Budget Cuts Suggested by Analyst : Finances: Nonpartisan official says Wilson proposal would put state further in red. Even her changes are not enough, she concedes.

SACRAMENTO —  The Legislature’s nonpartisan analyst urged lawmakers on Wednesday to cut nearly $600 million from Gov. Pete Wilson’s $60.2-billion budget proposal and add another $65 million in new revenues, mostly by increasing fees on private industry.

But Legislative Analyst Elizabeth G. Hill conceded that her proposals, if adopted, would fall far short of erasing the $2.4-billion deficit she projects will result if the Legislature enacts Wilson’s proposed budget for the next fiscal year, which begins July 1.

Hill also questioned the wisdom of Wilson’s proposal to slash welfare benefits and offered an alternative more strongly based on educating and training welfare recipients. She suggested that the Administration’s proposal to eliminate dental care for poor adults and no longer offer several medical services not required by the federal government could backfire if the poor substitute other, more expensive services for the ones that are curtailed.

But Hill’s analysis backed up Wilson’s oft-repeated complaint that congressional mandates are adding to the state’s budget woes. She said federal laws expanding eligibility for Medi-Cal were responsible for more than one-third of the increase in the program’s cost since 1988.

Elsewhere in her budget analysis, Hill suggested adding one class to the teaching workload of University of California professors and folding three dozen regulatory boards into a reorganized Department of Consumer Affairs. She also urged the Legislature to place on the ballot a constitutional amendment repealing the homeowners’ property tax exemption.

Hill, who answers to the Joint Legislative Budget Committee, produced the two-inch-thick critique with about 50 analysts, half the number she had at her disposal 18 months ago. The cut was the result of voter-approved Proposition 140, which limited lawmakers’ terms and required the Legislature to reduce its operating budget by nearly 40%.

The analysis concludes that even if the Legislature gives Wilson everything he has requested, his budget will end the next fiscal year in the red. This is similar to a prediction made separately last month by the Commission on State Finance.

The bulk of the shortfall, Hill said, would be caused by tax revenues failing to live up to Wilson’s expectations. In her analysis, revenues will fall $1 billion short of Wilson’s latest projection in the current fiscal year, leaving a deficit of about $3 billion on June 30. Any hope of wiping out that debt in the next fiscal year will be hampered by another $1-billion shortfall, she said, leaving Wilson’s budget for next fiscal year $2.4 billion in arrears.

“Clearly the economy is not going as the Administration had hoped,” Hill said. “The recession was deeper in 1991 than was anticipated and, in our view, the recovery will be delayed until mid-year.”

To help reduce the deficit, Hill recommended $590 million in budget cuts. More than half the cuts, or about $365 million, would come from public schools.

Among other things, Hill suggested elimination of special grants created by the Legislature to compensate suburban school districts that do not get as much money as urban districts for narrowly targeted programs. She also said a Wilson proposal for new health education technology was unneeded and suggested that the governor had proposed more money than necessary to expand preschool and his “Healthy Start” program.

State schools Supt. Bill Honig said Hill’s proposals would exacerbate budget problems already burdening the schools.

“We have a problem with any kind of wholesale ‘Let’s go chuck it to the schools’ attitude,” Honig said. “You can’t take it out of the system without it affecting something.”

The other major potential for savings Hill identified was in the administration of welfare programs by counties. She said Wilson had overestimated this cost by $126 million in the current and next fiscal years.

Hill also suggested collecting $65 million in new revenues, primarily by increasing fees on industries regulated by the state. She suggested bringing in $28 million more from those regulated by the Water Resources Control Board, $15 million more from pesticide makers and $8 million more from timber companies.

Hill said Wilson’s effort to force more welfare recipients to work by reducing benefits and offering some incentives may not succeed because only 73,000 new jobs are expected to be created in California this year. Wilson wants to reduce grants by 10% immediately and another 15% for those who remain on aid for another six months.

As an alternative, Hill suggested exempting from the 15% cut welfare recipients enrolled in the state’s job training program, which she said should receive more funding. She also said the state should allow welfare recipients to earn more money from a job without losing their welfare benefits.

Hill questioned the logic of Wilson’s proposal to eliminate the poor’s access to dental care and health services such as podiatry, chiropractic and acupuncture. She said the elimination of dental care could lead adults to let their teeth deteriorate until they need emergency care--which could cost the state more in the long run. And patients who now see a chiropractor, for example, could instead go to a physician, which Medi-Cal would pay for at a higher rate.

Hill also recommended that:

* The University of California require professors to teach six, rather than five, classes per academic year and that a new benchmark be used to set UC faculty salaries. Combined, the two proposals could save $63 million a year. Another $25 million could be saved by redirecting 10% of the freshman class at the University of California and state universities to community colleges, she said.

* The Legislature eliminate 37 boards and bureaus that regulate occupations and professions and require the Department of Consumer Affairs to assume the duties, using advisory boards if needed. Hill said this would be more effective and eliminate the perception that board members who come from the regulated professions have a conflict of interest.

* The homeowner property tax exemption and the renter tax credit be eliminated. Hill said the homeowner exemption, which reduces the typical homeowner’s taxes by about $75, is obsolete because Proposition 13 eliminated the need for property tax relief. The renter tax credit, which is worth $120 to married couples earning less than $41,000 annually, was created at the same time as the homeowner exemption and also could be eliminated, she said.

Wilson has proposed wiping out the renter credit but opposes any effort to also jettison the homeowner exemption, a spokesman said.

Deputy Finance Director Steven Olsen said the Wilson Adminstration was reviewing Hill’s report.