Democrats’ Budget Calls for Cuts Up to 18%

SACRAMENTO —  Declaring that they are willing to cut deeper into some state services than even Republican Gov. Pete Wilson has proposed, Assembly Democrats on Monday unveiled their plan to balance the budget without a major tax increase.

Wilson immediately criticized the plan as inadequate because it would not cut as deeply into health and welfare programs as he has proposed. His Republican allies in the Assembly vowed to reject the budget on the Assembly floor.

But the plan represents a stunning reversal of strategy for the Assembly Democrats, whose leaders now are on record supporting cuts of as much as 18% in popular state programs, including the University of California.

“This is a radically different approach from what I’ve watched for eight years, which is, you pass a budget that spends money you don’t have, you lie about how much money you have and what the costs of the programs are, and you hope for a miracle,” said Democratic Assemblyman Phillip Isenberg of Sacramento. “This is grim.”

Assemblyman John Vasconcellos (D-Santa Clara), longtime chairman of the budget-writing Ways and Means Committee, said the Democratic strategy was to demonstrate how state services will suffer if the governor and Republicans in the Legislature refuse to support even modest tax increases.

“We’re going to let people know they’re not going to get much government next year,” Vasconcellos said. “Kids will get fed and educated, if nothing else happens. We won’t close the prisons or raise taxes. Everything else will go by the boards. It will be a disaster, but it’s all we know how to do.”

The plan, devised under the direction of Assembly Speaker Willie Brown of San Francisco, represents the Assembly Democrats’ response to the $60.2-billion budget Wilson proposed for the fiscal year that begins July 1.

Since Wilson unveiled his spending plan in January, two independent state analysts have concluded that the governor’s budget, even if enacted exactly as he proposed, would be at least $2 billion in the red because tax revenues will fall short of the Administration’s projections.

The Democrats accepted most of Wilson’s budget, but rejected some key elements, most notably his proposal to reduce welfare benefits by as much as 25%.

To help make up for the revenue shortfall and to compensate for their rejection of Wilson’s welfare cut, the Democrats propose a series of 6% reductions in almost all programs except education and welfare. Colleges, prisons, state operations and aid to local government would be among the programs affected.

The first 6% cut was included in a budget bill approved Monday by the Ways and Means Committee and sent to the Assembly floor. With that cut, which would save about $750 million, the Democrats contend that their proposed spending is balanced with the revenues the governor projected in January.

But if tax receipts do not meet Wilson’s projections, a separate bill would trigger two additional swipes at the budget to save $2 billion. The first cut would be another 6%, with the same exceptions for education and welfare. The second cut would be another 6%--bringing the total for those programs to 18%--plus 4.5% for welfare grants, benefits for the disabled and aged, and payments to doctors who care for the poor.

Wilson, speaking separately to reporters, said he would oppose the Democrats’ plan because the across-the-board cuts do not provide the flexibility to set priorities. He said the reductions would be too deep in some areas and not deep enough in others.

“Another way to pass an unbalanced budget and to do it covertly is to pass a budget . . . that makes unallocated cuts large enough so in fact they can’t be made as a practical matter, with certain things kept out, certain things exempted from those cuts,” Wilson said. “That (appears) to be what they have done.”

Assembly Republican Leader Bill Jones of Fresno said that the budget, which requires a two-thirds vote on the floor for passage, would be defeated.

“Rather than making the difficult budget cuts that absolutely must be made, the Democrats are tossing the ball back to the governor with the so-called trigger mechanism,” Jones said. The partisan sniping obscured a significant political development: The Democratic leadership is now supporting a budget that includes billions in cuts and no major tax increases. The plan includes about $54 million in new taxes or fees on pesticide producers, timber companies and businesses that discharge waste into public waters--to offset the cost of regulating those industries.

With the tax issue settled, the two parties now can negotiate over what to cut, and the Democratic plan leaves plenty of room for negotiation.

Public education, for instance, was spared in the Democrats’ opening offer, but even education leaders are saying that they expect the Legislature and the governor eventually to adopt a $1-billion cut for kindergarten through community college. For now, the problem is that neither the Democrats nor the Republicans want to be the first to propose the reduction.

Democrats also agreed Monday to a 4.5% cut in welfare payments, but have said they want the cut delayed until a shortage of revenue makes it absolutely necessary. They could win more Republican support by agreeing to make the welfare cut up front without tying it to the state’s fiscal condition.

Finally, the Democrats’ plan does not include Wilson’s proposal to repeal the renters’ tax credit. Democrats say this amounts to a tax increase. But they might be willing to consider the repeal if Republicans are willing to repeal tax credits that benefit businesses.

In a separate but similar event, the Democrats on Monday also disclosed their plan to cut workers’ compensation costs by $1 billion, in a move they hope will blunt Wilson’s criticism of them on an issue crucial to the state’s business community.

Key to that plan is the repeal of a law that sets a minimum rate for workers’ compensation insurance, in effect eliminating competition among insurers on the premiums they charge employers.

The workers’ compensation plan also includes major changes that Democrats have opposed for years, including curtailing vocational rehabilitation costs and limiting the rights of workers to claim compensation for job-related stress.