Election Section

$2.7 billion from $100 billion state budget

By Alexa Haussler The Associated Press
Friday January 11, 2002

SACRAMENTO — Gov. Gray Davis proposed a $100 billion budget Thursday that cuts $2.7 billion from programs while borrowing from future tobacco settlement money and shifting funds to get the state through tough financial times. 

The spending plan cuts heavily from welfare and health programs for the fiscal year that begins July 1, slightly increases education and public safety spending and includes no new taxes. 

“I will not advocate a tax increase to bridge the budget gap,” Davis said. “I believe we have enough financial tools to bridge the shortfall without increasing taxes or severely damaging vital programs.” 

The much-anticipated announcement shows how Davis plans to close the expected $12.4 billion hole in the state budget. It’s Davis’ fourth budget and, for the first time since he took office, spends less than previous years. 

Davis called the budget work painful, adding that “we had to make some difficult choices and make some reductions I would prefer not to make.” 

Revenues have steadily declined in California and nationwide because of an already sagging economy and the aftermath of the Sept. 11 terrorist attacks. 

This budget includes $78.8 billion in general fund spending, $19.9 billion in special fund money and $2.1 billion from bond funds to reach its total of just more than $100 billion. The 2001-02 budget approved last year totaled almost $103 billion. 

The budget plan puts Davis in some political risk, as it relies heavily on an expected economic upswing in the next 12 months and on the long-delayed sale of bonds to repay the state treasury for buying power through much of 2001. 

Thursday’s budget plans comes on top of almost $3 billion in cuts Davis proposed in November and which must be approved by a special legislative session. Combined with Thursday’s proposal, the combined effects are $5.2 billion in cuts, $586 million in funding shifts and $5.6 billion in loans, transfers and one-time measure to speed up receipts. 

It also freezes cost of living increases for state welfare recipients, which saves $100 million, and increases some state fees, including penalties for late payment of car registration fees. 

The budget increases spending for enrollment and cost of living growth in the state’s schools by about $1 billion, but makes small cuts to other education areas and assumes that the Legislature will approve $843 million in education cuts to the current budget. Davis also proposes to revive a plan to expand before- and after- school programs that he scrapped in the current budget. 

Davis’ plan also cuts $451 million from higher education but does not include an increase in student fees. 

He also proposes to trim $742 million from human services programs and delay $92 million in capital projects. His budget cuts $38 million from housing programs in anticipation the state will borrow the money instead, and cuts $35 million from environmental and natural resources programs. 

Local government programs see a $9 million cut, and the corrections department a $17 million cut largely based on lower prison populations. 

Davis’ budget also relies on a series of complicated accounting maneuvers, including $160 million worth of internal shifts, $579 million in internal borrowing, and shifting some debt to the future in hopes of economic rebound in the next year. 

The governor also hopes the federal government will the state $350 million to cover state and local spending to increase security after the Sept. 11 terrorist attacks. Of that, Davis proposes $129 million go to the California Highway Patrol’s budget to pay for anti-terrorism measures this year and next. 

Davis said Thursday he hoped for federal “down payment” this year and more money in the new federal budget that takes effect in October. 

Without that federal money, administration officials warned that much of the money would have to come from the state’s general fund and other programs. 

The budget also uses future tobacco settlement money to pay for a $2.4 billion bond deal that would support health programs. That borrowing will cost the state $62 million next year and $190 million annually for the next 22 years. 

While not proposing new taxes, Davis has not firmly said he will reject any legislative tax increase proposals. 

Now the Legislature gets Davis’ new 2002-03 budget on top of the $2.2 billion in cuts he proposed for the current fiscal year. Already, some legislators have objected to some parts of the plans, foreshadowing what could be an intense fight in the Legislature over taxes and spending cuts. 

The 2002-03 budget is strikingly different from Davis’ first three spending plans, which came during an unprecedented economic boom, included billion in tax breaks and added new and expanded programs. 

But the state’s treasury depends heavily on cash from income, sales, capital gains and corporate taxes, as well as tourism and trade. And in the past year, the once-lucrative stock options from high-tech sector workers dropped off as the industry collapsed. The state was socked by a national recession and corporate downsizing, and then the Sept. 11 attacks further cut into tourism, jobs and other revenues. 


On the net: Details on the governor’s budget plan can be found at http://www.dof.ca.gov