First The Drought, Now A Sea Of Troubles

Hours before Pete Wilson was to be inaugurated last January as California's 36th governor, rain clouds gathered over Sacramento. As staffers scrambled to move the ceremony inside, Wilson joked: "I've only been in office for 20 minutes, and already I've solved the drought."

Today, the former U. S. Senator might concede that those dark clouds were more ominous than they looked. Barely settled into his new office, the Republican chief executive faces some daunting problems (table), including two of historic proportions: a five-year drought that's the most severe in memory and a projected budget deficit that has nearly doubled -- with blinding speed -- to $12.6 billion. While Wilson's budget woes are similar to those of governors in such states as New York and Connecticut, which next fiscal year projects a $1.7 billion shortfall, the deficit he must eliminate in the next three months is the largest ever projected by a state. "I'm just glad that I'm not governor," says California Assembly Speaker Willie L. Brown Jr., the powerful Democratic leader.

For Wilson, who campaigned on a platform that included improving nutrition programs for kids, the state's problems amount to a rude wake-up call. Elected from a crowded field with just 49% of the vote, the 57-year-old governor's first budget proposes to raise nearly $1.8 billion by closing tax loopholes and adding sales taxes and fees. He has also called for cutting $5.3 billion in spending by savaging education and welfare programs. In addition, Wilson has stopped water deliveries from state aqueducts to farmers and has severely curtailed deliveries to cities. The unpopular moves abruptly ended any honeymoon Wilson might have hoped to enjoy. Grumbles David A. Roberti, Democratic president pro tem of the California Senate: "I'd give Governor Wilson a C-plus, so far."

Wilson's undoing is a state economy that seemed recession-proof but now is slowing alarmingly. Mounting layoffs in defense, construction, and farming have dramatically throttled back revenue growth, while spending has jumped. By the time Wilson submitted his $55.7 billion budget in January, his staff estimated a $7 billion shortfall. In late March, as the recession threw the brakes on revenue growth, estimates for the red ink shot up, to $12.6 billion.

MAD TEACHERS. A wetter-than-normal March eased the drought, keeping Wilson from having to impose further water cuts. But there's no such respite from budget woes. Although the state constitution requires Wilson to balance spending and revenues, a crazy quilt of ballot propositions enacted over the past two decades makes that all but impossible. For instance, 1988's Proposition 98 mandates that 40% of all new revenues goto the state's school system. Wilson's proposal to defy Proposition 98 and reduce school programs by $2 billion has aroused the fury of the huge California Teachers Assn., which has mounted an advertising blitz in opposition. Moreover, Democrats have lined up to fight the governor's call to repeal Proposition 98.

Wilson and the legislators must balance the budget by the end of June. But the new governor is already at odds with the Democrat-controlled legislature. Wilson's aides say he's mulling layoffs of government workers. Instead, Democratic leaders want Wilson to embrace an increase in state income tax rates--something the governor says he would veto. But to win the support of Willie Brown for his plan to rescind Proposition 98, Wilson may have to accept Brown's proposed tax on lawyers and accountants.

Even if Wilson manages to negotiate his way through the budget, more worries await. By year's end, Wilson and Brown will no doubt lock horns over redrawing the state's congressional districts. And the water shortage remains. By yearend, it may force Wilson to stop the state's remaining water sales.

Can Wilson handle all this as neatly as his inaugural? Moving that affair inside was one thing. Moving the headstrong legislature will be something else again.

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