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California Lawmakers Face Both Short-, Long-Term Fiscal Woes

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California lawmakers are set to convene this week to tackle both a short-term budget deficit and long-term fiscal issues raised by Gov. Pete Wilson's proposal to curb welfare costs and overhaul the state's budgeting process.

Despite $14 billion in politically wrenching tax increases and spending cuts approved by the legislature last summer, California now faces a new projected deficit up of to $5 billion for the current fiscal year.

Governor Wilson's controversial plan, however, seeks to focus attention more broadly on structural changes in the California economy that, he warns, could cripple the state government's ability to provide services if left unchecked.

The plan, released last month, will be placed on the November ballot if sponsors can obtain enough petition signatures from voters.

One part of the plan calls for an immediate 10 percent cut in welfare grants. Six months later, benefits would be reduced an additional 15 percent for families that included an "able-bodied adult."

The plan would encourage teenage parents to return to school by providing a $50-per-month welfare increase as long as they were working toward a high-school diploma. If they dropped out, however, benefits would be reduced by $50.

At the same time, the measure would provide for scheduling changes aimed at ensuring a prompt and accurate state budget each year.

The plan would deny salary and other pay to lawmakers and the governor, for example, for each day that the budget was not passed after the existing deadline of June 15. If the budget was not law by the start of the new fiscal year on July 1, the governor could declare a fiscal emergency. While the state would continue to operate under the previous year's budget, the governor would gain power to make spending cuts.

Because minimum education funding levels are constitutionally guaranteed under the state's Proposition 98, however, elementary and secondary spending would be immune from the cuts.

Budgetary 'Dictator'?

The measure also would grant the governor budget-cutting authority if the budget fell out of balance by more than 3 percent due to revenue shortfalls or unexpected spending.

Aides to Mr. Wilson described the plan as a common-sense reaction to runaway costs. The measure would "dramatically reform autopilot government spending, which threatens to bankrupt taxpayers, as well as crowd out essential funding for our schools, health care, and public safety," according to a press release.

Although lawmakers from both parties acknowledge the need for welfare reforms, the Republican Governor's measure has been criticized by Democratic legislators and welfare advocates for making the poor scapegoats of the state's financial woes.

Lawmakers have also blasted Mr. Wilson's attempt to gain new budget powers. The ballot initiative "would make the Governor the dictator of California," argued Senator David Roberti, the leader of the Senate's Democratic majority.

Ominous Demographic Trends

Mr. Wilson's proposal was at least in part a response to an ominous report released in November by the state finance department.

The report argues strongly that the financing of California's government must be overhauled in light of new demographic and economic patterns. "No matter how strong its economic recovery, the state will not be able to fund existing programs at current levels with projected tax revenues," the report warns.

The study calculated that the state's general-fund revenues would have to rise from the current $43 billion to nearly $105 billion by the year 2000 to maintain existing services. Even with a 7 percent growth rate, however, revenues would only reach $85 billion.

The report attributes the imbalance to the disparity between the soaring number of recipients of government programs, such as schools and health care, and the slowly growing number of taxpayers.

"A rapid increase in population-and the mix of that population growth--is contributing to a growing imbalance between the demand for public services and the availability of tax dollars," the report says.

In the 1990's, the state's working-age population is expected to grow by 14 percent while its school-age population rises by 40 percent.

Although the growth trends will squeeze school spending, their clearest impact will be on welfare costs in a state that has one of the nation's highest welfare rates and provides among the most generous benefits. Without welfare reforms, the report suggests, California will see its base for welfare spending fall from the current ratio of more than six taxpayers for each beneficiary to less than three to one by the decade's end.

Mr. Wilson also plans to propose legislation on teacher assessment and alternative certification, and aides are at work on a merit-pay plan for teachers, a spokesman said.

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