‘Golden State’ going broke

Press, 9 February 1983, Page 23

‘Golden State’ going broke

From

WILLIAM SCOBIE

in Los Angeles

The state is more than $2 billion in the red. Eight million angry taxpayers

are receiving lOUs. not the rebates they expected. Unemployment is at record levels. Long lines wait outside soup kitchens. Thousands sleep in rescue shelters or on the streets. A new conservative Governor demands absolute power to deal with the crisis.

Hard times in the Deep South? A Depression-era scenario from New York? No. This is California, the state Queen Elizabeth is to visit this month aboard the royal yacht Britannia, for an expensive whirl of gala balls and lavish receptions. President Reagan will fly in from Washington to entertain the Royals at his mountain-top ranch. Presidential jets will be placed at their disposal. With California on- the verge of bankruptcy, unable to meet its own monthly state payroll without heavy borrowing from the banks.

some legislators here are asking if Her Majesty’s visit is really necessary.

"A better time could have been picked," says one legislator, a black. “It’s nice that the Queen will be partying with Ronald and Nancy Reagan and our new Governor, but we could sure use some of that tax money for relief in my district.”

In the midst of a national recession, bountiful California is tasting the bitter fruit of its five-year orgy of taxcutting without curbing spending. “We knew Jerry Brown (the former Governor) had almost doubled public outlays in his eight years in office, despite the huge tax cuts mandated by voters in the same period," says a California banker, “but noone foresaw a financial mess this bad. We’ve blundered into the same trap as New

York in the 19705." The decline and fall of the “golden state” from the euphoric heights of the Brown regime’s heyday, when government had amassed a $4 billion budget surplus, has stunned citizens, if not economic gurus who predicted something of the sort when California’s tax cut binge began in 1978.

California's tax base was eroded time and again by voter demands. Proposition 13, the notorious property tax reduction which started a nationwide movement, has eliminated $42 billion from state revenue. Income tax was indexed to inflation. Inheritance tax was abolished.

Meanwhile, the free-spend-ing Brown administration bailed out cities and public services from that $4 billion surplus until all was gone. Other state funds for highways and suchlike were

plundered. Recession sent California’s jobless rate close to 12 per cent, well above the national average, increasing the need for relief cash.

Now nobody likes the medicine prescribed by the new Governor, George Deukmejian, aged 54, a Reaga-nomics-minded Republican who took office on January 3. “Duke", as he likes to be called, is asking for massive cuts in social programmes, in aid to the needy, and in university budgeting.

He has announced a plan to carry over half the deficit, estimated at $2.4 billion for this fiscal year, into next year's budget. He has asked, rather desperately, that the state legislature step aside and hand him absolute powers to do all this.

“It’s dictatorial. It's absurd.” says State Assembly Speaker Willie Brown. "The Governor wants to sweep half the problem under the rug until next year. Voters

are calling me to ask if that means they need pay only half their taxes this year."

For the second time since the Great Depression, California has been forced to borrow from state banks — $4OO million so far — to pay bills. New debts of $1.7 billion fall due next month.

The state treasury has plans to pay employees, teachers, and suppliers with promissory notes. Some $2.2 billion due to taxpayers in rebates cannot be found: they will be sent "non-negotiable state warrants” — lOUs — until new tax sources are found.

Governor Deukmejian. a stolid family man who believes in budget-balancing, is fighting Democratic efforts to retrieve some of the tax cuts of recent years. Already his top financial aides are hinting that if the rescue plan does not work, governor “Duke" will break his campaign promises and raise new taxes. Copyright — London Observer Service.