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California Tries to Meet Budget

To avoid another year of deficit spending, state faces tough decisions on cuts

CALIFORNIA'S budget battle of 1993 has begun in earnest.

On the heels of $14.5 billion and $11-plus billion budget shortfalls in 1991 and last year, the state's lawmakers are looking to whittle another $8 to $10 billion more out of existing programs this year, based on revised figures released yesterday. The spending limit to be reached by the June 15 constitutional deadline is $51.2 billion.

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"There are not a lot of options left," says Dan Schnur, press secretary to Gov. Pete Wilson. "The state has already cut well into the bone."

Democratic-led legislative plans have proposed major cuts to universities, criminal justice, Medi-Cal, and local governments. Earlier plans submitted by the Republican governor to reduce welfare grants to families, cut community colleges, and discontinue renters' credits were bolstered with further proposed cuts to health and welfare announced yesterday. Mr. Wilson also wants to extend a repayment schedule for $3 billion in debt left over from last year's deficit.

Recalling last year's well-publicized fiasco in which state employees were paid with IOUs when lawmakers failed to meet the budget's constitutional deadline by 64 days, Mr. Schnur said there is no reason to repeat the scenario.

"The fight to make these cuts will definitely be tough, but nobody wants a repeat of last year. The legislature will just have to realize, as it did not last year, that the governor is not going to raise taxes or deficit spend."

Democratic Assemblyman John Vasconcellos, who chairs the Assembly Ways and Means Committee, predicts the legislature will meet its deadline. But he does not relish the coming fight. "The state has cut about all the fat there is to be found, we're into muscle and bone," he says. "The threats of prisoners being released, criminal cases not being prosecuted, and people dying in the streets for lack of health services are real."

Spokesmen for both Republicans and Democrats say Wilson and state treasurer Kathleen Brown have worked out a new agreement for short-term borrowing should another standoff last beyond July 1, when the state officially loses its authority to spend money. Short-term bonds, known as reimbursement warrants, would finance state borrowing, backed by the major bond houses that deal with the state. The state Constitution provides no penalty for missing the deadline, and lawmakers have met it only four times in the last 15 years.

Subcommittees in both chambers have spent months wrestling with ways to trim the budget. One point of contention has been Democratic pushes to extend a half-cent sales tax that would raise $1.4 billion in revenue. Wilson, who is concerned that the state's already burdensome tax structure is forcing business exodus, has been vehemently against the extension.

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Wilson wants to transfer $2.6 billion of property tax revenue that usually goes to local governments to support public schools. But the plan has been hotly contested by Democrats. Cities and counties have complained such cuts would require them to cut up to 50 percent of their budgets and could force elimination of public services from libraries to parks.

January estimates of $8 billion in red ink were added to this week with new figures released by the State Department of Finance.

Declining state property values would push incoming state revenue $600 million more into the red, the department said. Another $1.5 billion in federal reimbursements due for immigration-related social services will be $900 million shy this year, they say. And two bills expected but not yet passed by the legislature - concerning renter tax credits and welfare packages - will cost another $900 million.

"The California economy has just not been able to deal with all the people that have come into the state," says Republican Assemblyman Charles Quackenbush, noting an average 650,000 population growth per year throughout the 1980s.

Mr. Vasconcellos says a comprehensive package of 14 bills and four resolutions to deal with the state's long-term problems has been working through the legislature since fall, but will not be ready in time to fix the current shortfall. He has proposed a combination of further cuts, fee increases, reform of local government tax authority, and extension of the sales tax.

Whatever happens, the governor wants to hold the line against spending increases.

"California will not make the same mistake the federal government did in building up a crippling deficit," Schnur says. "For all the problems we've had ... when we come out of recession, we will be in a position to spend where we need."

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