State Budget Outlook Darkens as Deficit Nears $30 Billion
Davis is expected to announce new estimate today. Democrats criticize
By Sharon Bernstein and Evan Halper
Times Staff Writers
December 18 2002
With leading California Democrats already complaining about proposed
cuts in state spending, Gov. Gray Davis is expected today to announce new
estimates of the government's anticipated shortfall that will put the deficit
at about $30 billion, a far worse fiscal crisis than is already gripping
the state's leadership.
Today, the governor will announce that the state's deficit, earlier pegged
at $21 billion over the next 18 months, has ballooned into "the high 20 billions,"
said Davis spokeswoman Hilary McLean. She said the new number is based on
updated revenue projections that will be released today. Others estimated
that the shortfall would exceed $27 billion and could even top $30 billion.
McLean said that those figures will "lay out in stark relief the challenge
the entire state will face this year," and that Davis stands behind his plan
to start dealing with it.
"The governor is dead serious, and we need the Legislature to get on board,"
she said. "He has said from the outset this is extremely painful."
The predictions regarding the size of the state deficit have steadily increased
in recent months. Today's report is expected to redouble pressure on Democrats
to consider still deeper cuts in state services and on Republicans to embrace
some tax increases.
On Dec. 6, Davis outlined cuts and savings intended to trim $10.2 billion
over the coming 18 months; the new estimates could wipe out the effect of
most of those proposals in one revision, forcing the administration to once
again reexamine a range of proposed tax and fee increases as well as cuts
to state services as diverse as education, health, welfare, transportation
McLean said Davis may still suggest new taxes when he releases his proposal
to balance next year's budget on Jan. 10.
Meeting at the Ronald Reagan State Building in Los Angeles, urban Democrats
used an Assembly hearing on Davis' proposed $2 billion in cuts to medical
services for the poor to signal their unwillingness to support his plan.
About 500,000 poor people would lose access to medical care under the Davis
package of cuts. Several leading Democrats said they will not consider steep
cuts in services until tax hikes are on the table.
"I can't believe that we would ask for sacrifices from those who can't afford
it, while asking nothing of those who can," said Assemblywoman Judy Chu (D-Monterey
Park), chairwoman of the Assembly subcommittee that held Tuesday's hearing
Though it is full of steep reductions in services, Davis' initial package
of cuts does not raise taxes. That is an omission that has pleased Republicans
but has not gone over well in the governor's party.
"What we have here is a crisis in leadership," said Sen. Gil Cedillo (D-Los
Angeles), who was among several legislators at the hearing.
Cedillo criticized Davis for claiming throughout his recent election campaign
that California has the fifth-largest economy in the world, while now suggesting
that the state should fund public services as if "it is an underdeveloped
The cuts were proposed by Davis earlier this month as part of his plan to
reduce the state budget gap by $10.2 billion. Davis administration officials
called the plan the governor's "opening salvo" in dealing with California's
Assemblywoman Jackie Goldberg (D-Los Angeles) told about 500 people packed
into Tuesday's hearing room and spilling out into the hall that "there is
a big movement afoot" to reject the governor's proposed cuts in medical assistance
During the hearing, Chu held up medical equipment that would no longer be
covered under the governor's proposed changes to the medical plan.
"This is a colostomy bag," Chu said, passing to other legislators the clear
plastic bag used by people who have had their colons removed to collect fecal
matter. "This is a catheter.... This is a syringe used by diabetics."
Chu and other Democrats have cited a number of potential new fees and taxes
that could offset much of the budget hole, including a "sin tax" of 5 cents
for each alcoholic drink sold in the state, elimination of some business
tax credits and an increase in vehicle license fees.
Republicans, meanwhile, continue to warn against tax increases.
At another Assembly hearing Tuesday in Sacramento, to assess the governor's
proposed $1.6 billion in cuts from state employee compensation and government
operations, Republican committee members released a statement warning that
tax hikes would "further devastate the state's economy."
"The proposals put forward by the governor are not pleasant by any means,
but they must be enacted if we are going to begin the process of restoring
fiscal responsibility," said Assemblyman Dave Cogdill (R-Modesto). "We need
to reduce our spending. Tax increases will not solve the problem."
McLean said the nonpartisan legislative analyst's office called the Davis
plan a "good start" in dealing with the fiscal problems.
But that office also suggested in a report released Monday that any plan
to balance the budget should include raising taxes and fees along with cuts.
The report criticized the administration for having "virtually no meaningful
reductions" in the prison system.
The union that represents state prison guards is one of the biggest contributors
to Davis and other lawmakers.
Senate President Pro Tem John Burton (D-San Francisco) has said that the
criminal justice system will not be spared.
At Tuesday's hearing in Sacramento, staff with the legislative analyst's
office said up to 7,000 state employees could lose their jobs under the governor's
plan. Or they could meet his goal of cutting $470 million in employee compensation
by taking a roughly 8% salary cut.
Several union officials said the cuts would cripple the ability of various
state departments to do their jobs.
They warned of longer lines at the Department of Motor Vehicles, private
nursing homes not getting inspected, and battered women being unable to get
restraining orders against abusers.
"The people of California will feel the cuts and be worse off because of
them," said Jim Hard, civil service division director of the California State
Employees Assn. "It's literally a matter of health versus sickness, and even
life and death, for many Californians."
Other union officials said they will not begin to reopen salary and benefits
negotiations until legislators stop contracting engineering jobs out at a
hefty cost to the state and sheltering large corporations from state taxes.
Times staff writer Gregg Jones contributed to this report.