No One Is Happy With State Budget

When it’s finally approved, California’s new budget won’t so much reflect high-minded policy as it will the shrewd politics of Gov. Pete Wilson, who sought to drive a wedge between Democrats and their political patrons.

The upshot has left Senate President Pro Tem Bill Lockyer (D-Hayward), the Senate Democrats’ lead negotiator, to conclude that this year’s budget debacle was a “failure,” both for him personally and for his institution.

It also has left Assembly Speaker Cruz Bustamante (D-Fresno) saying he learned hard lessons. Even the governor seems dejected.

“This year has been a disgrace,” Wilson said in an interview Thursday.

A budget vote is still at least a week away, and no final deal has emerged. But with neither side expecting a last-minute compromise, Wilson and many legislators have decided to simply end the impasse, a month after the constitutional deadline for adopting a budget.

There is no single reason for the budget breakdown. Inexperienced legislators, political miscalculations by both sides, unrealistic expectations, promises of funding for pet projects, unyielding political stands--all and more played roles.

Wilson and the Democrats’ solution is to spend all extra money paying off a $1.36-billion legal judgment and adopt a pared-down budget in which neither Republicans nor Democrats will get much of what they want.

The maneuvering in recent days means that, despite the billions in tax dollars flowing into state coffers as a result of California’s bustling economy, the state will muddle through the 1997-1998 fiscal year by not enhancing programs, other than schools, with much money beyond what was spent on them last year.

It will be a far distance from Wilson’s original $68-billion budget proposal, which held the promise of everything from major environmental programs, tax cuts, a bailout for local government and several new public health initiatives.

The turn of events is a prime example of the gulf that separates Wilson and his GOP allies from the Democrats. While Democrats appear to have compromised with Wilson on the most sweeping issue of the year--welfare reform--the budget impasse and the proposed Draconian solution points once more to Sacramento politicians’ inability to find common ground, even in a year when revenues are high.

“With Pete Wilson, when you don’t agree with him, he just picks up his marbles and walks away,” said Assembly Democratic Majority Leader Antonio Villaraigosa of Los Angeles.

The Legislature, however, shares much of the blame.

The Assembly is filled with first-term legislators who were unfamiliar with budget politics. Several freshmen, as well as many veterans, made major demands for money for pet projects ranging from spruced-up parks to new museums.

The Assembly-Senate budget conference committee responded by producing a late document that had a deficit and contained no reserve. The conference committee tweaked Wilson several times by stripping money from his agencies, something that did not go over well with the governor.

And it is the governor who has the upper hand in the budget process. Even Lockyer, the most powerful Democrat in town, says the governor will end up getting 90% of what he wants in any budget.

This year, the Republican governor seized control the of budget debate by tying his desire for a tax cut to the Democrats’ desire to help their allies in organized labor by winning a pay raise for state workers, who have gone without a wage hike since January 1995.

Democrats believe Wilson also was seeking to drive a wedge between powerful school unions and unions representing other state workers--something Wilson denies, saying Democrats “use that as cover for their gut-level antipathy to any tax cut.”

Two non-school unions that have supported Wilson did announce their endorsement of the tax cut-pay raise deal, but other unions held fast--despite grumbling by some members who saw the pocketbook benefits of getting both a raise and a tax cut. The leaders of the other unions decided to stand firm with the Democrats in opposing any cuts to public education.

Under California’s system of school finance, every dollar cut in taxes means that schools lose 50 cents. As a result, school lobbyists are among the most ardent foes of any plan to reduce taxes.

In the budget negotiations, Bustamante said he tried to persuadeWilson to go along with a lesser tax cut. Perhaps $170 million--rather than $1 billion--would suffice, he said.

The governor was adamant.

“If you go less than $1 billion, then you are, frankly, in danger of not offering significant tax relief,” the governor said.

The $1-billion-a-year tax cut, Democrats argued, would have taken $500 million a year from public schools.

That may not seem like much when schools will receive $32 billion in state and local money in the new year. But Democrats and school advocates insist that the money is needed if California ever hopes to reach the national average in school spending.

“When faced with a decision whether or not we would have a major tax that would cut education by $2.5 billion or more [over several years], the Democrats said, ‘No,’ ” Bustamante said Thursday. “It is more than just rhetoric. It goes to the core of who we are as a caucus.”

Bustamante said Assembly Democrats would have been willing to go as high as $400 million. Any tax cut beyond that, however, would require “serious reflection” by Democrats.

“There is no limit to their appetite, but it is shortsighted,” Wilson said of the powerful public school lobby. “People . . . are going to have a belly full of that type of greed.”

When he saw that Democrats would not back his tax cut, Wilson blew up the budget talks by decreeing that the state should use its extra money to repay a $1.36-billion legal judgment, a debt that stemmed from a lawsuit over a decision by legislators and him to delay state workers’ pension payments in order to balance budgets during the recession.

Democrats, seeing that Wilson had outflanked them, agreed, and essentially opted to retreat. By refusing to go along with the tax cut, Democrats could claim they had protected their highest priority--public education.

Although Democrats ensured that schools would get their full funding, they apparently will be able to offer little help to other allies, chief among them state workers who will go another year without a pay raise.

Republican and Democratic legislators, many of whom are fresh from seats on city councils and boards of supervisors, also are in danger of failing to win any significant new money to aid local government. Among the items that are likely to be cut is $280 million in aid to local government.

“We gave him an answer on the choice he gave us,” said Assemblyman Fred Keeley (D-Boulder Creek). “That means that everything else we cared about is deferred until next year.”

Democrats and Wilson already are planning for next year. The governor says he intends to push for a tax cut again, when the state will have even more money, and no major legal debt to repay.

“We won’t be able to blame the dog the second time,” said Assemblyman Don Perata (D-Alameda).