Wilson's Daunting Challenge

Economic woes loom large for incoming governor. CALIFORNIA

WHEN Pete Wilson takes over as governor of California next month, he will have the job he has always coveted. The United States senator will become chief executive of a country that masquerades as a state, one with an economy larger than Canada and Australia. He will also, not coincidentally, be well positioned should the calling for higher office ever come, which it often does for California governors.

Yet gloat, he probably won't.

As the 1990s begin, California faces daunting problems. Along with enduring concerns like traffic, crime, smog, health care, and drought, there now looms a budget problem of Sequoia proportions.

In his first year in office, Mr. Wilson is going to have to grapple with a deficit that is now projected to be almost $6 billion - the largest in state history and a figure higher than the budget of 32 states.

``He is taking office under historically bad conditions,'' says Sherry Bebitch Jeffe, a political scientist at the Claremont Graduate School.

Political honeymoons are in short supply this year. The nation's freshman governors, and even those returning to office after this fall's elections, face unusually difficult times. Encroaching recession, years of shouldering more of the burden of federal programs, and rising costs - for education, prisons, and just about everything else - are creating budget crises from Connecticut to California.

Twenty-four states raised taxes in 1990. The pressure will be there for even more to do so this year, experts say, which will mean plenty of quarreling in a year already politically charged over redistricting.

``What's interesting is the number of states that had large tax increases in 1990 and still have big budget problems,'' says Corina Eckl, a senior fiscal analyst with the National Conference of State Legislatures.

Groans over the Golden State's financial affairs began to be heard a couple of months ago, when it became clear that a gap would arise in the current fiscal year. Like other states, California has been hurt by a slowing economy and the spiraling costs of providing services. Budgeting is also affected by a series of voter-imposed limits on government spending and programs.

In an effort to balance his final budget, outgoing Republican Gov. George Deukmejian has proposed a $1 billion austerity program. His ideas were aired in a special two-day session of the state Legislature this week.

The Democratic-controlled Legislature, though, isn't expected to act on the package. Democrats chafe at two spending cuts proposed by the governor: one that would trim $526 million from education funding (and require suspending a voter initiative mandating a certain level of funding to schools), and another that would cut renters' credits.

More than that, they want to wait until Mr. Wilson comes into office Jan. 7. They are interested in how he is going to approach a far bigger deficit expected next year.

The state legislative analyst this week predicted there will be a $5.9 billion shortfall in fiscal 1991-92. That is far above an earlier estimate by the Commission on State Finance, which put the figure at $4.3 billion.

Mr. Wilson has been quiet on what he might do. During the campaign, the GOP lawmaker didn't rule out the possibility of a tax hike, and many Democrats believe new revenues will be necessary to close the yawning gap.

Yet Wilson has also indicated he wants to reform the budgeting process before taxes are increased - which means giving elected officials more flexibility in determining how money can be spent.

``The budget process now is an oxymoron,'' says Otto Bos, a Wilson aide.

The budget issue is likely to define Wilson's early relations with the Legislature. Analysts believe he will be less ``ideologically rigid'' on fiscal matters than Mr. Deukmejian. Democratic leaders are encouraged by some signals from Wilson: his courtesy calls on legislators in Sacramento; his appointment of Thomas Hayes, the respected outgoing state treasurer, to be top fiscal adviser.

Still, Wilson's support of a sweeping limit on the terms of state lawmakers that passed in November has left hard feelings in the Legislature.

As Democrat David Roberti, president pro tem of the state Senate, has put it: ``It is going to be difficult to sit across the table from the man who helped bring in the 300-pound gorilla named Proposition 140....''

So, no honeymoon?

``Even if there weren't residual resentment over Prop. 140,'' says Bud Lembke, editor of a Sacramento-based political newsletter, ``the fiscal problems facing the state are so severe that they are all going to have to pitch in and try to solve them. That means somebody's ox is going to get gored.''

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