Budget Begets Intense Debate in California

CALIFORNIA's 1993 budget battle has started.

Gov. Pete Wilson (R) has offered the state Legislature an austere, $51.2 billion state spending plan that, he hopes, will steer clear of the partisan budget deadlock that eclipsed all other state business last summer and that forced the state to issue IOUs for the first time in a half-century.

The new plan spends 11 percent less than last year and is based on very conservative estimates of tax revenue to be taken in. The budget raises no new general taxes and is balanced. It also foresees deep cuts in nearly every government service except prisons and schools.

"This is a very, very, difficult budget," Governor Wilson told a news conference. "It reflects the hard times California is facing."

Budget problems are the top issue for nearly every state in the union in 1993, according to a recent study by the National Conference of State Legislatures (NCSL). And many eyes are on California to see how the largest state copes with its problems.

"As the world's seventh largest economy, California has developed many models, from welfare to universities, that other states look to as an example," says William Pound, executive director of NCSL. "What state leaders do there can have a direct impact on what others try."

In California's latest proposed budget, dramatic drops in funding for every city and county top a list of cuts that also include a 19 percent reduction in welfare grants, a 15 percent reduction in state government administration, and lower limits on health services to the poor.

Some economists are predicting up to a tripling in fees for community colleges and substantial fee increases for state universities. State in recession

Also on the chopping block are several state agencies from the Franchise Tax Board and the California Energy Commission to the Agricultural Labor Relations Board. Seventy-eight state-funded advisory boards and commissions are slated for oblivion.

"On the economic side, the message is that California is not yet out of recession," says Pauline Sweezey, chief economist for the state Department of Finance.

She predicts that 100,000 more jobs will be lost in the state in 1993 on top of the 800,000 that already have been lost since 1990. "We don't see any signficant turnaround until 1994," Ms. Sweezey says.

In part because of the high jobless rate, the revenue which drives the new budget is expected to total only $39.9 billion, down 2.6 percent from 1992.

Yet demand for state services is on the rise. Three hundred-eighty thousand more people are eligible for Medi-Cal, for instance. Welfare agencies expect 50,000 more recipients. Public schools are expecting 96,000 more students and the University of California and California State University systems are expecting 13,000 more students.

Based on these figures, the state will be $7 billion short in meeting the demand for state services running at current levels, as well as $2 billion short in making up a shortfall from 1992.

So a total of $9 billion must be made up for with spending cuts.

But Wilson's proposals in that area are hardly final. His proposed spending plan will be subject to tinkering from state legislators at least until June 15, when the state Senate and Assembly are constitutionally required to pass a budget.

"These are only the first mark on the blackboard," says Jack Kyser, chief economist of the Los Angeles Economic Development Corporation.

"You are going to see lots of scribbling on this by those who are having it taken from their hides," he says.

Among several key Democrats who have criticized the plan is Senate president pro tempore David Roberti (D) of Los Angeles.

"It is unfair and hurtful to increase taxes and fees on more than five million renters and 1.5 million college students," he said.

Senator Roberti especially criticized the governor's budget proposal to end a renter's tax credit for low-income tenants. "Generally they are the poorest citizens in our state and it is unclear why the governor's `no tax increase' pledge does not apply to them," he said.

Roberti also said Wilson's $2.6 billion cut from local governments would severely hurt police and fire protection, emergency services and health care for the poor. `A tough year for everyone'

"Unfortunately, it's going to be a tough year for everyone," said state Controller Gray Davis (D). "It's going to take a great deal of wisdom and cooperation for California just to survive for the next couple of years."

Mr. Davis last week warned the governor that the state will run out of cash again this spring unless Wilson borrows $2 billion to fill a gap in the general fund by May.

Last year Davis asked Wilson to borrow $4 billion to stave off the use of IOUs. Wilson's failure to do so led to the eventual issuance of $3.7 billion in IOUs to state employees, health care providers, and vendors.