Wilson Details Plans for $55.7-Billion Budget : Spending: Schools and impoverished mothers would bear the brunt of the governor’s cutbacks.

SACRAMENTO —  Gov. Pete Wilson, unveiling his first state budget Thursday in the midst of a recession, proposed resolving a potential $7 billion deficit with service cuts and tax increases that would touch nearly every Californian over the next 18 months.

Wilson’s proposed $55.7-billion budget for the 1991-92 fiscal year aims its deepest cuts at public schools and poor women who receive public assistance. Financial aid to public schools and community colleges would be cut $2 billion. For the first time in recent history, basic subsistence grants to the roughly 2.2 million women and children in the Aid to Families With Dependent Children program would be reduced, by about 9%.

Just about everyone affected by the budget would feel the money squeeze resulting from a sharp drop in tax receipts and soaring costs of human services programs.

While the spending plan seeks no general tax increases, Wilson will ask the Legislature to approve nearly $1.8 billion in higher motor vehicle license fees and taxes on liquor, snack foods, newspapers and periodicals. On top of that, Wilson wants to save an additional $210 million by reducing the renter tax credit.

“There is a crisis and we are obliged to solve it,” said Wilson, who inherited a potential $1.9-billion deficit in the current year’s budget from his predecessor, Gov. George Deukmejian. Add to that a projected $3.7-billion shortfall in the next fiscal year beginning July 1 and another $1.4 billion to rebuild the state’s emergency reserve and the result is a record $7-billion shortfall.

The budget problem the Republican governor is attempting to resolve is similar to the one Deukmejian inherited in 1983 from Edmund G. Brown Jr. Deukmejian faced a looming $1.5-billion deficit when he took office and he was forced to carry it into the next fiscal year.

Under Wilson’s plan, which faces months of hearings in the Legislature, most state programs face cuts of 4%. Some programs, including those aimed at the homeless, would be eliminated.

Tuition at the University of California and the California State University system would be boosted 20%.

Despite the proposed tuition increases, officials said, the UC system would not be able to accept the top 12.5% of the state’s high school graduates beginning with the 1992 academic year. It would be the first time that budget constraints have forced the university system to pare its admissions.

Regardless of all the proposed spending cuts, the new governor said some tax increases were inevitable.

“We felt we had to increase certain revenues to avoid Draconian cuts,” Wilson told reporters. “I did not want to cut health programs. I think a tax on candy and newspapers and a tax on beer, wine and hard liquor is a great deal more equitable.”

The Democrat-controlled Legislature fought Deukmejian over many similar proposals contained in the new budget plan, particularly efforts last summer to reduce welfare benefits and cut renter tax credits.

Although Democrats indicated Thursday they are still as strongly opposed to such cuts, some appeared anxious to avoid a confrontation with the new governor.

“It’s a good-faith effort to make the best of an impossible situation,” said Assemblyman John Vasconcellos (D-San Jose), one of Deukmejian’s harshest budget critics.

Senate President Pro Tem David A. Roberti (D-Los Angeles) said, “We don’t agree with some of the things the governor has proposed.” But he said the budget plan reflected “the bleak economic period we are in.”

Wilson Administration officials said the spending proposal is so complicated and interrelated that it will require passage of more than 20 individual bills, in addition to the main budget bill. Before Wilson can cut public school programs, he must persuade the Legislature to suspend the constitutional funding guarantees given to schools under Proposition 98, which was approved by voters in 1988.

Most of the bills would require approval by two-thirds of the Senate and Assembly.

Even if the plan were to survive intact, everything would have to break just right for Wilson’s financial plan to work. The budget proposal optimistically anticipates a one-time gain of $800 million as the result of a change in accounting practices and predicts a substantial turnaround in the economy this year.

Spending overall would increase by 1.4%, substantially less than inflation and far less than the 11% to 12% that state officials have said was needed to maintain the current level of services.

Cuts in the current budget year, which ends June 30, would drop the immediate deficit to $1.1 billion. Wilson wants to carry the deficit over into the 1991-92 budget year, which will begin July 1, and resolve it during the next spending cycle.

Despite the lean budget, Wilson was able to put his own stamp on the spending plan, proposing a series of new programs that he said keeps faith with his promise to attack problems at their earliest stages by setting up preventive programs.

“The emphasis is on prevention,” he told reporters during a Capitol news conference.

The budget document argues that, “the social problems which are driving the state’s fiscal problems--crime, mental illness, child abuse, illiteracy, premature births--are largely preventable.”

Wilson’s budget calls for $52.7 million to be spent on new services for pregnant women before and after giving birth. An extra $10 million would be added to family planning services, targeted for unmarried teen-agers and substance-abusing women.

Funding for drug and alcohol treatment programs aimed at pregnant women would be increased by $25 million.

Pre-school services would get an extra $50 million as part of the first phase of a five-year program to provide the services to every 4-year-old who needs them.

Another $50 million would be spent on a variety of mental health, human service and drug education programs targeted at young people.

Vasconcellos welcomed the Wilson initiatives. “He recognizes the need to start in a new direction and develop and invest in human potential,” Vasconcellos said.

Wilson also is proposing to turn over to counties responsibility for local mental health and public health programs, but with about $900 million annually in new tax revenues to pay for them. Financially strapped counties would get a growing pot of vehicle license fees, beginning with $781 million next year, and $190 million a year from the proposed hikes in liquor, beer and wine taxes.

The new revenues would have no strings attached, so counties would not be required to spend the money on mental health programs. Finance Director Thomas W. Hayes said he expects counties to cooperate. “I think they are going to be comfortable with our proposal,” he said.

Even Wilson’s plan to cut welfare grants had a reform twist to it.

Although basic grants would be cut by about 9%, work rules would be relaxed so that welfare recipients would be allowed to work to make up for the loss without losing their eligibility for AFDC or Medi-Cal. The plan is designed to encourage welfare recipients to become more self-sufficient.

In a move welcomed by environmentalists, Wilson reversed years of budget cuts for the Coastal Commission under Deukmejian and proposed increasing the agency’s budget by $656,000, a 12% jump.

Much of the new money would be used to reopen the commission’s office on the Northern California coast.

Wilson, who has long viewed the Coastal Commission more favorably than his predecessor, said the increased funding proposal was “an initial step in providing the commission with adequate resources.”

Ann Notthoff, a spokeswoman for the Natural Resources Defense Council praised the new governor for seeking to increase the agency’s budget when state funds are short.

“It’s a welcome change,” she said. “We in the environmental community are pretty excited about it even though it’s not much.”

To a avoid a replay of last summer’s prolonged budget stalemate--which left the state without the legal authority to pay its bills for a record 31 days--Wilson proposed a stepped-up schedule for passing budget bills.

STORIES: A3, A28

GOVERNOR’S BUDGETARY CONTROL

According to the state Department of Finance, the governor has control over only 8% of the budget. This is because federal mandates, voter initiatives and other restrictions prevent the governor and Legislature from spending as they please. The best example of this is the 41% of the general fund mandated for education by Proposition 98. Here are some examples of the percentages of discretionary control that the governor and Legislature have over individual departments and programs. 50% CONTROL OVER:

Emergency Medical Services

Department of Alcohol and Drug Programs

33% CONTROL OVER:

Department of Aging

10% CONTROL OVER:

Department of Health Services

Department of Mental Health

Department of Social Services

University of California

California State Universities

Department of Food and Agriculture

Department of Developmental Services

5% CONTROL OVER:

Department of Corrections

Department of Youth Authority

Department of Commerce

Department of Housing and Community Development

Source: California Department of Finance

Compiled by Times researcher Michael Meyers

STATE BOND EXPENDITURES The figures below show the increasing cost of the state’s bonded debt over the years. Shown is the percentage of change in the annual cost to retire the debt and the percent of bond costs in relation to the overall general fund. Figures are in millions of dollars.

Year Bond Costs Annual General Fund Bond Cost % Change Expenditures as % of GF 1980-81 $210.1 6.60 $20,995.5 1.0% 1981-82 218.1 4.19 21,606.4 1.01 1982-83 258.0 18.29 21,661.7 1.19 1983-84 317.5 23.06 22,834.7 1.39 1984-85 375.7 18.33 25,721.7 1.46 1985-86 452.3 20.39 28,841.3 1.57 1986-87 526.7 16.45 31,469.0 1.67 1987-88 511.9 -2.81 33,020.8 1.55 1988-89 513.5 0.31 36,068.3 1.42 1989-90 630.0 22.69 39,445.9 1.62 1990-91* 833.2 32.25 42,720.6 2.04 1991-92** 1,148.5 37.84 43,282.4 2.65

* Budget was updated midway into the fiscal year.

**Proposed budget.

Source: California Department of Finance