Wilson Puts Budget Expert in Health Post : Cabinet: Governor names Russell Gould to lead state’s largest department, which faces severe funding problems.

SACRAMENTO —  Gov. Pete Wilson, heading toward dramatic cutbacks in state spending, turned Tuesday to budget veteran Russell Gould to take the helm of the vast Health and Welfare Agency.

Gould, chief deputy director of the state Department of Finance, was named secretary of the Health and Welfare Agency at one of the most troubled times in its history.

With the state facing a $12.6-billion shortfall, Gould will be charged with carrying out Wilson’s proposal to cut welfare grants while implementing the governor’s plan to increase preventive care for the poor.

“It is clear Russ has his work cut out for him,” Wilson said at a ceremony to announce the appointment. “He is a man of compassion, but a man who understands that good intentions must be tempered by the reality of available resources.”

Coming on Wilson’s 100th day in office, the selection of Gould, 41, is the final appointment to his Cabinet.

Health and Welfare is the largest agency in state government and administers a range of social services and programs including Medi-Cal, welfare, nursing homes, toxic chemical management, mental health care, unemployment insurance, drug and alcohol abuse prevention, and aid to the aged, blind and disabled.

Wilson noted that the agency’s $25-billion budget is similar in size to the national budget of Greece, Poland or Israel. The agency has nearly 40,000 employees.

The most controversial issue to face Gould is the governor’s proposal to cut welfare grants by 9%--a saving that would be used to finance Wilson’s pet health care programs.

“We’re going to put our priority on the preventive side of care and we’re going to have to make some structural reforms in terms of how we operate government services within the state,” Gould said.

Wilson made the announcement at the modernistic Bateson building that houses Gould’s new office. Hundreds of agency employees lined the rails on each floor of the four-story atrium to see the governor and applaud their new boss.

Wilson’s selection of a budget expert--rather than a medical or welfare specialist--highlights the budgetary crisis that underlies all policy decisions in state government.

Gould, who has been in state service for 19 years, worked his way up through the Department of Finance and served as personnel chief for the Department of Social Services.

“He is among our leading authorities in the intricacies of state finance,” the governor said. “I am confident that he will make the tough decisions that are needed to tame runaway costs and at the same time see to it that this agency continues to be able to take pride in providing quality services.”

One of the issues Gould must deal with is the creation of a health care insurance system for those without coverage. Wilson made it clear he would reject legislative proposals that attempt to place the burden for health insurance on employers.

“I think we have to see to it that we spread the cost of providing it in an equitable way and in a way that does not realistically threaten to drive jobs out of the state,” he said.

Another key issue will be Wilson’s proposal to transfer to county governments the authority and funding for most of the state’s mental health programs.

In response to reporters’ questions, Wilson said he is considering having state employees stay home one day a month without pay as a way to help reduce the budget shortfall.

“We are compelled to consider that possibility among a number of unpleasant possibilities,” he said.

The governor also acknowledged that Gould was not his first choice for the Health and Welfare post, noting that he had planned to keep Gould in his key post at the Department of Finance. However, the first person considered for the $106,410-a-year job was forced to turn it down because of a conflict with his personal business interests, an aide to the governor said.

“I regard this as a particularly important post,” Wilson said. “It is true for one reason or another, personal reasons, there are some other people in whom we expressed great interest who desperately wanted to take the job and finally concluded that they were not able to do so.”

Earlier, Wilson attended a ceremony at a gas station in south Sacramento to celebrate the opening of the first natural gas station for vehicles in California. Wilson, backing efforts to find alternatives to gasoline, praised compressed natural gas as a cleaner, more efficient fuel for automobiles.