STATE BUDGET PLAN EXPECTED TO FOCUS ON SCHOOLS, PRISONS.

Byline: John Howard Associated Press 

Gov. Pete Wilson's new budget, the first since taking office in which he doesn't face multibillion-dollar shortages, will funnel 60 percent of its dollars into education, boost money for prisons and likely cut welfare and some social services, administration sources said Wednesday.

There also will be no increases proposed in college and university fees in the 1996-97 budget to be unveiled next week, the governor's office announced.

But the administration says the still-unresolved federal budget could have a sharp impact on the Republican governor's proposed $59 billion spending plan: If the feds cut, so will the state.

The federal budget crunch already has affected the state's allocation for Medi-Cal, California's state-federal health program for the poor.

State Finance Department spokesman H.D. Palmer said California has received only 40 percent of its quarterly allocation for Medi-Cal - enough to cover the federal share through the end of January. Normally, the allocation would be enough to provide funding through March.

"The budget will reflect our assumptions of what the federal government is going to do in a number of entitlement programs, the principal ones being Medicaid and Medicare, and the block grants," Palmer said.

Wilson's fifth state budget differs markedly from his earlier proposals. The state is emerging - slowly - from its worst economic conditions in 60 years. His first budget required more than $14 billion in cuts or taxes, and his subsequent budgets also required cuts, transfers in funds, fees and other devices to balance the books in the face of recession-weakened revenues.

But the new budget is likely to reflect improved revenue projections.

Through November, revenues were about $700 million above projections, a trend that is expected to continue through at least the first quarter of 1996.