First but Not Final Word

Gov. Gray Davis appears to be channeling his Republican predecessor, Pete Wilson, in proposing to wipe out the estimated $35-billion state budget deficit with a precarious combination of budget cuts and tax increases. As Wilson did, he would also shift more social welfare programs onto local governments. What Davis unfortunately forgot is that many of Wilson's painful fixes were temporary.

The $96.4-billion state budget proposal for the fiscal year beginning July 1 also lacks the basic structural reforms Davis himself called for earlier in the week.

The plan released Friday is far from the final word, and it will take a bruising from everyone who has an ox being gored. As Davis promised, though, the pain runs wide and generally deep. Taking big hits are taxpayers -- $8.3 billion in higher levies -- some health and welfare programs and state aid to cities and counties. Largely spared is public health insurance for children.

Some need to feel more pain, including the Corrections Department, which would sacrifice less than 1% of its $5.6-billion budget, compared with about 8% in overall state cuts. Davis, who accepted lavish donations from the prison guards, has something to prove on this issue.

Davis patterned his major budget change after something Wilson did during the fiscal crisis of a decade ago. Then, Wilson and the Legislature erased a $14-billion deficit by raising taxes roughly $7 billion and cutting spending a like amount. Similarly, Davis proposes to reinstate the 10% and 11% income tax brackets imposed by Ronald Reagan in the late 1960s -- and to raise the sales tax by a penny on the dollar statewide, to more than 9% in Los Angeles. The new money, $8.3 billion including higher cigarette levies, would go to the counties to pay for the health and welfare programs they would absorb. By linking the tax increases to social services being taken over by localities, Davis makes reducing them in the future much harder. Moreover, Davis is taking back from the cities and counties nearly $3 billion annually in state payments that made up for the loss of shrinking car tax revenues.

Davis' income tax boost threatens to make the tax system even more volatile, increasing the gyrations that made the deficit so sudden and so steep. That needs fixing. The state also needs a disciplined budgeting process to halt the overspending that added to this crisis, something urged by GOP legislators in their initial counterproposal. Democrats must take it seriously to have any hope of GOP support for new taxation.

One small reason for optimism is the impending arrival of former state Sen. Steve Peace of San Diego as Davis' finance director. He is a longtime advocate of basic fiscal reform. One of Peace's first jobs will be figuring out whether the deficit is really $35 billion over 18 months -- or something less, as Republicans argue.

Davis rang the opening bell Friday and now the Legislature will take its turn in the arena. It has to do more than say "no."

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