George Deukmejian

35th Governor, Republican
1983–1991

State of the State Address

Delivered: January 10, 1983

Lt. Governor McCarthy, Mr. Speaker, Mr. President pro Tem, members of the Legislature, and fellow constitutional officers.

In my inaugural address last week, I told the citizens of California that the grave problems facing our state deserved common sense answers arrived at in a spirit of bipartisanship. I came here today in that spirit – determined to work with you in close cooperation.

It is my sincere wish that I could stand in front of you today and say that the State of California is healthy. It is not.

Every year since 1978, the State has spent more than it has collected in revenues. During that period, we spent $6 billion more than we have collected. Like a spendthrift who wastes his inheritance, we have not lived within our means but have imprudently spent all our savings, which once totaled $4 billion in surplus. Now we are paying the terrible price for this overindulgence.

Five years of deficit spending has left us with two serious fiscal problems.

First, the State may be faced with a $1.5 billion deficit by June 30. We are currently spending $4 million a day more than we are collecting.

Second, because of the growing deficit, we are facing critical cash flow problems. The State has been forced to borrow from private lenders once this fiscal year. We will have to borrow again before this fiscal year ends. However, unless steps are taken to return our State to a sound fiscal policy, we, like the spendthrift, may be classified as a bad credit risk, or be forced to pay our bills with IOUs.

Ladies and gentlemen, deficit spending in California must come to an end.

It has been suggested by some that we must raise taxes as the only alternative to solving this fiscal crisis.

Time and time again, in the past few years, and as recently as six months ago, the people of our state have voted to reduce taxes and spending. A great many of our citizens are suffering from the tragic recession which is gripping our economy. In the midst of a lagging economy, we should not propose to tax those who are already paying a high price in reduced prosperity.

Therefore, I am proposing actions which will solve the cash flow and massive deficit problems without a tax increase.

Rather than raising taxes, I propose a plan to return California to solvency over an 18-month period of time. During that period, I propose that we not only live within our means, but that we save money, and use those savings to pay off the debts left over from the past.

To do this will require that the Legislature work with me to achieve two goals.

First, we must act quickly in the current year to reduce the projected deficit by $750 million. Because there is little time left, this will be a difficult task. But this goal can be reached by freezing expenditures in a number of areas, by transferring money from special funds to the General Fund, and by reducing expenditures in selected programs. Most of these options have already been considered and generally accepted by the Legislature. I have already begun the process by freezing hiring, contract, and out-of-state travel in state government.?

I have detailed the actions that need to be taken to accomplish the $750 million reduction in the budget and budget message that are being submitted to you today.

Obviously, these program reductions only deal with half of the projected deficit. That still leaves another$750 million to capture in order to bring the year 1982-83 into balance.

I propose to use the 1983-84 budget as the vehicle to reduce the remainder of this deficit. In preparing that budget, we have achieved reduction in spending sufficient to provide us with a balanced budget which includes a projected total reserve of $800 million. In addition, we have proposed approximately $1.1 billion in cost-of-living allowances and capital expenditures.

When the Department of Finance conducts the "May Revision" – the springtime update of the budget I submit today – I will ask the department to estimate the amount of the deficit which will still remain as of June 30, and amend the 1983-84 budget act to include an appropriation sufficient to pay off any part of the 1982-83 deficit which is still on the books. Working with the Legislature, we will make adjustments to the reserve, the cost-of-living allowances and the capital outlay fund in an amount necessary to cover this deficit. These actions would extinguish the debt.

We have reviewed this plan with the Attorney General who advises us that it consistent with the Constitution and laws of California.

We have engaged in hidden deficit financing for five consecutive years. Now, I want to make it clear that this one time act, difficult and demanding as it is, is taken to bring an end to such damaging practices.

Put simply: in the next 18 months, we will bring a firm end to the idea of spending more than we take in, and we will give the citizens of California the outright balanced budget they are entitle to.

Although the 1982-83 deficit problem can be solved over 18 months, the cash flow problem must be dealt with by the end of this month because at the end of February over $2 billion in cash expenditures must be made.

It is the opinion of the Director of Finance, the Controller, and the Treasurer, that due to our cash flow crisis, we will have to resort to additional external borrowing or to issuing registered warrants this fiscal year. This is true regardless of what is done to resolve the deficit problem.

We are also in agreement that borrowing money by using short-term notes is preferable to issuing registered warrants because of the difficulty of selling registered warrants.

In fact, if we are forced to issue registered warrants, it is likely that we will have to issue them in payment to state employees and creditors because many do not believe that the financial community will once again purchase them as it did las November.

I urge you enact legislation to authorize the State to temporarily issue notes to deal with cash flow problem. It is essential that this action be taken by January31 to allow sufficient time to market these notes before the cash crunch comes.

However, authority to sell notes does not mean that there will be a market which agrees to buy them. Only if the financial community believes that California seriously intends to end its pattern of deficit spending will we be assured of a ready market for these notes.

We must send them a clear signal that both the executive and legislative branches of government are prepared to make our state fiscally sound once again. If we do not, it is extremely likely that we will have to resort to registered warrants.

In view of the urgency of the situation, I ask you to act immediately upon my proposal to reduce the current year deficit by $750 million. If we accomplish these two actions by January 31, we will have met this cash flow crisis.

I cannot overemphasize the necessity for prompt action in this area. Therefore, I will be meeting tomorrow with the legislative leadership together with the Treasurer and Controller to begin discussions concerning my proposals.

From this difficult past and present, let's move to the challenging future. Today, I am sending to you a budget for the Fiscal Year 1983-84. Let me briefly highlight that budget for you now.

This is a balanced budget which calls for no tax increases. I urge the Legislature in the strongest possible manner to join me in listening to the will of the people. In the course of nearly two years of traveling the state as a candidate for Governor, I cannot recall once a citizen asking me to raise his or her taxes. This budget respects what I feel is my commitment to the people.

This budget represents the first time in five years that we won't spend what we don't have.

This budget proposes expenditures at the same level as actual expenditures two years ago and calls for a reduction in the State work force of approximately 1,000 positions.

One week ago I said that public education is among the highest of my priorities. We have reflected this priority by providing a six percent cost of living adjustment -- $447 million – for K-12 regular educational programs. This is the largest such increase of nay cost-of-living adjustment in the budget.

Low-wealth districts will receive a special adjustment which will bring 96% of the students of this state within the mandates established by the Supreme Court in Serrano v. Priest.

The increases that we have made in the K-12 education program reflect my strong feeling of support for public education. Yet, I am also convinced, along with millions of parents in California, that vigorous reforms must take place in our educational system. I have already met with the Superintendent of Public Instruction, and we have agreed to work closely to being these reforms into reality. This increased funding must be accompanied by significant reforms.

In higher education, we are providing for the full funding of undergraduate enrollment increases at the University of California and the California State University. In order to maintain the highest of quality while keeping our responsibility to balance the budget, I am asking that U.C. students and their families pay an additional fee of $150 and those attending CSUS an additional $230. Even with these fees, our students will be paying less than their counterparts in comparable schools in many other states.

I am aware that for some students these increased fees will work a hardship and therefore have provided for a portion of the fee revenue to be allocated to the two systems to provide scholarships to needy students.

You will also note that I am proposing a $50 per semester fee to students attending our community colleges. There are 40 states with community college systems, and California is the only one which charges no attendance fees at all. Our community colleges provide an excellent education, so I don't believe a modest fee of 57 cents per school day is too much to ask of those who benefit directly from this fine system.

Students cannot learn and teachers cannot teach if they are worried that they might become victims of crime while at school. I am increasing fund for crime prevention in our schools with a particular focus on use and trafficking in drugs with in the school environment.

In the corrections area, the California prison system is faced with an unprecedented demand far exceeding our current inmate housing ability. I have proposed an increase of nearly 1,700 positions and $74 million to deal with this urgent problem.

I also will request funds to increase the number of California Highway Patrol officers and support personnel to provide more protection for the motoring public.

In these difficult times, we must review state programs to assure that they are efficient and necessary. My budget includes cost benefit adjustments in a wide range of programs. These reductions in appropriations and personnel do not involve an across-the-board, meat-axe, approach. Rather, we have made a program-by-program review for inefficiency and waste.

As an example to others, I have reduced the Executive Office of the Governor by 10 percent.

Another example is the Agricultural Labor Relations Board. It was found to be overstaffed by 47 people, and over budgeted by $2.2 million according to its own work standards, which it had adopted in 1979 but never followed. It is reduced by those amounts in our budget. You will find many other similar reductions set forth in the budget.

Further efficiencies must be reviewed. I will soon appoint government efficiency teams, comprised of representatives of the private and public sectors, to review selected state programs and recommend further efficiencies in the budget year.

An essential element of the health and welfare budget is the maintenance of approved staffing levels in all state hospitals serving the developmentally disabled and mentally ill. Four hundred eighty new positions have been added to insure high quality care in these institutions.

The 1983-84 budget reduces the cost of health and welfare programs to the taxpayer by approximately $400 million. These reductions are achieved within the framework of maintain assistance and services to those who need them, by reducing inefficiency, in equality and abuse.

We will achieve our reforms through the following actions:

– Substantial antifraud measures will work to save us millions of dollars. I am suggesting immediate statewide implementations of Orange County's highly successful early detection welfare fraud prevent program. By stationing fraud investigators in the application process, early detection has already saved substantial sums of money. We need more of these kinds of saving across the state.

– Major new efficiencies will be gained through shifting to block grant programs in some areas.

– We also save by proportionally reducing support payments for housing in AFDC households where the house is being shared by someone not eligible for welfare who should contribute his or her fair share of the hosing cots. Hard-pressed taxpayers are not obligated to provide housing subsidies for someone who I otherwise capable of paying rent.

– California maximum aid payments for an AFDC family of three exceed by 32 percent – or $123 per month – the combined average payments of New York, Massachusetts, Michigan, New Jersey and Pennsylvania. It's time to hold these grants at a constant level for limited time until our state more nearly approximates the maximum no cost-of-living increase this year for AFDC. For the elderly, I am proposing to allow the 2.1 percent federal increase in the SSI/SSP cost-of-living adjustments to pass through to the recipients.

– Finally, I am maintaining the cost savings in the Medi-Cal program that were negotiated by the Legislature in 1982.

Let me briefly summarize the other highlights of this budget.

This year, our state employees were required to forego a general salary increase. Our budget provides a benefit package of $337 million, or equal to a five percent increase.

Our transportation infrastructure has badly deteriorated over the las eight years. My budget establishes priorities which shift the emphasis from exotic alternative transportation schemes over to the proven priorities of safe, well-maintained, and efficient highways.

My budget proposes that the state develop a ‘new partnership' with local government in which a stable funding source local government in which a stable funding source for local government is established an authority is returned to that level of government most responsive to the people. The first step toward this has been done by establishing block grant programs in several areas. In the near future, I will appoint a task force to develop and recommend a plan to redefine the local-state relationship.

These are tough times, and so we've made some tough decisions. We've got to face up to the fact that much of our government has spun out of control. We can still be humane while being sensible. That's why in all the areas that I've looked at, I've applied these basic, simple standards of common sense. Some programs just plain don't work; other just cost too much; still others are grounded in philosophies about which the voters and taxpayers of California have made their sentiments abundantly clear.

I think it's time to make government work better. And instead of looking to things which are new, I think we can improve upon what we already have. Throughout this process, we should apply the same rigorous standards that the hard-strapped families of California do as they struggle through the recession. That requires setting priorities and then following through with actions consistent with those priorities. In every instance, that is what this balanced 1983-84 budget seeks to accomplish.

At the same time that we are attending to the serious fiscal problems which are confronting us, we must still move ahead with actions and initiatives in many other areas of government which are equally important.

The common sense principles that we will be applying to budgetary matters are the same principles that we will be applying to budgetary matters are the same principles we will apply to other urgent priorities that make up the agenda of my administration.

To begin with, let us start on the road of putting California back to work. Nothing is more tragic than the wasted human resources of the unemployed. Nothing is more heart-wrenching than the uncertain of the future and who seek again the dignity that their form employment gave them.

The answers are not complicated. They simply require action. It's time to start our state growing again. It's time to recreate that robust, every expanding sense of progress and opportunity that made California a miracle story after World War II.

There is a shortage of affordable housing. Energy costs are higher than they might have been. Too many plants have closed, and too many people can't get from here to there because our transportation system has faltered. In recent years, we have lost the vision which made the state bloom and prosper with abundant sources of water.

Well, the result has been reduced productivity and reduced prosperity. Business has been scared out of our state, and the working people have suffered. In the past, no-growth policies have been the major high-growth activity. That must end.

We cannot create prosperity by shackling those who are best able to create it. That is why we have got to unburden the business and labor communities from the stringent and sometimes arbitrary regulations which have hamstrung progress. From now on, those regulations which do not serve an important public interest, are not authorized by law, or which result in costs which outweigh the public benefit will be eliminated.

We can build anew for the future, create new jobs, make California thrive again, and restore the promise and opportunity that we once had – we can do all these things if we set about the job of making state government the ally of responsible progress, instead of its adversary.

But opportunities in the business community do not come without responsibilities as well. That is why I have already sent the message to a number of business leaders that in these economic doldrums, they can help spark recovery by taking a more confident outlook about the future. I have assured business that there is a welcome mat out in California. In return, I want business to seek out every opportunity to hire new people and make plans for prudent expansion. Their ingenuity, resources and abilities must be put to the same tests of effort as I am asking of the rest of our citizens.

We must especially commit ourselves to provide maximum assistance to the small businesses of California, which make up the vast majority of the business community. My administration will ensure that small entrepreneurs have equal opportunities to grow and prosper.

At the same time we build new strength into our economic structure, I hope that we can do one simple act: make our streets, homes and neighborhoods safe again.

As Governor, I intend to be the number one crime fighter in California. There are many reforms I have in mind for the criminal justice system, and I will outline them in the months ahead. But for now, these goals:

– I will appoint judges who are committed to public safety and the rights of victims. These will be judges who will not engage in justice by loopholes, but justice under the law as intended.

– I will give every support I can to law enforcement agencies, both at the State and local levels.

– I assure you that my longtime support for capital punishment shall continue. In the past 19 years, criminals have invoked the "death penalty" against their victims more than 30,000 times. During the same period, only on convicted murderer has paid the full price for the most antisocial of all acts. A Common Sense Society is on in which murderers are not let off the hook by convoluted legal opinions which leap through verbal gymnastics to find ways to exonerate those who have snuffed out the lives of their fellow men and women.

– Finally, I will soon present a program recommending specific actions to reform today's seemingly endless and costly courtroom procedures.

The fields of California's remarkable agricultural industry should be of no less concern than the streets of our cities. Unquestionably, agriculture is critical to the economic welfare of California as one of our top industries. We will take every responsible step to insure that our farmers and ranchers have an environment in which they can thrive and prosper and not be the whipping boy of government.

Food does not grown on the market shelves by some feat of spontaneous generation. It comes from the sweat, commitment, ingenuity and high risk assumed by the agricultural sector of our State. They give us their support by providing the most fabulous array of food and clothing ever known to man. I think it's time they had our full support in return.

This means, for example, that we should ask the Agricultural Labor Relations Board to make fairness a standard instead of a joke. I intend to appoint a fair and balanced board which understands the importance of agriculture to California.

On pesticides, while the health and safety of agricultural workers and consumers will be full protected by my administration, we will not impose impossible of foolish standards upon our farmers.

These and other actions will reflect the view of my administration that as much as possible we should get out of the way of this most productive industry and give them freedom and room to help put us back on the boom road to recovery.

Any lasting progress in agriculture is closely tied to the way in which we manage the magnificent natural resources of California. This world of ours was created by One far greater than ourselves and our stewardship of what He gave us will determine the quality of tomorrow as well as the progress of today.

The development of our resources and environmental protection are compatible goals. But the marriage of those two public interests should be presided over by people of reason and realism and not by social engineers in search of Utopia.

I believe that it's time to review under the microscope of reason all regulations developed by our government agencies for consistency with enabling legislation and effectiveness in meeting original purposes. As we deal with our ongoing resource and environmental problems, we will follow these guideposts.

We will protect our air, water and forest resources and preserve and improve our excellent state park system.

We will develop a rational and effective system for hazardous waste disposal.

We need to restore a common sense approach to land use in the coastal region, and I will be closely reviewing the entire work of the Coastal Commission with an eye towards phasing out its more meddlesome activities.

Finally, I cannot even conceive of a world without water – but we must move quickly or we shall soon experience crucial water shortages in California. I intend to work with the Legislature and all interested individuals and organizations to create a fair water policy for the state, and I will encourage conservation through education. I have instructed the Resources Agency to begin an expeditious review of this matter with a full set of options to be presented to me within the next few months.

We had better start planning for the needs of our children. We don't have the luxury of too much water and we no longer have the luxury of time.

If you will permit me a personal note, I first spoke in this chamber 20 years ago from a desk in the last row on the center aisle. I can remember the pride I felt to be here as one of a select few chosen by the people to represent them. I feel that same sense of honor today.

Mr. President pro Tempore, Mr. Speaker, I wish to thank you and your colleagues for this opportunity to address this joint session. For sixteen years I was a privileged to be a member of the Legislature and to engage in spirited debate with my colleagues.

I fully expect that we will continue those debates in the months and years to come. That is our system. That is as it was intended to be. After all, we are doing the people's business, and they will best be served in our system by the free and open discussion that leads the answers which we all obligated to find.

As your former colleague, I extend my hand to all of you both as a symbol of my willingness to cooperate and as a request to you that the Legislature give me support in putting through these solutions to critical problems.

But this is also a moment for candor. Time and time again in the past few years, the people of California have gone around their elected representatives in frustration to seek measures to change the course of their lives. On taxes, spending, public safety, reapportionment and many more, they have sent a message to us that perhaps we have not been as attentive as we might be.

We have an obligation – a public trust – to do better than that. We can, beginning today, work to streamline our government and make it work better. I know that we can provide needed services at reasonable costs. I am confident that with a little effort and ingenuity we can return fiscal soundness without burdening our citizens with new taxes. I truly believe that within one year, we can free up the engine of California's industry and technology to churn out new jobs and new hope to life the despair of those not working.

You have my pledge that I will always be willing to listen. You have my promise that I will strive to unite, not divide.

I will bring all my energy to the task and all the good will I can muster. Let us start our work now.

Thank you very much.