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NEWS ANALYSIS : Wilson's Bold Move Puts Him Step Ahead of Democrats : Budget: Governor seizes the political high ground, in contrast to a year ago. Democrats now must accept proposal's outlines or call for higher taxes to support social programs.

May 23, 1993|DANIEL M. WEINTRAUB | TIMES STAFF WRITER

SACRAMENTO — Despite early opposition from a handful of leading Democrats, Gov. Pete Wilson's bold revision of his state budget proposal last week is likely to become the framework for a two-year spending plan that finally ends the state's annual struggle with the bottom line.

Seizing the political high ground, Wilson has offered a budget that protects basic education and prison spending while easing taxes on business and cutting health and welfare services to the poor. Wilson also keeps his pledge to allow a half-cent state sales tax to expire on schedule June 30.

Wilson's proposal stands in contrast to his approach a year ago, when he offered a budget in January that even he soon recognized was billions out of balance. Then he ducked the issue for months, only to emerge calling on the Legislature to reduce per-pupil funding for education, a political blunder from which he retreated after absorbing a beating from school groups and a plunge in the polls.

This year, however, Wilson has offered a complete, updated proposal that puts Democrats in an awkward position. They must either accept the outlines of his plan, probably with a few significant changes, or call for higher taxes to support health and welfare programs. That is not a position that has a lot of support from voters.

Another reason Wilson's proposal stands a good chance of passage is that the governor has adopted as his own two elements that Democrats suggested a year ago but he rejected.

One is a massive transfer of property tax revenue from local government to the schools, which would keep education funding growing without tapping into scarce state resources. The other is a deficit-spending plan that would stretch out repayment of the state's year-end debt over 18 months, instead of the usual 12.

Local government officials say the tax shift would devastate their services, from police and fire protection to libraries and parks.

But state legislators, not local officials, will be voting on the budget. And together, Wilson's local government transfer and deficit spending would prevent about $3.7 billion in cuts to state programs that otherwise would have to be made in the 1993-94 fiscal year, which begins July 1. That figure is nearly 10% of the state's general fund and is more than the state cost of such programs as welfare, higher education and prisons.

Even so, Wilson still needs more than $1.5 billion in health and welfare reductions to balance his budget. Most of his proposals are ones that the Democrats, who control the Legislature, have rejected in the past.

He wants to cut welfare grants by more than one-third to families with an able-bodied adult who has been on the rolls for five years or more. He has proposed cutting aid to the aged, blind and disabled by up to 4.4%. And he has suggested the elimination of dental, psychological and other health services for poor adults.

But the governor has left room for negotiation.

He has set aside $457 million to pay for a business tax cut that would exempt the purchase of factory equipment from the sales tax. But any tax cut is going to be a hard sell in the Legislature when essential programs are being hit, so that money may end up going for services instead.

Wilson also could tinker with his deficit-spending schedule. He has proposed repaying 60% of the state's $2.7-billion debt in the first year of his two-year plan and 40% in the second year. By spreading the payments out over a 24-month period, he could free another $250 million in the first year to blunt the service cuts he has proposed.

Finally, Wilson's plan envisions general fund expenditures dropping to $38.2 billion in the next fiscal year before returning to $41.1 billion the year after that, about the same amount the state will spend this year.

By smoothing out those fluctuations, Wilson could free up still more money to spend in the first year of his plan, which would please Democrats. He could make it palatable for Republicans by insisting on triggers that would automatically reduce spending on specific programs if tax receipts fell short of projections.

Senate Leader David A. Roberti of Van Nuys and Assemblyman John Vasconcellos of Santa Clara, two of the Legislature's most senior Democrats, both condemned Wilson's proposal as soon as he released it Thursday. Like most Democrats in the Legislature, they want to extend the temporary sales tax and use it to soften the blow on state programs for the poor.

But Wilson has dug in on the sales tax issue and shows no sign of budging. Assembly Republicans, whose votes would be needed to extend the tax, are lining up behind the governor.

Unless Wilson blinks, Democrats at some point will have to focus on how to balance the budget without that money. The governor's surprising call for a statewide special election on Nov. 2 was intended, in part, to hasten the day that Democrats acknowledge that he is not going to back down on the sales tax, aides said.

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