Revision Aims to Mend Fences With Democrats

The revised budget released Wednesday by Gov. Gray Davis held two key attractions for an unpopular Democratic governor who faces the threat of a special election to recall him from office.

By restoring some of the sweeping cuts he proposed in his initial budget in January, Davis could boost his political standing -- most notably among Democrats who have criticized the governor for cutting education and other state services. The new plan includes more spending on Davis’ signature issue of education -- long the most important concern of California voters -- and restores some of the health-care cuts that had drawn fire from his fellow Democrats.

More immediately, the revision could bring Davis closer to breaking the budget deadlock of a sharply split Legislature. That move is critical to his ability to convince Californians that he is an effective leader, a characteristic on which they have judged him lacking.

Given Davis’ dismal poll ratings, the new budget plan and its potential to improve his political image could be crucial if opponents succeed in getting a recall proposal on the ballot, analysts said.

For the governor, the emergence of the recall campaign is the biggest change in the political climate since he released his original budget plan in January. At the time, it appeared that Davis -- whatever his political ambitions might be -- would have the full four years of his second term to rebound from the damage of the budget crisis.

But with a recall election now a distinct, if still far from certain, possibility within months, he must tend more aggressively to his political base, analysts said.

If his first budget was crafted at least in part to entice the few Republican votes needed to pass it, the revised plan was directed at the Democrats who control the Legislature and whose support would prove helpful politically.

“Play it down as they may, I don’t believe that any official in the position of Gov. Davis could afford not to look at the recall effort,” said political scientist Larry Gerston of San Jose State. “Fledgling as it may be -- unlikely as it may be -- it’s still out there.”

Davis’ advisors, however, denied that the recall threat has influenced the governor’s budget decisions.

“The best politics is him being a successful governor,” said senior advisor Nancy McFadden. “That’s what he’s trying to do.”

Whatever the motivation, the budget revision played directly to Davis’ base by emphasizing education, his top priority when he ran for governor in 1998. His earlier, larger proposed cuts of education programs appeared to sour not only Democratic officials but also voters; a recent Times poll found more than two out of three voters disapprove of the way the governor has handled education.

By scaling back the school cuts Wednesday, Davis helped mend a rift with the powerful California Teachers Assn. In January, the union dismissed his school budget as an “outrageous mess,” but on Wednesday, union officials appeared with Davis at the Capitol to voice support for the restorations.

“The entire education community is supportive of where he ended up,” said John Hein, the union’s government relations chief.

“That doesn’t mean there aren’t some cuts in there that [are] going to cause some pain.”

But the new Davis plan must do more than cater to Democratic-leaning interest groups; it must also lead to a resolution of the budget impasse.

Whether it could meet that tall order remained unclear Wednesday.

Political strategist Gale Kaufman, a budget advisor to Democratic lawmakers, said the restorations proposed by Davis were “incredibly important to get Democratic votes on the budget.”

“He’s meeting reality head-on,” Kaufman said. “It’s a realistic attempt to move the Legislature to a place where they can discuss an endgame. Is everybody going to be happy with it? Certainly not.”

Indeed, although liberal legislators welcomed the governor’s restoration of some proposed cuts to education and health care, they nonetheless voiced concerns.

Assemblywoman Jackie Goldberg (D-Los Angeles) said cutbacks in Medi-Cal health coverage for the poor were still far too deep.

She also warned that the $10.7 billion in borrowing that is part of the governor’s package would only worsen future budget troubles and make deeper cuts inevitable.

Still, she said, “I don’t want to be overly critical, because he’s moved a long way in our direction, and I’m grateful for it.”

Republicans were not so grateful. Some of them suggested that the recall campaign was a key motive behind Davis’ revisions.

Assembly Republican leader Dave Cox of Fair Oaks said the recall also explained the governor’s effort to distance himself from the state’s expected tripling of the vehicle license fee.

Davis is relying on the higher fee to produce $4.2 billion in new revenue but has stressed that the increase is automatic under state law.

“He knows how unpopular [the hike] would be,” Cox said.

Others focused on Davis’ move to keep more than $8 billion in tax increases in his budget, albeit a revised combination of them.

“It’s a terrible proposal, the worst of all worlds: tax, borrow and spend,” said Assemblyman John Campbell of Irvine, the ranking Republican on the Assembly Budget Committee.

He described the key component of the revision -- the plan to borrow $10.7 billion to pay for state operations -- as irresponsible.

But he said Republicans were nonetheless “OK with it” as long as the budget included no tax increases.

“That’s the one thing we won’t compromise on,” he said.

*

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

*

(BEGIN TEXT OF INFOBOX)

From surplus to shortfall

Awash in tax revenue from a booming stock market, California had a $12.8-billion surplus when Gov. Gray Davis signed the budget in June 2000. Now lawmakers face a $38.2-billion shortfall over the next 13 months. Some key dates in this year’s budget debate:

Jan. 10 -- Facing a budget gap of $34.6 billion, Davis proposes a $96.4-billion spending plan for 2003-04, with $8 billion in tax hikes and $11.8 billion in cuts to schools, health care and other programs.

Jan. 30 -- Legislators agree to cuts of $3.2 billion but link them to a hike in the so-called car tax. Davis, knowing Republicans won’t vote to raise the car tax, threatens a veto and the proposal is dropped.

Feb. 26 -- Senate Republicans suggest closing the gap without raising taxes, relying instead on across-the-board cuts. Assembly Republicans raise the prospect of borrowing $10 billion.

March 11 -- Attorneys for the administration and state Controller Steve Westly conclude that the state can raise the car tax by administrative action, without a vote of the Legislature.

March 13 -- Lawmakers approve $3.3 billion in midyear cuts, some of which Davis had proposed.

May 1 -- Lawmakers approve a second round of cuts and borrowing totaling $3.6 billion. The state Supreme Court rules that if a budget isn’t passed by July 1, California cannot keep paying full wages to state employees.

May 14 -- Davis says the shortfall has grown to $38.2 billion. He softens proposed cuts to the poor, raises school spending, assumes the car tax will rise administratively, and proposes borrowing $10.7 billion to be repaid by a new half-cent increase in the sales tax.

June 15 -- Constitutional deadline for legislative approval of a new budget.

July 1 -- Constitutional deadline for having a budget in place.

Los Angeles Times