Governor Places Rebate Limit at $95 Per Person

Gov. George Deukmejian said Tuesday that taxpayers would receive a 10% state income tax refund, with a maximum of $95 per person, under a rebate plan he will soon submit to the Legislature.

Providing the first details of his proposal to refund $700 million in tax revenues, Deukmejian called on the Legislature to return the money to its “rightful owners, the taxpayers.”

At a Los Angeles press conference, Deukmejian said the limit for couples would be $190, double the individual limit. Many taxpayers would receive less than the maximum amount, however, depending on how much they pay in income taxes during 1987.

Shortly after Deukmejian spoke, Assembly Speaker Willie Brown (D-San Francisco) told reporters in Sacramento he wants to put the issue before the voters in June, 1988. Brown said he will seek an advisory referendum to give voters a choice between getting a tax rebate or spending the money on education, transportation or other programs.

And state school Supt. Bill Honig promptly attacked the governor’s rebate plan, saying it would provide only a small tax refund while depriving public schools of needed money. Honig and other critics of the refund proposal say it would average only about $50 per taxpayer--enough for dinner out or a new pair of shoes.

Anticipating criticism of his plan to refund the money rather than to spend it on education, Deukmejian emphasized that his budget plan would also increase funds available for schools. “With our rebate plan, we are still providing all levels of education with a $1.2-billion increase over the current year, with $758 million of that going to (kindergarten through 12th-grade) schools,” the Republican governor said.

The governor, who has repeatedly insisted that the state Constitution requires the rebate, acknowledged that the law would also allow tax money to be diverted to cities, counties and school districts.

The law in question is Proposition 4, which was approved by the voters in 1979. It placed limits on how much money the state, cities, counties and school districts can spend, based on increases in population and inflation. Tax revenues exceeding the limit must be returned to the taxpayers within two years unless voters in the jurisdiction approve an increase in the spending lid.

Analysts’ Interpretation

Under the law, the state also has the power to shift funds to local agencies that have not hit their own limits. Although some local governments have already reached their spending caps, nonpartisan legislative analyst Elizabeth Hill has estimated that cities, counties and school districts could spend $2 billion more before reaching their combined limits.

In an impromptu radio debate with Honig last week, Deukmejian accused the schools chief of attempting to circumvent the law by diverting the $700 million to the schools. “You want to break the law. You want to break the law,” the governor charged.

And on Tuesday, the governor again said, “The issue is that there’s a law. The law requires it and the law is in the Constitution.”

But, in response to a reporter’s question, Deukmejian said it would be legal to shift money to local agencies and that, in fact, his budget proposal calls for diverting some revenue to the counties.

While acknowledging that some cities, counties and school districts would remain below their spending limits even after his proposed transfer, Deukmejian said it would be very difficult to draft legislation to transfer money and meet the limits of the 1,500 government bodies in the state.

Difficulty Seen

“It becomes virtually impossible to have a general law that is going to, let’s say, fund county programs, for example, in a way in which you can design it precisely for each county to bring it up to its full capacity under the spending limit,” he said.

Honig, who contends the schools could legally spend another $1.1 billion, said: “If they want to give the money to schools, they can do it. It’s a policy issue, not a legal issue.”

Speaker Brown said he believes Deukmejian is misreading public opinion on the spending question, but that a vote would end the controversy.

“Everybody tells me, in public opinion polls, in my own reading of people in my district, that they would prefer not to have that money returned to them if they knew what the alternative for the use of that money would be,” Brown said.

Even though the vote would be advisory, the Speaker said he believes its result would be binding.

Times staff writer Douglas Shuit in Sacramento also contributed to this story.