California Earthquake Tests the Tension of State's Purse Strings

THE 15 seconds that shook the San Francisco area may hold political implications for California for years to come. The billions of dollars in emergency aid that will be needed for victims of the earthquake is forcing the state to reassess its long-held aversion to taxing and spending.

While some of the changes enacted might be short-lived, others could be more permanent. The quake is already enhancing a drive that was under way to alter a constitutional limit on state spending.

Some analysts say the debacle might raise a broader question: whether the state can continue to be tight with its purse strings - much of it enforced through a series of voter-approved initiatives in the late 1970s - and still provide adequate roads, bridges, and other public works and services for a rapidly expanding populace.

``The public had already seen there were needs not being met,'' says California pollster Mervin Field. ``The earthquake is going to give that a big boost.''

An early test of the political impact of the quake will come within the next two weeks, when the state Legislature is expected to sit down in special session to figure out how to pay for the damage.

President Bush Thursday morning approved a disaster relief package that included $3.45 billion for California. Although unprecedented in amount, it will hardly cover all the costs of the earthquake. Damage estimates of the temblor, which hit 7.1 on the Richter scale, now top $7 billion and are rising by the day.

The state has a $1-billion rainy-day fund set aside for such emergencies but that seems less and less likely to be enough.

``As the damage estimates increase, the probability of a tax increase looks more real,'' says an aide to California Assembly Speaker Willie Brown.

Gov. George Deukmejian (R), as staunch an anti-tax man as inhabits public office, has indicated he might be amenable to a temporary increase in the gas or sales tax, which some pundits consider a political watershed in itself.

A sales-tax hike has the potential of bringing in more money, but some lawmakers object to it because they believe it would unfairly penalize consumers. One legislator has proposed a 25-cent-a-gallon hike in the gasoline tax, though many consider that too hefty.

Whatever levy might be chosen, lawmakers would have to deal with a lid on state spending, which raises other political implications. The Gann Limit, named after political conservative Paul Gann and passed by voters in 1979, restricts annual government spending based on population and inflation.

Once the state reaches its limit, as it is expected to this year, leftover money can't be spent. Thus even if California were to take in more revenue from a tax increase, it wouldn't be able to use it.

There is one exception: Under Gann, the state is allowed to exceed the spending cap in emergencies declared by the governor and state Legislature. But the funds have to be repaid within the next three years, which would mean a state already pinched would be pinched even more.

One way around this would be for the Legislature to pass a temporary tax hike and a one-shot exemption to Gann, which would require the approval of voters.

Another would be to move up an initiative now scheduled for next June's ballot. That measure seeks to permanently raise the gas tax to finance new highway construction and would give the state the authority to exceed the spending lid, which might be able to be invoked to deal with earthquake aid.

Whether or not this is done, many politicians believe the road and other infrastructure needs highlighted by the earthquake have increased the likelihood that this measure will pass.

Beyond this, some analysts say the quake of '89 could lead to a more far-reaching reappraisal of the state's unwillingness to tax and spend, which probably reached its peak with the passage of Proposition 13, the tax-slashing measure, in 1978 and Gann a year later.

``I don't think all of a sudden the state is going to go on a spending spree,'' says Bruce Cain, a political scientist at the University of California at Berkeley. ``But it will accelerate a change already underway'' of accepting taxes targeted for specific purposes.

Adds Sherry Jeffe of the Center for Politics and Policy at the Claremont Graduate School: ``I think we are coming out of the no-new-tax cycle. I think we are being nudged out of it by this earthquake.''

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