Honig Says Prop. 98 Is ‘Scapegoat’ in Cutbacks

SACRAMENTO —  State Supt. of Public Instruction Bill Honig said Wednesday that Gov. George Deukmejian is making Proposition 98, the school funding initiative, “a scapegoat” for threatened budget cutbacks.

Honig, one of the sponsors of the November ballot initiative, said budget difficulties facing Deukmejian are due to tax breaks for foreign corporations and wealthy individuals enacted by the governor and Legislature in recent years.

The comments are in response to statements by Deukmejian and his Chief of Staff Michael Frost that Proposition 98 is going to require painful budget reductions for non-school programs such as health and welfare in the new state budget that the governor will send to the Legislature on Jan. 10. Deukmejian said he may seek repeal of parts of Proposition 98.

Uses Magnifying Glass

Honig, armed with stacks of fact sheets and charts, used a magnifying glass to illustrate the relatively small amount schools will get during this budget year as a result of Proposition 98--about $200 million extra against an overall state budget of more than $44 billion.

Honig, who said he will oppose efforts to roll back budget guarantees that schools got under Proposition 98, argued that the schools’ share of the budget will be about what it has been receiving in recent years and less than schools received in banner years.

Under Proposition 98, public schools and community colleges will automatically receive about 40% of the state budget.

“We’re being made the scapegoats. They are saying the schools and kids and Proposition 98 are the cause of financial pressure,” Honig said. “It just isn’t so.”

Cut Back Programs

The schools superintendent argued that Deukmejian and the Legislature “have given away the store” in approving a huge tax reduction for foreign corporations in 1986 and then cutting back programs when a $1-billion revenue loss developed from tax legislation enacted the next year.

However, Deukmejian’s press secretary, Kevin Brett, insisted that the school finance initiative would impact “seriously” on the budgets of other programs and repeated the governor’s warning that he would be forced to cut back or withhold increases to the University of California, the California State University system, local mental health programs and state aid to counties.

The tax break for foreign corporations, the result of legislation revising the so-called unitary method of taxing income earned by California corporations in overseas businesses, will save companies with worldwide operations $180 million during the upcoming budget year, Honig said.

“The theory was that we need to give foreign corporations a tax break because we need to encourage them to invest in California. I mean, give me a break. They are already buying up half of California,” Honig said.

Honig said the biggest beneficiary of the unitary tax bill was Sony Corp. of Japan.

Added to Problem

Honig said the governor and Legislature added to the problem by not correcting tax legislation that resulted in an unexpected shortfall of $1 billion in income tax revenues last year. Lawmakers did not foresee the dramatic drop-off in revenues when they passed the tax bill, but chose to make up for the shortfall by cutting health, education and other programs, rather than revising the newly enacted tax codes.

“You ended up with a ($1-billion) windfall to the wealthiest taxpayers in the state and they should fix it,” Honig said.