WILSON REVEALS BUDGET; REVISION INCLUDES TAX CUT `INVITATION' : BUDGET AT A GLANCE.

Byline: Paul Hefner Daily News Sacramento Bureau

Gov. Pete Wilson issued his revised budget Wednesday with $2.3 billion extra in revenue, accompanying it with an ``invitation'' to the Legislature to cut the state income tax.

Wilson's spending plan calls for no income tax cut despite the extra money from California's bustling economy that is expected to bring in $2.3 billion more than projected in January.

Instead, it directs 98 percent of those extra dollars to education, to comply with terms of Proposition 98, a voter-approved school funding initiative.

Wilson said he saw no point in trying again to get an income tax reduction through the state Senate and Assembly, both of which are controlled by Democrats. But he said he would be delighted if the Democratic leadership proposed it.

``I will make a public invitation,'' Wilson said. ``If they are willing to do what makes good sense, if they are willing to reduce the income tax rate, I will be glad to sign a tax cut.''

State Sen. President Pro Tem Bill Lockyer, D-Hayward, offered a lukewarm response to Wilson's offer, issuing a statement that the personal income tax ``should be on the table.''

``So should cuts in student fees, which have more than doubled on Wilson's watch,'' Lockyer said. ``Now there's a harsh, burdensome tax on California's working families.''

Sen. Jim Brulte, R-Rancho Cucamonga, said he favors an income tax cut, as well as a tax credit for small businesses that offer workers health insurance. But he agreed with Wilson that there was little chance of getting a cut approved.

``The Democrats in the Legislature have gutted it two years in a row,'' Brulte said.

Wilson's budget does include a cut in taxes for businesses and corporations. But both Lockyer and Assembly Speaker Cruz Bustamante, D-Fresno, oppose it.

As expected, the Proposition 98 school funding formula laid claim to virtually every cent of new state revenues in Wilson's spending plan, which still must be approved by the Legislature.

Wilson called for using $230 million to put more kindergarten through third-grade students in classes of no more than 20. He also proposed increasing from $23.2 million to $82.6 million the amount set aside for standardized testing of school students and doubling the funding for his ``digital high school'' technology proposal to $100 million.

The budget calls for increases in general education spending as well, with funding per pupil rising to $5,151, compared to $4,773 in last year's budget.

Officials for Los Angeles Unified School District said they were pleased with Wilson's proposals. In particular, the district stands to benefit from his plan to allow a portion of the funds for class-size reduction to be spent building classrooms.

``That's what we've been fighting for,'' said Ron Prescott, the district's chief lobbyist.

The program, which started last year, pays districts a bonus for each student placed in a 20-pupil class. But Los Angeles, like many other districts, didn't have enough classrooms available to take full advantage of the program.

``In the old program, if you didn't have the space, you didn't get the money,'' Prescott said.

The spending increases Wilson proposed are possible because the state's economy is proving to be stronger than expected. Unemployment is down. The state has 50,000 more people at work than economists forecast in January.

As a result, tax collections are up. The state now expects to take in $23.6 billion in income taxes next fiscal year, $900 million more than forecast in January.

At the same time, the state is seeing the number of people on welfare and receiving publicly funded medical care decline, saving the state money in the process.

Wilson's plan calls for using some of those savings to funnel $225 million back into county and city governments, which have seen their budgets slashed in favor of school funding in recent years.

The revised budget also calls for spending an additional $277.7 million on child care. The increased funding would make care more widely available to welfare recipients expected to take jobs under the state's welfare reform effort.

Wilson and Democrats have differed sharply over how to implement welfare reform. But the money freed up as the number of people on the dole shrinks appeared to smooth some over some of those differences.

``With proposed investments in child care and job training, the governor has answered many of our initial concerns about his approach to welfare reform,'' Lockyer said.

But points of contention remain, both on welfare spending and other issues, including money for a pay raise for state workers, who have seen no increases since 1995.

Wilson's budget doesn't set aside any money for raises, and he said he won't negotiate the issue in public.

But Lockyer called the pay raise a high priority for Senate Democrats.

``There is clearly enough money to provide for a long overdue pay raise for our state workers,'' he said.

Here are the highlights of Gov. Pete Wilson's revised $68.2 million budget proposal:

REVENUES: General Fund revenues in the 1997-98 budget year are expected to be $1.3 billion more than first projected in January; revenues in the current budget year are expected to add another $960 million to state coffers.

EDUCATION: Most of the new money goes to education, under Proposition 98, the voter-approved constitutional amendment giving education priority for any increases in state revenues. However, because of savings elsewhere in the budget, Wilson has about $1 billion to spread among noneducation programs.

CLASS-SIZE REDUCTION: This program, a favorite of politicians, parents and educators alike, would be fully funded at about $800 per pupil. Critics of Wilson's January budget draft were unhappy that the state was expecting school districts to pick a share of the costs.

TAXES: Personal income tax rates remain the same. Wilson continues to seek a 5 percent cut in the bank and corporation tax rate in each of the next two years; the tax cuts, which had been expected to face tough sledding in the Democrat-controlled Legislature, nevertheless passed an Assembly committee vote Monday.

WELFARE: Proposed spending increases only modestly - up $8.8 million, to $14.6 billion - but thanks to expected declines in caseloads and other savings, some programs will see considerably more growth. Wilson's plan earmarks $213 million to expand welfare-related child care programs.

CAPTION(S):

box

BOX: BUDGET AT A GLANCE (see text)