Wilson Gets One Green Light on Budget : Governor: Key legislators back proposal on funding for disabled. But analysts warn a Senate committee that revenue estimates may be too optimistic.

SACRAMENTO —  With the outbreak of war threatening to blow a hole in his 1991-92 spending plan, Republican Gov. Pete Wilson held his first budget meeting with legislative leaders Thursday and was promised quick action on at least one money-raising proposal.

But there reportedly were no similar commitments on most major elements of Wilson’s budget plan, including proposals to reduce welfare grants by 9% and measures that would raise taxes for newspapers, magazine, candy and snack foods.

The one agreement came on Wilson’s request for legislative authority by Feb. 1 to charge fees to parents of developmentally disabled children who receive state services. The fees would be assessed on a sliding scale to parents who earn more than $50,000 a year. Wilson’s budget said passage of the fee legislation would free matching funds from the federal government and generate an extra $33.9 million for the state.

The governor said the commitment he received was “very heartening.” Wilson was joined in the luncheon meeting by Assembly Speaker Willie Brown (D-San Francisco), Senate President Pro Tem David A. Roberti (D-Los Angeles), Senate Republican Leader Ken Maddy of Fresno and Assembly GOP Leader Ross Johnson of La Habra.

Maddy later described the meeting as “very casual” and “friendly.” As to the proposed welfare cuts and tax increases, Maddy said, “No one was drawing any lines in the sand.”

Other budget developments were not encouraging. Fiscal experts told the Senate Budget and Fiscal Review Committee that Wilson’s budget assumptions, even before the outbreak of the war with Iraq, could have overestimated revenues by $1.2 billion and possibly much more.

Wilson, in his budget, anticipated a $7-billion shortfall in the 1991-92 budget year that begins July 1. He built his spending plan accordingly, proposing a series of budget cuts and tax increases to close the gap.

But an economic assumption underlying the governor’s budget was that the Persian Gulf crisis would end without war and that the domestic economy would have a strong economic recovery in 1992.

Legislative analyst Elizabeth G. Hill, in a review of Wilson’s budget for the Senate committee, warned that the governor’s economic scenario was optimistic and “entails significant downside risk.” She noted that his budget assumed the recovery would produce $1.2 billion more in tax receipts during 1991-92 than if the state followed less optimistic forecasts.

Hill’s assessment was backed by Kevin Scott, the newly appointed executive secretary of the Commission on State Finance. Rather than being $7 billion short, Scott told the committee that a continued economic slump could produce a budget gap closer to $8 billion or $8.5 billion.

On a positive note, Scott said Wilson’s budget took several “major steps” toward resolving long-term budget problems through his proposals to cut spending, increase taxes, transfer responsibility for health care to the counties and reduce constitutional guarantees for educational spending.

After the budget hearing, Sen. Alfred E. Alquist (D-San Jose), the chairman of the committee, said he thought it was clear that the Wilson budget plan was being overly optimistic. “The Administration has obviously got to revise its figures,” Alquistsaid.

Wilson, before going into the luncheon meeting, said he did not know what effect the war would have on state finances. “No one could say at this point. It’s much too early,” Wilson told reporters. “You don’t know how long the war will last. You don’t know how long the recession will last or how deep it will be.”

Cynthia Katz, assistant director of the Department of Finance, which assists the governor in preparation of the budget, said, “There is just too much uncertainty, a lot of volatility. It will be February or March before we understand fully how the Christmas season affected our revenues, much less a war that started yesterday.”