California a less attractive place for businesses to locate.

“It makes sense to me not to undercut foundations of the state’s economic attractiveness by going the pure spending cut route,” Levy said.

Ted Gibson, the state’s chief economist under former Republican Gov. Pete Wilson, said that although he does not necessarily agree that new taxes are needed, he believes that reducing state spending too drastically could hurt the economy.

“We’ve got to extract $13 billion or $14 billion [of government spending] out of the state economy to balance the budget,” he said. “If we can figure out a way to spread that out, it could be better for the economy.” But at the same time he warned that investors may not be willing to loan the state money to roll over its deficit if there is no consensus on a plan to balance the budget by spring.

“A lot of things have to happen in order to pull this off,” he said.

Republicans noted that their plan includes many of the measures proposed by Davis but rejects key elements.

Republicans opposed Davis’ call to shift $8 billion of services onto county governments, which Davis would fund with the tax increases. They also rejected a Davis plan to take $500 million in unused low-income housing funds from local governments. Their proposal spreads some of the pain to counties, calling on them to absorb $500 million per year in cuts.

The Republican plan does not include $1.5 billion in new revenue from Indian casinos that Davis said could be generated by renegotiating tribal-state gaming compacts. According to the plan, “Senate Republicans do not believe that this level of revenue will be realized.”

Brulte called on legislators to work through their Easter recess to get the budget balanced. He said that although all Republicans may not be on board with every facet of the proposal, he can deliver enough votes on his side of the aisle to reach the two-thirds requirement for passing each part of the plan.

“At the end of the day, the state is broke,” he said. “I don’t like a lot of things here. But the state’s broke and we’re going to figure out how to pay our bills.”

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Times staff writers Gregg Jones and Dan Morain contributed to this report.