Wilson Criticizes Union’s Opposition to School Cutbacks : Budget: If the governor can’t override the funding guarantees in Proposition 98, it will mean $2 million in cuts elsewhere, analyst says.

SACRAMENTO —  Gov. Pete Wilson stepped up his efforts to suspend $2 billion in school funding guarantees Wednesday, calling opposition by a teachers union “repugnant” and warning that failure by the Legislature to act on his budget balancing plan will mean $500 million in cuts to health, welfare and other programs.

Wilson got support in his bid to suspend the school guarantees contained in Proposition 98 from legislative analyst Elizabeth G. Hill. In a 1,758-page review of the governor’s proposed $55.7-billion budget, Hill said that if Proposition 98 guarantees were untouched, the Legislature would have to cut $2 billion from non-school programs, raise an equivalent in new taxes or enact some combination of the two.

While the debate was heating up on budget issues, Treasurer Kathleen Brown announced that California had sold $1.3 billion in state bonds--a one-day record--and still managed to get the lowest interest rate in 10 years. The bonds will finance a variety of school, prison, water and other construction projects.

The bond sale attracted an unusual amount of interest not only because of its size but also because of earlier warnings that budgetary problems threatened California’s long-term credit rating. The state is expected to end the current budget year June 30 with a deficit of at least $1.2 billion, with the possibility of even more red ink next year.

Brown told reporters after the bond sale that Wall Street firms and investment bankers looked past the state’s immediate budget problems. The winning bid went to a syndicate headed by Goldman, Sachs & Co., which will charge the state an interest rate of 6.35% on the tax-free bonds. “The market today spoke loudly about their long-term confidence in California,” Brown said.

Wilson’s comments about Proposition 98 came in a hard-hitting speech to the California Taxpayers Assn., a business-oriented group.

Wilson noted that the California Teachers Assn., which represents about 230,000 active and retired teachers, is fighting the suspension of Proposition 98 on the grounds that the state is not in a “fiscal emergency.”

The CTA, which led the drive to pass the constitutional amendment in 1988, had argued during the campaign that Proposition 98 contained an escape clause allowing it to be suspended during emergencies, Wilson reminded his audience. The union is arguing that the emergency it was referring to involved natural disasters, such as earthquakes.

Wilson said the union was “going back on its word.”

“By God, if we’re not in (a fiscal emergency), I don’t want to see one,” he told the audience of business and government executives.

Proposition 98 requires at least 40% of state general purpose tax revenues to go to public schools and community colleges. Wilson’s spending plan would drop the schools’ share of the budget to 37.5%.

Wilson again blasted the CTA for a television commercial it is running on stations statewide that shows a schoolgirl expressing alarm over the possible suspension of Proposition 98. The ad, which implies that the girl is from California, is part of a multimillion-dollar campaign organized by the CTA.

The Republican governor noted that the actress actually is a 20-year-old from Chicago. “She’s not from Calistoga, or Santa Cruz or Sacramento,” Wilson said. “She is from Chicago. I hope she is making enough to afford a fine private school.”

Wilson added: “Let me tell you what the union ads won’t say. They will not tell you that if we don’t suspend Proposition 98 it will force an additional $500-million cut in health, welfare and other basic services. It will mean cuts to programs that serve poor pregnant women, or perhaps indigent patients, perhaps the homeless. And don’t think that children would necessarily escape the brunt of these cuts (if Proposition 98 is protected) because everything would be on the chopping block.”

A CTA official accused Wilson of “setting up a false choice.”

The official, who asked not to be identified, said Wilson continues to refuse consideration of further tax increases to head off the kinds of budget cuts he mentioned as the price for saving Proposition 98.

“He is protecting tax loopholes that favor the very rich, the ones that are his basic constituency. The choice isn’t between the elderly and school kids; it’s between the wealthy and the rest of us.”

School interests and others in recent weeks have been urging the governor and Legislature to consider returning the top level of the personal income tax from its current peak of 9.3% to 11%, along with enacting a host of proposed taxes on oil companies, corporations and others. The top tax rate was reduced in sweeping tax legislation enacted in 1987.

Wilson, in his speech, vowed to “veto any tax proposal that would chase jobs out of California.”

The legislative analyst, in her assessment of Wilson’s proposed 1991-92 budget, again concluded that Wilson’s spending plan “overestimates revenues and underestimates expenditures.”

Shortly after Wilson unveiled his budget, Hill boosted the projected budget shortage over a two-year period from the $7 billion outlined by the governor to $9.9 billion.

During a news conference Wednesday, she said she was sticking by the higher figure, although she said a quick conclusion to the Persian Gulf War and the effects of the drought could upset budget projections.

“If the Legislature did everything that the governor has proposed in terms of a solution, in our view it would be $1.5 billion short,” she said.

Hill and her staff recommended hundreds of changes in the governor’s proposed budget, which collectively would produce a $440-million spending reduction.

Hill, however, made no specific recommendation on what to do about Proposition 98.