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Trims OKd, but Less Than Davis Sought

Senate cuts $3.2 billion, following Assembly lead on the budget. The governor wanted steeper reductions and warns of peril to state finances.

January 31, 2003|Evan Halper and Carl Ingram | Times Staff Writers

SACRAMENTO — The California Senate followed the lead of the Assembly and on Thursday passed a package of cuts for the next five months that amounts to far less than what Gov. Gray Davis proposed, a move the governor warned threatens to worsen the state's financial problems.

Voting along party lines, the Senate approved cutting the budget adopted in September by about $3.2 billion -- $2.2 billion short of what Davis wanted. Many of the reductions approved by the Senate would be achieved by bookkeeping changes; like the Assembly, the Senate voted to delay more than $1 billion in expected school payments from late June into early July, effectively shifting that expense out of this year's budget and into next year's.

Other cuts include a proposal to release some nonviolent offenders from state prisons earlier, which would allow the Department of Corrections to save about $31 million between now and June 30, when the fiscal year ends.

"They still have not bitten the bullet and done what is needed to balance the budget," Davis said after meeting with Democratic and Republican leaders of the Assembly and Senate.

Davis was hoping to sign steeper reductions into law before California's top finance officials go to New York next week to persuade bond raters and others that concrete action is being taken to close a budget gap projected to be between $26 billion and $35 billion over the next 17 months.

That gap includes the deficit that officials say the state is running this year, along with the shortfall that budget analysts say the government faces next year unless it cuts back on existing programs or raises taxes.

While Democrats in the Legislature acknowledge that the budget problems are severe, they said the Davis plan would cause too much pain to the poor.

Sen. Wesley Chesbro (D-Arcata), chairman of the budget committee, defended the Senate bills as making "real cuts." He acknowledged a lot more need to come before the budget is balanced. "We have a long, long ways to go," he said.

The Senate did not include language in its bills that would prohibit the cuts from occurring unless the car tax was increased, as the Assembly did earlier in the week. But Sen. President Pro Tem John Burton (D-San Francisco) said the final bill sent to the governor after the two houses reconcile their measures will likely include it.

"The Assembly feels very strongly about linkage," Burton said. "Why would we get into an argument or a test of wills over something they feel very strongly about and something we don't?"

Davis has consistently warned against a car tax increase, which would triple vehicle license fees back up to 2%. The money would allow the state over the next 17 months to take about $4 billion in money currently going to local governments and use it to plug the budget gap.

The increase would cost $124 a year for the driver of a vehicle worth $9,200. Owners of cars with a sale price below $5,000 would be exempt.

Democrats want to use that money to refund local governments the $4 billion that Davis is proposing to take from them to help balance the budget. Davis says doing that will undercut the political viability of other major tax hikes needed to close this year's deficit.

As a result, the Legislature's linking cuts to a car tax increase would put Davis in a bind: To achieve any reductions, he would have to sign the tax into law.

Republicans joined the governor in warning against the car tax increase and complaining that the cuts passed in the Democrat-controlled Legislature are not enough.

They proposed an amendment in the Senate that would have added another $1.1 billion in spending reductions -- almost all of which had been proposed by the governor.

"There are people in this building that need to wake up and realize that we have a huge fiscal problem and [that] delaying does nothing but make it worse," said Senate Republican leader Jim Brulte of Rancho Cucamonga.

"We are extremely concerned about the cash situation for the state."

Echoing that concern, Davis said he was already planning for California to borrow $5 billion beginning in July to cover this year's deficit. The failure of the Legislature to enact his suggested cuts for this year could add billions to that amount, Davis said, and could force the state to begin borrowing money at least a month early.

The Senate budget reductions approved Thursday involve chiefly a variety of bookkeeping and technical changes that would help ease the deficit by transfers and loans from various funds. The package also included fee increases on companies and utilities that discharge waste into the water and air.

The Senate did not approve Davis' proposals to change Medi-Cal eligibility requirements that would have cost hundreds of thousands of poor Californians their health insurance.

Despite the urging of the governor and Republicans to spare the state prison system, the Senate plan also took aim at the Department of Corrections.

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