California

By Jordan Bonfante/Los Angeles

In Sacramento lawmakers call it "the budget from hell" -- and not just because trying to reach agreement on the $56.4 billion spending plan has required both houses of the legislature to work far into the night no fewer than a dozen times. Closing a $14.3 billion deficit -- the largest state shortfall in U.S. history -- means violating the politician's basic instinct to please voters by cutting taxes and handing out goodies.

Previous Governors spent years postponing the hard choices the state must make, but Republican Pete Wilson, who took office in January, is determined to put California's rickety fiscal house in order. To raise revenues, he called for $7 billion in new sales and alcohol taxes as well as higher vehicle- registration and education fees. He also proposed $5 billion in spending cuts, including a 5% salary reduction and monthly one- to two-day furloughs for the state's 276,000 employees. His most controversial proposal for getting the state off what he calls "autopilot spending": a $500 million reduction + in the Aid to Families with Dependent Children program that will not only suspend cost-of-living increases but actually cut the $694 monthly welfare payment to a poor mother with two children to $663.

Wilson's main opponents in the budget battle are legislators from his own party. Last week the assembly's 31 Republican members helped torpedo Wilson's compromise plan for raising the $2.3 billion still needed to balance the budget. The sticking point was a proposal to increase state income tax rates for those with incomes over $100,000 from 9.3% to 10%. As an enticement to tax-shy Republicans, Wilson had backed a probusiness reform that would make it harder for workers to qualify for stress-related workers' compensation. But after Democrats, under pressure from organized labor, rejected the linkage between the tax and workers' compensation reform, the compromise collapsed. Rather than veto the whole budget, a battle-weary Wilson pledged to continue bargaining.

California's fiscal plight is rooted in explosive population growth. During the 1980s, the state's population swelled more than 6 million, to nearly 30 million; almost half of the new arrivals were immigrants, who put huge strains on welfare, health-care and education programs. The crunch was made worse by plummeting tax collections caused by the current recession and by the limits on new levies imposed by Proposition 13, the 1978 ballot measure that cut property taxes and shifted the lion's share of fiscal responsibility from local governments to the state. Wilson has suggested reversing that trend by returning $2.3 billion worth of social and health programs from the state to county governments. Local administrations have welcomed the idea, because the shifted programs are to be accompanied by corresponding tax revenues to pay for them.

Wilson's attempts to find a long-term cure to the crisis have reopened old fissures within the state's G.O.P. On one side are die-hard antitax conservatives. On the other are moderate pragmatists like Wilson. Faced with the feuding in his own party, Wilson has decided to write off the right wing and seek common ground with moderate Republicans and Democrats. Conservative assemblyman Tom McClintock has refused to vote for any part of what he called Wilson's "obscene" budget. He recalls meeting with the Governor's chief of staff last February and being told bluntly, "If you don't play along, we're going to ignore you." So far, Wilson has made good on that threat. On the other hand, the dozen Republican assemblymen who have backed Wilson, off and on, have been offered what G.O.P. insiders call "protection." That includes promises of the Governor's endorsement in future races, fund-raising help for next year's primary and the implicit promise of his help in preserving their districts when the state is reapportioned later this year.

If Wilson's mix of arm twisting and cajoling succeeds in breaking the impasse, more than California's budget could be at stake. Wilson's own future could also be riding on the outcome. Putting his state on the road to fiscal sanity would burnish Wilson's credentials as a can-do politician with the guts to cast aside ideology for the sake of better government. That in turn could put him on a very short list of Republicans who might succeed George Bush in 1996.