More Adds Up to Less in Fiscal Numbers Game : Budget: Despite cutbacks, anticipated 20% increase in revenues, the state is spending more than it is taking in.

SACRAMENTO —  Welfare recipients’ checks would be cut. Automatic cost-of-living raises for social programs would be suspended. More than 10,000 state workers may lose their jobs.

From all this, you might conclude that the state budget is shrinking. But it’s not.

The 1991-1992 budget plan the Assembly passed Thursday would increase spending 11% over the current fiscal year, which ends June 30, according to numbers supplied by the state Finance Department.

Even more surprising, perhaps, is that state revenues are expected to climb 20% next year if Gov. Pete Wilson’s proposed tax package is passed by the Legislature.

These figures do not include a $2.2-billion tax increase that will be collected by the state and then sent to county governments to pay for a batch of health and social programs that are being transferred to the locals from Sacramento.

Why all the hardship in a year of apparent plenty?

The problem is that the state is spending more than it is taking in. A deficit in this year’s budget must be paid off and a new reserve built for next year. On top of that, inflation and the demand for state programs to serve a growing population are climbing faster than tax revenues.

The result is a two-year, $14.3-billion gap between what the state would receive in its general fund and what it would need to spend if taxes were left at current levels and programs were not cut.

Here is how the numbers fit together:

The state began the current fiscal year last July 1 with $612 million in reserve and is expecting to take in about $38.5 billion by the time the budget year ends, 10 days from now. But expenses will total $40.5 billion. This leaves a deficit of about $1.4 billion.

During the next year beginning July 1, revenues from taxes and fees, counting the governor’s tax plan, are expected to climb to $46.4 billion--an increase of $7.8 billion, or 20.4%, according to the Finance Department.

But before any of that $7.8 billion increase is spent, $1.4 billion must go to pay off this year’s deficit. Another $1.2 billion that has been paid to public schools this year will be counted against next year’s revenues, for bookkeeping and political purposes. Another $1.6 billion will be kept in an emergency reserve.

These items total $4.2 billion. This leaves $42.2 billion for programs next year, $1.7 billion more than will be spent this year. This is an increase of about 4%.

But the cost of living is forecast to climb about 4.3% next year, wiping out the boost in revenues. This leaves no new money to meet the demand for state services, from schools to welfare to prisons.

The state expects to lock up an additional 12,700 prisoners next year, a 12% increase over the current prison population.

Another 245,000 poor people are expected to become eligible for the Medi-Cal health services program, an increase of about 6.1%.

More than 36,000 additional families are expected to qualify for welfare assistance under the Aid to Families with Dependent Children Program, up 5.3% from this year. And the number of recipients of aid to the aged, blind and disabled is forecast to climb by 7.3%.

These and other programs, if allowed to expand according to current law, would cost the state $48 billion next year. Wilson’s proposed budget cuts, including the shifting of $2.1 billion in programs to the counties, reduce state expenditures to $43.4 billion.

But revenues, while they have grown at a robust pace in past years, are flat this year and will not even keep up with the reduced growth in programs. The personal income tax is indexed to inflation, so proceeds from that tax climb only when the growth in income exceeds the rise in the cost of living. Sales, bank and corporation taxes have been leveled by the recession.

If tax rates and other revenue sources were left unchanged, the state would take in about $38.5 billion. Wilson’s proposed taxes would increase that to $46.4 billion. Another $10 billion in bond money and special funds bring the total budget to $56.4 billion.

ASSEMBLY OKS BUDGET: Several Republicans back governor and his spending plan. A1