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Davis Lowers Expectations in 1st Budget, Blames Deficit


SACRAMENTO — Gov. Gray Davis concluded a dizzying first week in office Friday by proposing a status-quo state budget of $77.5 billion, with a focus on schools, a 2% raise for state workers and cuts in several programs.

Acknowledging that he was disappointed by his opening proposals, Davis said he was forced to pare back his expectations because of an anticipated $2.3-billion shortfall--the result of rising costs for some state programs and what he believes is a slowing economic expansion in California.

"I'm disappointed that I do not have more resources to allocate to programs I want," the Democratic governor said. "I have to bring this budget into balance. . . . I'm doing my best to compensate for the shortfall I inherited. Was I able to do everything I want? Not at all."

The budget is the single most sweeping piece of state legislation in any year, defining the governor's and Legislature's priorities on everything from schools and colleges to flood control projects, health care, prisons and parks.

In the first Democratic budget plan in 16 years, Davis proposed 3% more spending than was approved under Republican Gov. Pete Wilson last year. Davis called for no tax increases, but he did propose a 10% hike in tuition for out-of-state students at California's universities and colleges. Although Davis advocated a capital gains tax cut during his campaign, he offered no tax cuts Friday in the plan for fiscal 1999-2000.

The governor's pledge to boost state workers' pay fell significantly short of expectations. He proposes to spend $190 million more on pay next year--a raise of about 2% for 150,000 state employees. Workers were dismayed; most have not had a raise or a contract since 1995.

"Looks like we're going to have to squeeze blood out of a turnip," said Dennis Trujillo, a spokesman for state unions representing engineers, attorneys and others.

Davis focused instead on schools. Under his plan, expenditures on elementary and secondary schools, counting local, state and federal money, would be $43 billion, a 6.9% increase and more than half of all government spending in California.

The state's share would be $25.7 billion, including payments for such costs as teacher retirement. That represents more than 42% of California's general fund, from which most state programs get their money.

"For months and months, he has said education, education, education," said Assembly Budget Committee Chairwoman Denise Moreno Ducheny (D-San Diego). "This budget says it quite clearly."

Still, Davis--who promised to be an education governor--has simply met the legal requirements for school funding. Education advocates had been expecting him to exceed the legal minimum by at least $100 million.

"I was a little disappointed, although it may still happen," said state Supt. of Public Instruction Delaine Eastin.

The spending outlined in the budget will be covered by--in addition to more than $60 billion from the general fund--$17.5 billion from such sources as the federal government, the lottery and special levies like the gas tax.

Davis had little time leading up to his inauguration Monday to shape the spending plan for the fiscal year that begins July 1.

"It required some very quick, instinctive decisions. He clearly could not have studied all the pieces," said Barry Munitz, president of the J. Paul Getty Trust and the head of Davis' transition team. "But it tells you that he cares about education. It tells you that he is not going to make extreme decisions."

Many of Davis' spending proposals are for programs begun by Wilson. Davis recommended, for example, continuing $100 million in state aid to local law enforcement, a program Wilson started three years ago.

Davis did say he wants to reshape the program so local governments will use the money to hire more police. His aides said the budget contains sufficient money to hire 700 more officers statewide.

The budget, headed for months of legislative hearings, will be revised significantly in May, after taxpayers file their income tax returns and state experts gain a better grasp of prospects for revenue.

"Schools and state employees will have very high claim on any additional funds," Davis said Friday as he unveiled the budget.

The lowered expectations--from a governor whose inaugural speech stressed higher ones--result largely from slower economic growth and higher-than-foreseen demands for such state programs as Medi-Cal.

Additionally, Davis' aides say spending late last year--some for pay raises Wilson granted to prison guards, highway patrol officers and others--ate up much of the $1.16-billion surplus that Wilson said he was leaving behind.

Apparent Dig at Wilson Irks GOP

Davis' plans were further dampened by large tax cuts that lawmakers approved in recent years, including a $1.4-billion package of reductions that Wilson signed in August.

Republicans chastised Davis for seeming to blame Wilson for the $2.3-billion shortfall.

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