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California's Diverse Economy Being Challenged by Deficit and Drought

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CALIFORNIA needs rain, but the only storm clouds overhead are severe budget woes. Even if things go well, incoming Republican Gov. Pete Wilson's proposed $55.7 billion 1991-92 budget will spend $7 billion to $10 billion more than the state takes in over the next 18 months.

But things are not going well.

``This is the Golden State, the diverse-as-you-can-get economy that's supposed to be recession proof, on the cutting edge of Pacific Rim trade,'' says Sherry Bebitch Jeffe, senior associate of the Center for Politics and Policy at the Claremont Graduate School. ``And we are in dire financial straits.''

The problem is tax revenue - lower in the short term because of recession, war, and a four-year drought that is worsening. Long term, the problem has been growth in demand for public services. Six million people came here in the 1980s, straining public assistance, health, primary education, and prison allotments.

``At once victims of our dream of making the desert bloom, we are being buffeted by national events and the vagaries of nature,'' adds Dr. Jeffe.

Governor Wilson is tackling the budget problem as one of structure. That means finding ways of unlocking constraints on money earmarked by ballot-box initiatives and spending limits going back to the Proposition 13 tax revolt of 1978.

One of these is Proposition 98, a 1988 initiative that gave education first priority on 41 percent of the state's general funds. Wilson also has his eye on renters' credits, programs for the homeless, and welfare.

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