California's Down-to-Earth Duke

By Alessandra Stanley

Facing a bare till, a tightfisted Governor builds a surplus

Ronald Reagan would have picked Lester Lanin and Dom Perignon. Jerry Brown might have insisted on box lunches in a Sacramento park. George Deukmejian celebrated his first year in office at a Holiday Inn serving steak, salad and below-the-Borscht Belt Comedian Shecky Greene. When it comes to suavity and symbolic gestures, the current Governor of California is no match for his two famous predecessors. But it hardly seemed to matter last week. Describing the budget-priced dinner as "a little bit offence mending and a little bit of entertainment," the Republican Governor welcomed 200 legislators with a confident smile.

For once, even the tightfisted Deukmejian could have afforded to splurge. For the first time since he took office last January, the Governor's financial resources and political stock are soaring. The state's coffers, depleted only six months ago, are newly flush with an expected $205 million surplus this year, and nearly $1 billion projected for the next. Bolstered by cash and a record public-approval rating of 76%, Deukmejian took a bold conciliatory step in his State of the State address to the legislature the morning after the dinner. He presented a $30.3 billion spending plan that was so comprehensive and popular that even his toughest Democratic detractors clapped.

Only a short time ago, such applause would have been unthinkable. When Deukmejian took office in January of 1983, the recession had eaten away what little remained in the till; earlier, billions in state revenues had been tapped to bail out local governments in the wake of Proposition 13, the 1978 voter initiative that drastically slashed property taxes. Deukmejian faced a staggering $1.5 billion deficit, an unemployment rate of 11.2%, and a Democratic-controlled legislature steeling for a fight. Having pledged not to raise taxes, Deukmejian instead offered an 18-month salvage plan to balance the budget. The battle bitter. Deukmejian rejected the legislature's demands for a tax increase, and instead pared $1.1 billion from its budget by selective vetoes of spending items. The Democrats retaliated where they could, stonewalling Republican efforts to redraw the state's congressional districts and rejecting three of the Governor's high-level appointees. At times the conflict got a little childish. Last summer, when the Governor's staff began posting the number of days the Democrats had been holding the budget "hostage," the Democratic chairman of the rules committee yanked the parking passes of three of the Governor's staffers.

Deukmejian prevailed in the budget battle. California also was helped greatly by the economic recovery, which boosted states across the nation; it particularly benefited from the boom in defense industries.

Compared with his first budget, the one presented by Deukmejian last week was, in the words of Democratic Lieutenant Governor Leo McCarthy, "an olive branch." Deukmejian reached out with an overall spending increase of 11.3%. The biggest windfall went to education. The University of California system received a 30% increase in funding, making possible salary hikes for the faculty, lower student fees ($1,317 to attend Berkeley, $70 cheaper than last year) and new equipment and programs. Community colleges may also receive more money, provided the legislature assesses a $50-per-semester fee on students. Deukmejian earmarked $900 million in additional aid to public schools.

Deukmejian's unexpected largesse does not signal a fundamental change of heart, however. His budget eliminates 5,000 government jobs and calls for $609 million to build prisons for 11,000 convicts. Health and welfare programs got a miserly 3.5% increase. Most important, the debt-fearing Governor socked away $950 million for "rainy days." Said he: "This emergency fund is our highest savings priority."

The sober, dutiful son of Armenian immigrants, Deukmejian began his career as an attorney in Long Beach, grappling his way up in law and politics by means of single-minded hard work more than personality or connections. As state attorney general, Deukmejian proved a tough law-and-order foil to liberal Governor Jerry Brown, pushing hard for California's death penalty. Before then, Deukmejian had served 16 years as a representative in both the state assembly and senate. Married and with three children, Deukmejian is unabashedly square in his habits and style. Weekends, he commutes to his family home in Long Beach. During the week he stays in a Sacramento apartment, eating frozen dinners and pizzas many nights. (He was prevented from moving into the lavish Governor's mansion built by Reagan when the Democrats voted not to provide funds for the Xanadu.)

Republican Senate Caucus Chairman Ken Maddy observed that the new proposals "will not placate the Democrats, but they do pre-empt them." Although his 1984-85 budget seems sure to pass, Deukmejian faces skirmishes down the road over his penny-pinching attitude toward entitlement programs. Senate Democratic Leader David Roberti grumbles, "The Governor hasn't shown much movement for the elderly and the poor."

Deukmejian's long-term agenda includes more welfare trimming, reform of a state supreme court he deems too liberal and a hotly disputed Republican proposal to redraw legislative districts last jiggered by Democrats. The test of his potential as a future leader of national stature, now that he has overcome a critical fiscal crisis, will be how well he can build a lasting prosperity.

--By Alessandra Stanley. Reported by Joseph J. Kane/Sacramento

With reporting by Joseph J. Kane/Sacramento