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California and the West

Davis' Revised Budget Rises to $98.4 Billion

Spending: Schools, transportation and one-time expenses, such as a tax rebate, are emphasized.


SACRAMENTO — Estimating California's surplus at $12.3 billion, Gov. Gray Davis on Monday offered a revised budget that has ballooned to $98.4 billion and emphasizes schools, transportation and tax rebates. It was met with a sharp reaction from top lawmakers.

In Davis' proposed budget for the 2000-01 fiscal year, California would spend an average of $6,768 per public school student, a jump of more than $1,000 since 1998, an amount that Davis' aides say pushes the state's spending on schools above the national average. He proposes to spend $3.9 billion of the surplus on schools.

The governor's proposed education spending would push the state's share of the cost of public education to more than $30 billion, $1.1 billion above the minimum required by state law.

Although the budget surplus is at an all-time high, Davis' Department of Finance estimates that more than half of the $12.3 billion came to Sacramento by way of a one-time windfall, largely due to taxes on massive stock market gains in 1999.

"It's very important to recognize that 1999 was a special year," Davis said. "It's not likely to reoccur soon."

Contending that the state cannot count on a dot-com bounty in the future, Davis proposes to spend the bulk of the surplus on one-time expenses, including $1.9 billion on a tax rebate for 12 million taxpayers and elderly people, $2 billion for freeway and mass transit projects, and smaller sums on programs ranging from parks and public safety to health care.

Altogether, the governor is proposing to spend almost $7 billion of the surplus on so-called one-time programs, and $5.3 billion on programs that will be ongoing. Davis rejected Republican demands for deep permanent tax cuts and Democratic calls to pump up spending in such areas as mental health care.

"I intend to resist the siren song of permanent expenditures, whether it comes from the left or the right," Davis said.

Reaction from Republicans and Democrats ranged from tepid to outright anger, particularly at the governor and his chief spokesman's reaction to their opposition to Davis' idea of ending income taxes for public school teachers, at a cost of $545 million in the new fiscal year.

On Monday, Davis described eliminating state income taxes for public school teachers as a "big idea."

"Sometimes," he said, "it takes a while for a big idea to sink in."

Davis' comment followed one by his press secretary, Michael Bustamante, who brushed aside lawmakers' criticisms voiced on Saturday by saying: "Perhaps this is a bigger idea than they're accustomed to."

Senate President Pro Tem John Burton blasted back: "Thinking big is doing something for the future of the largest and greatest state in the union. That's thinking big. Giving people money ain't thinking big."

Even as Davis vowed to fight to eliminate state income taxes for teachers, he acknowledged for the first time publicly that the idea he proposed on Saturday might fail to win legislative approval.

"People may disagree," Davis said. "It may not pass. But I'm standing up and fighting for this puppy, I can assure you."

Assembly Republican Leader Scott Baugh of Huntington Beach warned that if Davis is serious about fighting to eliminate income taxes for teachers, "it's going to be a long summer." The idea is discriminatory, he said, adding, "You'd have every group screaming at you for a tax cut of their own."

The jousting comes as negotiations begin to turn serious over the budget for the 2000-01 fiscal year. The state Constitution says that the Legislature must approve the budget by June 15, and that the governor must sign it by the July 1 start of the new fiscal year. There is no penalty for failing to meet the deadline.

The overall $98.4-billion spending package includes funds paid for specific taxes, such as the gasoline tax that funds freeway construction. The preliminary budget that Davis offered in January, before people paid their 1999 income taxes and the surplus swelled, was $88 billion.

Citing the record budget growth, Republicans called for permanent tax cuts. Assembly Republicans advocate a $2-billion tax cut, plus one-time tax reductions of another $2 billion.

"There is a lot of work to be done on the governor's tax proposal," said Sen. Charles Poochigian (R-Fresno), speaking on behalf of Senate Republicans. "We're just not there. I don't think we're even close."

Assembly Democrats, by contrast, said Davis' tax cuts--totaling more than $2.5 billion--are too deep. "The big issues are tax policy--the amount and the policy," said Assembly Speaker Bob Hertzberg (D-Sherman Oaks).

In addition to offering income tax rebates--in the form of $150 checks for 12 million people who paid 1999 income taxes--plus tax breaks for the elderly in a package totaling $1.9 billion, Davis is proposing two tax breaks for businesses aimed at helping high tech and start-up companies.

He also is proposing $18.5 million to help the film industry, including $15 million to reimburse local governments for the cost of allowing productions.

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