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Davis Budget of 'Hard Choices' Spreads the Pain

The governor says he has no option but to slash government services, raise taxes and impose fees. Republicans call his proposal a nonstarter.

January 11, 2003|Mitchell Landsberg and Evan Halper | Times Staff Writers

SACRAMENTO — Gov. Gray Davis proposed a $96.4-billion state budget Friday that offers pain for almost every Californian, from tax hikes for the rich to reductions in medical care for the poor and elderly, and pointedly sidesteps the long-term "structural reform" that Davis has said is necessary.

The budget also shifts $8 billion in programs, along with the revenue to fund them, to county governments. Although Davis stressed that he tried to spare children from the harshest cuts, the budget would cost California school districts $5.4 billion. Local governments would lose $4.2 billion that they had expected from vehicle license fees.

"These are hard choices," Davis told reporters at a packed Capitol news conference. "I did not like making them. But the buck stops with me, and I had to make them."

Faced with a budget gap that he estimated at nearly $35 billion over the next 18 months, the Democratic governor said he had no choice but to sharply reduce government services and raise taxes. But his proposals came under immediate attack from Republicans in the Legislature, who said they could not accept any tax increases.

"This budget will not pass the Legislature as presented, not with $8 billion worth of job-killing tax increases," said Assemblyman John Campbell (R-Irvine), vice chairman of the Assembly Budget Committee. "That will not happen. Republicans will not vote for that."

Although Democrats control both houses of the Legislature, Davis needs the votes of at least two Republicans in the state Senate and six in the Assembly to win the two-thirds majority he will need to pass any budget.The tax increases include a jump of as much as two percentage points in personal income tax rates for the richest Californians, a 1-cent increase in the general sales tax, a $1.10-per-pack increase in cigarette taxes, a 0.25% surcharge on in-state telephone calls and a variety of added fees for state services. Fees at community colleges would more than double, from $11 to $24 per unit.

The sales tax increase would be effective July 1, assuming the budget is passed by then. The personal income tax increase would be effective for the 2003 tax year.

The budget also counts on $1.5 billion in new revenues from Indian casinos, although administration officials acknowledged that the figure is an estimate based on a revenue-sharing agreement that has not been reached.

In all, the budget proposes $11.8 billion in spending cuts in the fiscal year that begins July 1, on top of $10.2 billion in midyear cuts already proposed for the 2002-03 budget. The state's neediest residents would take some of the biggest hits. Eligibility for the low-income Medi-Cal program would be tightened, and entire classes of benefits for poor adults would be eliminated, including hospice care, optometry, artificial limbs and hearing aids. There would be cutbacks in Supplemental Security Income grants for the blind, elderly and disabled.

Nearly every state agency or recipient of state dollars would face leaner times.

The University of California and the California State University system would each face cuts of about 10% in state aid, a total of about $700 million.

Davis said he would cut at least 1,900 state jobs, some through layoffs. He issued a thinly veiled warning to public employee unions, saying he hoped to save $500 million by renegotiating public employee contracts. "Maybe, at the end of the day, certain bargaining units decide they would rather not take concessions, and they would rather make the savings through layoffs," the governor said. "So the layoffs number could rise based on the outcome of those negotiations."

The budget assumes only sluggish growth in California's economy this year, leading to modest growth in 2004. State Finance Director Tim Gage said it is based on a "reasonable, conservative forecast."

In his inaugural address earlier this week, Davis called for structural reforms that would "wean state government off the feast-and-famine budgeting it's experienced for generations."

Aside from the shift of $8 billion in social service programs from the state to county governments, an extension of a realignment begun by Republican Gov. Pete Wilson, Davis offered no such reforms in his budget. Instead, he called on the Legislature to work with him to find solutions that would insulate the state from boom-and-bust economic cycles.

The most recent such cycle was perhaps the most dramatic in California since the Gold Rush, and left the state staring down a mine shaft into its deepest budget shortfall.

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