A New Pragmatism

By PRISCILLA PAINTON

Every Governor in America last year could have recited the Jim Florio Rule of political survival: never mount an honest attack against a state deficit.

The New Jersey Governor, who combined service cuts with the highest tax hike in the state's history, was all but tarred and feathered for his efforts. But now, with at least 29 states facing potential deficits, Florio's approach is beginning to seem almost prescient. In the past six weeks, Governors from California to Connecticut have been doing the unthinkable: they are trying to turn their fiscal disasters into political opportunities. First-term Governors, with all the bravura of newcomers, are the most ready to break the rules.

In Connecticut, where the idea of a state income tax has been practically banned from political discourse, incoming Governor Lowell Weicker Jr. has boldly called for one. Elected 15 months ago, Governor Douglas Wilder of Virginia has continued to defy assumptions about the social priorities of black Democrats by proposing that the state eliminate, among other things, the Department for Children, the Council on the Status of Women and the Council on Indians. In California, where health and highways are obsessions, Governor Pete Wilson, a Republican, is taxing granola bars and raising the cost of registering cars.

Some Governors have pledged never to raise taxes and are instead cutting back on government spending. Others have resorted to tax increases while vowing not to abandon government's role of social engineer. But what many of these executives have in common is that they are wrapping their plans in the mantle of moral courage. "Let us make history as well as headlines by reinventing the way state government functions in this cradle of democratic capitalism," said William F. Weld, the newly elected Republican Governor of Massachusetts, in his inaugural address. From the ornate chamber of Connecticut's General Assembly, Weicker, in office scarcely a month, told legislators: "Neither you nor I signed on to muck around for two to four years in the mistakes of the past."

The impetus for all this is that the nation's freshman Governors, like many of those returning to office after last fall's elections, are confronted with three problems all at once. The recession has cut deeply into revenues from state corporate and income taxes, while also leading to more cautious consumer spending that reduces the take from sales taxes. At the same time, the states are shouldering more of the burden of federal programs and facing stiff increases in the costs of Medicaid (18.4% in fiscal 1990 alone), bridge and highway maintenance, prison construction and new schoolrooms.

The sheer size of California puts its deficit, estimated to be as high as $10 billion, in a class by itself. To close the gap, Wilson has proposed cutting the state's grants to poor women and children 9%, eliminating programs for the homeless and freezing all cost-of-living increases for state employees. So far, he has not breached the state's decade-long resistance to new income or property taxes. In an effort to raise $1.7 billion, however, he has asked for higher vehicle-license fees, a 20% increase in state university and college tuition, and an extension of the 6% sales tax to previously exempt items like pretzels and magazines. "Between the budget and the drought, the situation is so bad in California, we may all become statesmen," says the Republican leader in the state senate, Ken Maddy.

In Massachusetts, Weld has defined statesmanship by presiding over the most sweeping reduction ever in the state government. With only four months left to close an $850 million budget gap for fiscal 1991, and facing a projected $1.8 billion shortfall next year, the Governor has calmly proposed putting everything from zoos to skating rinks into private hands, firing 6,200 of 63,000 state employees, forcing the state government's entire remaining work force to take 10 days of unpaid leave before July, shutting down 18 of 37 motor-vehicle offices, closing mental-health hospitals, abolishing the board of regents and making the elderly count their homes as assets in qualifying for Medicaid nursing-home care.

Like several of his colleagues around the nation, Weld is bringing ideological zeal to his rescue plan. As a follower of supply-side economics, he shuns any new taxes, will not go to Wall Street to do more borrowing and wants to give businesses some tax relief. "I can't imagine a sharper break with the past," Weld said last week. Except for the chancellor of the board of regents, who resigned in protest, most of Weld's constituents so far seem to believe they deserve Weld's bitter medicine now that Massachusetts has an unemployment rate of 8.6% and has swallowed three huge tax increases since 1988.

If Weld is brazen, then Weicker and Tennessee's Ned McWherter, who is also trying to institute a state income tax, may be courting political folly. The only time a state income tax was enacted in Connecticut, in 1971, it provoked such an outcry that it was repealed within six weeks. Tennesseans dislike the tax so much that the state courts once declared it unconstitutional. Both Governors hope to soften the blow of the new levies by lowering sales taxes. McWherter, a Democrat re-elected last fall, has also made the plan more palatable by promising to channel the new revenue toward education in a state that currently ranks near the bottom in per-pupil expenditure.

Weicker, who bolted from the Republican Party to run as an independent last year, is making no excuses. When he took over in January, he found the state running a $2.4 billion deficit, out of a $7.4 billion budget. "All the gimmicks, the bonding, the shenanigans -- there's none left, they've been used up," he says. Along with instituting the income tax, Weicker wants to lay off state employees and limit Medicaid nursing-home allowances. Like Weld, he has sworn not to seek credit from the financial markets, and is determined to jump-start the state economy by giving $300 million in tax breaks to corporations. In the meantime, Weicker sounds almost pleased about the outcry his budget has provoked. "That's a good sign. It shows that it is fair because everybody is getting hurt," he says.

While many of these fiscal disciplinarians are driven by necessity, some are also hoping their efforts will be rewarded with national attention. Under Virginia law, Wilder cannot run for re-election, so his budget slashing and firm rejection of any new taxes in dealing with the state's $2 billion deficit are also an attempt to define himself as a lean and mean Democrat before he runs for his party's presidential nomination in 1992. "He wants the national party to notice that his lips don't move," says Larry Sabato, a political scientist at the University of Virginia.

But as George Bush learned last year, there are political hazards in fiscal risk taking. A poll conducted last month by Mason-Dixon Opinion Research, for example, showed that Wilder's popularity is at 44%, a record low for postwar Virginia Governors. So for all their budgetary courage, many of the nation's brave new Governors may learn that the Jim Florio Rule cannot be ignored with impunity.

With reporting by Robert Ajemian/Boston, Bonnie Angelo/New York and Joseph J. Kane/Atlanta