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    "ocrText": "Ronald Reagan Presidential Library\nDigital Library Collections\nThis is a PDF of a folder from our textual\ncollections.\nCollection: Reagan, Ronald: Gubernatorial Papers,\n1966-74: Press Unit\nFolder Title: Press Conference Transcripts -\n07/07/1971, 09/07/1971, 10/05/1971, 10/20/1971\nBox: P03\nTo see more digitized collections visit:\nhttps://reaganlibrary.gov/archives/digital-library\nTo see all Ronald Reagan Presidential Library\ninventories visit:\nhttps://reaganlibrary.gov/document-collection\nContact a reference archivist at:\[email protected]\nCitation Guidelines: https://reaganlibrary.gov/citing\n7/7\nPRESS CO! ERENCE OF GOVERNOR RONALD\nAGAN\nHeld July 7, 1971\nReported by\nLinda S. Gage, CSR\n(This rough transcript of the Governor's press conference\nis furnished to the members of the Capitol press corps for their\nconvenience only. Because of the need to get it to the press as rapidly\nas possible after the conference, no corrections are made and there is\nno guarantee of absolute accuracy).\n(Whereupon Governor Reagan read Press Release #403)\nPAUL BECK: Governor, there is a typographical error on the\nfourth paragraph of the letter, \"Therefore, we are requesting that the\nBoard of Forestry review its action.\" It should be \"rescind.\"\nd\nWell, even so they say they are going to resubmit it. All\nthey are asking for is time to explain their plan, apparently. What are\nyou pleased about exactly? And you say here the following conversations,\nbut you only give us a letter. What was your end of the conversation\nwith them?\nA\nWell, you would have to ask Mr. Livermore that what it was.\nBut, the thing is where you say---the very fact that they are asking the\nBoard to rescind means that they will present this case and the Board\nthen would perhaps have a better understanding of what's involved and\nwill take whatever action.\nQ\nThey are not indicating they have any different plan or purpose\nto change their plans in any way?\nA\nWell, they have explained their position in the letter.\nQ\nGovernor, is the implication of your involvement in this that\nyour administration feels that the plan of the Simpson Timber Company\nwould have been destructive to the Redwoods? Were you opposed to it as it\nwas approved by the Forestry Board?\nA\nI think that the\nI am not equipped to say that. I know that\nthey believe that this was a plan that was in keeping with long-range\nforestry plans but there never has been anything done quite on that\nscale or over the period of years they had suggested and it seemed to\nburst so on the people that again, part of the reason for doing this is\nthe very fact that I myself have to say I don't quite understand all the\nramifications of it myself.\nQ\nDid you ask them to withdraw their permit or did Mr. Livermore\naskthem to do that?\n- 1 -\nA\nI don't kn\nwhether he made an outrig\nrequest for that or\nnot. He has been in conversations with them. They were most\ncooperative. They have a good record, that particular company, in their\nforestry practices, and they were cooperative enough to take the action\nthat was outlined in there.\nQ\nIt is difficult to understand just what the rule of your\nadministration was. Was it your intention to get the company to withdraw\nthis permit? Did you want to terminate this plan\nA\nWhy not take that up with Mr. Livermore as to exactly\nI am not going to put words in his mouth. He didn't relate to me word by\nword. He expressed his concern to them over the action\nthe way it\nhad been done\nthe decision that had been made and they immediately\noffered to cooperate in the manner they have outlined in their letter.\n2\nGovernor, in regard to the decision by the Forestry Board it's\nmy understanding that several years ago the legislature empowered you to\nappoint two members to that board from the private sector in other\nwords, just normal citizens and that you have not as yet appointed any\ncitizens from the public sector to that board, that the board is composed\nprimarily of forest-industry people. Do you plan to appoint\nconservationists or citizens to that board?\nA\nWell, I operate this thing on recommendations from the\nSecretary and, as you know, we are undergoing, or we are working on,\nsome reorganization plans in the whole field of resources, and again,\nthis is a subject I think you would get better answers from Mr. Livermore.\nQ\nWill Mr. Livermore take the rostrum when you're through here\ntoday then?\nA\nNo---well, he is perfectly willing to. Do you want to have\nhim answer some questions now?\nQ\nI mean after you are through with the press conference?\nA\nWhichever way you want to do it. All right.\nQ\nAnother related topic. Governor, a couple of weeks ago you\nput out a statement regarding Round Valley and expressed your concern\nwith preserving it. There are several bills that will be before the\nSenate Local Government Committee on Tuesday which would empower local\ngovernments to more closely regulate these kinds of rural subdivisions.\nI wonder if your administration plans to take a stand in support of that\nlegislation?\n- 2 -\nA\nWell, again you are asking me to comment on legislation which\nI normally do not do. We know that this is a problem. We have been\nstudying it ourselves. The mention about Round Valley was a concern\nthat had to do with the Water Control Board because the subdivision\nthat was envisioned\nwas going to call upon ground water and also\ngoing to utilize septic tanks in lieu of the sewer system and we had to\nknow whether that big a growth in that kind of area is going to affect\nthe ground water whether it's going to draw down ground water from\nthe present users, and whether there's a possibility of pollution.\nQ\nIt is my understanding that this legislation by Assemblyman\nMcCarthy seeks to do the kinds of things which you proposed in your\nstatement. I was just wondering whether you felt some leadership from\nyour office was necessary? The bill may run into some problems in\ncommittee.\nA\nWell, we're going to have to find out. I am going to have to\nsee that I don't think we have taken a position on that legislation\nas yet.\nQ\nDo you expect to take a position before it comes up in\ncommittee?\nA\nWell, I am just trying to think of the schedule we have. I\nam sure that we will. I just can't give you an answer on that because I\ndon't know what he's put in there yet.\nQ\nAnother subject. Do you have any reaction to the disclosure\nthat a number of relatives and friends of state officials are being\ngiven jobs under the Summer Jobs for Youth Program?\nA\nYes. Lt. Governor Reinecke has been heading up this program\nand he made it very plain that the first priority was to go to those\nwho had real need, that there was to be a priority given to those who are\ngoing to be using such summer work to finance their future education.\nI have no personal knowledge now of the situation that was brought out\nin the paper about one department and what the individual cases might\nbe, but I am sure that those who are running that program under the\nLt. Governor are going to look into this.\nQ\nAnother subject.\nA\nWell now, if I do that\nI'll come back to you from Ray. He\nhad first call on the next subject.\nQ\nGovernor, Democrats said yesterday they definitely plan to take\nyou to court on bluepencilling control language in the budget. Did you\nseek legal advice prior to doing so, and if so, to whom did you speak?\n- 3 -\nA\nWell, yes, had a ruling from the At. rney General on this,\nthat this was an interference with my constitutional right to line item\nveto, have a line item veto.\nQ\nDo you welcome the chance to take the matter to court?\nA\nMy batting record in court, so far, you approach this a little\nif\nbit like the last mile. Anytime /they choose to do that though, they can\ndo it. I felt that it was necessary to protect a constitutional right.\nQ\nMy question is on a similar subject, The manager of San Mateo\nCounty said yesterday he had hoped that property tax in his county would\ngo down, but now because of your budget he expects the property tax in\nSan Mateo County to go up 9 cents. What is your comment?\nA\nWell, I don't know just where he feels that he is going to have\nto raise the tax because of things that we did in our budget.\nQ\nHe was referring to welfare and Medi-Cal particularly.\nA\nWell, welfare and Medi-Cal---I think all of the counties should\nrecognize I still stand by the statement we are not ging to impose added\ncosts in the reforms we have sought for welfare. But I'd like to point\nout to the counties if welfare and Medi-Cal are not reformed, they are\ngoing to face a tax increase every year from here on out as well as a\nfederal increased cost and as well as a state increased cost. And the\nanswer to this is for them to recognize the need. They do recognize\nthe need for reform. They have tried to put together their own program.\nor\nSpeaker Moretti said yesterday he had met with you last week\nand had made some progress on Medi-Cal, tax and welfare reform, but not\non school finance. Do you feel that your meeting with him was fruitful,\nand if so, does this mean you are going to get your welfare package\nrevived.\nA\nI don't know. The meeting we had was one in which he had\nwritten me and I called him down and we discussed the necessity of getting\ntogether, and finally, on what we have been talking about for six months,\nattempting to work out in a bipartisan fashion these matters that must\nbe solved. And I pointed out to him that the most essential matters with\nregard to the budget are the welfare and Medi-Cal reforms, and the matter\nof tax reform, because I believe it is within the framework of tax reform\nthat we possibly have the best chance of getting withholding to make up\nfor the revenue shortage. But, the thing that has got to be understood\nby the people of California is that the budget as finally signed by me,\nis back where it was some time ago and before all of that time up there\nin the conference committee.\n- 4 -\nIt is a budget that IS some four hundred and thirty odd million dollars\nout of balance, unless the legislature is willing to adopt tax with-\nholding, welfare and Medi-Cal reform, and to go on talking about new\nexpenditures requiring new taxes--when the choice is clear cut before\nthem. They either give the people these reforms or they have got to\ncome up with four hundred and thirty million in new taxes now to balance\nthe present budget without squawking as they are about the new additions\nto the budget that I vetoed out.\nQ\nGovernor, if you should not get welfare reform that is\nsatisfactory this year from the legislature, would you be prepared to\ntry to get some kind of welfare reform on the ballot in 1972?\nA\nI haven't taken any steps. I am optimistic that we are going\nto get this because I think the choice is so clear cut. I think the\nlegislature should be moving and moving very swiftly on this, because\nthe plain truth of the matter is that California's deficit increases a\ntwo\nmillion/every day that goes by without taking these steps to provide the\nfinancing or the possibility fbalancing this present budget.\nQ\nIf you reach an impasse with the Democrats, and that seems to\nbe the trend these days, would you be prepared to take welfare reform\ndirectly to the people by some sort of ballot?\nA\nYou know, I don't think that I would have to. I said this\nabout tax reform. I think the evidence is already there, that the people,\nif once again this legislature breaks the pledge thatboth parties have\nbeen making every year that they are going to give property tax relief\nthey're going to give tax. reform, and they don't do it again, no matter\nhow flimsy their excuse, or how good their excuse, I think the people are\ngoing to put something on the ballot, and I could very well see wherein\nthe amount of publicity that has been given to the matter of welfare\nreform, the need for it, the polls that show that as high as 85 percent\nof the people in both parties want it, I could easily see that the same\nthing would happen.\nQ\nGovernor, when you spoke the other day when you signed the\nsaying\nbudget, I think you qualified your statement by\nthat taxes could\nbe avoided provided the legislature enacted total welfare and Medi-Cal\nreform?\nA\nYes.\nQ\nDo you still believe that total welfare and Medi-Cal reform\nwill be enacted this year, and if it isn't, doesn't that mean new taxes?\n- 5 -\nA\nIf it isn' then they have made the C. vice. The leadership\nthroughout\nin the legislature, who have blocked these things\n/\nthese several\nmonths, have that choice to make and the choice is theirs. They can have\na balanced budget without increased taxes or they can simply disregard\nthese means of balancing the budget and opt for new taxes, and there is\nno escaping that responsibility.\nQ\nGovernor, do you honestly believe that they will enact total\nreform though?\nA\nWell, I know what I'd do in their place. I would. I think\nthe people want it.\nQ\nWhat do you think they are going to do? What is your\nassessment?\nA\nI am going to be optimistic that in these few weeks to come\nthat they will see their responsibility and do these things because I\noverwhelmingly\nthink the sentiment of the people is\n/\naginst a tax increase.\nQ\nDoes total welfare and Medi-Cal reform translate to Reagan\nwelfare and Medi-Cal, period?\nA\nNo, and contrary to what they have said, I have always been\nwilling to hear anything that might improve this. So far the only things\nthey talk about in the line of a compromise have been simply to just not\ngive the welfare reforms that would bring this cost within reason. And\nall of this talk about the tax increases, as I've said before, if they do\nnot make these reforms now, they are going to be making a tax increase\nvirtually every year. The program is increasing in cost that fast.\nQ\nMr. Moretti said if there is not a tax increase this year\nthat the situation will be so bad by next year that it will take at least\na billion or billion and a half in election year when people would rather\nnot raise taxes.\nA\nWell, I don't understand what Mr. Moretti is saying there. I\ndon't understand whether he is saying that if they give us the legislation\nthat will balance the budget, that we will still need a tax increase next\nyear, or whether he is saying that we are not going to have the welfare\nreforms and withholding this year, then I can top him. I can trump his\nace. Because I'll tell him he's not only going to need a tax increase\nnext year, he is going to need one this year because the budget is out\nof balance by four hundred and roughly thirty-two million dollars.\n2\nGovernor, are you still opposed to the family assistance plan\nas much as you were?\n- 6 -\nA\nIn principle, although I have not had the complete briefing\nthat we are going to have on HR 1. We have some briefings scheduled from\nofficials at HEW in the near future on that. But in principle, yes, I am.\nthe\nIn principle I think / feature that represents a guaranteed annual\nincome is a very dangerous principle, and it is going to enlarge the\nwelfare burden, not reduce it.\nQ\nGovernor, last year you spent a lot of time talking about tax\nreform. This year you have spent pretty much the same time talking about\nwelfare reform instead. Why the change?\nA\nWell, the welfare reform actually is an emergency situation.\nThis is the\nwith all of our economies that have put us in a very\nunique position among all the states in the present economic troubles\nnow, all of those have been negated by the runaway cost that we could not\ncontrol of welfare and Medi-Cal. The other factor about tax reform is,\nyou\nthat no matter what they try to tell / from upstairs I told in the firs\nfew weeks we were here told the Democratic leadership that this was a\ntop priority, that we could not go through another session without giving\nthe people tax reform. But, that since last year on the basis of one\nnegative vote that we couldn't switch to \"aye\" in the Senate, 78 percent\nof the legislature agreed upon a tax reform program, that is 78 percent\nof both houses. But, rather than go through that exercise again, with\nthe change in the leadership and the change in the majority of the\nleadership, I was willing to meet with them and see if we could not work\nout an acceptable tax reform program that would then be acceptable to\nboth sides and be passed without the kind of struggle we had last year.\nThey apparently, in fact, they did accept that enthusiastically, and the\nnext step was they submitted their own tax reform program. I continued\nto give in to Senators who were attempting on the Senate side to do what\nI had asked, to work out a bipartisan program, until that Senate group,\nunable to reconcile some differences, told me to go ahead and introduce\nour own, and then that is why, belatedly, we introduced our own plan to\nat least have one on the floor for whatever amending back and forth in\nthe legislative process could take place. But, this has never been\nanything but a top priority. I just recognized a fact of life. They had\na majority and they had the leadership of the legislature and frankly,\nthey did not, in spite of their assurances, they did not join us, or\njoin me, in an effort to work out a bipartisan program.\n- 7 -\na\nYou mean t. reason you are not talkin as much about tax\nreform this year is because you didn't get any place with it last year?\nfelt I\nA\nNo, I told you --I/wanted to approach this from a bipartisan\nstandpoint from the beginning. They agreed and then chose a different\ncourse. Now, I have never retreated from the fact this is a number one\npriority, and I am talking about it. I have talked about it in my most\nrecent speech in the Report to the People. And I have said before, I\nthink that within the framework of a tax reform can come now the with-\nholding feature that can make us catch up with the latest blow and that\nwas the declining revenues.\nQ\nGovernor, I want to be sure I understood your answer to an\nearlier question. Do you reject the thesis of the county supervisors\nthat as things stand now, the state is not forcing a higher property tax?\nA\nYes, I have to point out and they should understand this. The\nlegislature, in addition to sending down a vastly out-of-balance budget\nwith several hundred million dollars increased spending, attempted a\nsort of, what I have to interpret was a partisan, political trick. They\nreduced the budget for welfare down to the figure that we ourselves had\nsaid could be reached or achieved with welfare reform. They did not send\ndown welfare reform. They put language in the budget which what it\nreally buried it in the budget, said was, we know that this amount of\nmoney is not enough. We know that we will run out of money before the\nend of the year and then the governor will have to come to us and ask\nfor a tax increase to finance welfare. And I just thought that we ought\nto get their attention. They've submitted that figure. I could not\nincrease it. I could only plead again for welfare reform. So I simply\nerased the language to say all right, your figure is the figure we have\nfor welfare. Now give us welfare reform. But it is one hundred and eight\nmillion dollars less than will be needed without welfare reform.\nQ\nIf the legislature does not send you welfare reform and instead\nsends you a tax increase, what will you do?\nA\nThey will have made a choice over which I don't have very much\ncontrol. If they have made that choice that they are going to refuse to\nbalance the budget in the ways they can balance it and they choose instead\nto increase the taxes on the people of California, that is the choice they\nhave the power to make. I think it would be a choice that would lie\npractically solely with the leadership of the majority party.\n0\nThen you would sign that into law?\n- 8 -\nA\nWhat?\n&\nThen you would sign that into law?\nA\nIf all else fails I would have to. They submitted a budget\nthat I vetoed. I could have done one more thing. I could have vetoed\nthe other four hundred and thirty-two million dollars out of the budget\nwithout it would have been an irresponsible act because I know that the\nbudget is lean and I know that the budget will provide essential services.\nThere is no place to find the other four hundred and thirty-two million\nby vetoing out of the budget and have a workable budget that would\nmeet the needs of the people of California.\nQ\nGovernor, there is some conversation among the Democrat leaders\nof also sending you again in separate appropriation bills some of the\nitems, particularly school aid, which would require now only 41 votes in\nthe Assembly, just a simple majority. Along with a revenue measure to\nsupport them, would you view that then as in the same way as the\nlegislature having made a choice or would you perhaps veto those\nappropriations again?\nA\nWell, again I just don't see if they are going to refuse to\ngive us the things that would balance the budget, then as I say, they\nhave opted for a tax increase to balance this present lean budget. I\njust don't see how I could possibly accept new spending on top of that\ntax increase.\nQ\nGovernor, how can they balance four hundred and thirty-two\nmillion? Welfare reform won't do it alone. Welfare reform plus with-\nholding? Is that what you\nA\nThe three big things Medi-Cal reform, welfare reform, and\nwithholding.\nor\nGovernor, are you making any provision for restoring one\nhundred million dollars to the schools which you took out of the budget ?\nA\nNo.\nQ\nIn the bill right now?\nA\nNo.\n0\nDidn't the Department of Finance approve that hundred million\ndollars going in the budget?\nVERNE ORR:\nNo, what\nQ\nFor California\n- 9 -\nA\nWhat we ke\nin last year was, last ye\nwe put in an $88\nmillion item for the schools which was a cost-of-living increase and was\nput in on a one-year basis. When we originally submitted this budget,\nwe ourselves decided to continue that eighty-eight million dollar\nappropriation and to put it in this year's budget even though it was\nonly supposed to be a one-time item last year.\n2\nIf withholding increases tax revenue by one hundred and seventy\nmillion, why isn't that a tax increase?\nA\nWell, I myself have always called it that. It is, and I've\nbeen very careful in talking about it now to say that it\nprovides\nthe revenue without increasing the rate of taxation. But, it is not a\ntotal amount that is a tax increase on the people. It begins collecting\nin advance reflecting the improved earnings of people as the economy\nexpands. It begins catching an advance from newcomers in the state who\ncome in and get jobs, and first job holders. Some of it is from people\nwho are avoiding their taxes. That is the smallest percentage. And the\nother percentage, as I have explained so often, is literally, you would\nhave to call it borrowed money. It is money that we have and temporarily\nused that people have overpaid by virtue of withholding and which we have\nto give back, but by the time we give it back, that much more has come\nin for our use.\nQ\nGovernor, say if the recession should not completely recover\nby next year and revenues continue to lag and there was another revenue\ngap next year, would you be willing to consider a tax increase then to\ncover that?\nA\nI think you have to when we start putting the budget together\non the basis of the estimates of revenues, of course, you have to face\nthe problems that may come up depending on the economy. There are\nindications that we can have some reason to be a little more optimistic\non that. How fast the comeback will be, I don't know, but the\nindications of bottoming out are there. We have estimated a decline in\nrevenues over the original estimate last January. The estimate now is\nthat they will be down one hundred and fifty million dollars the next\nyear.\nQ\nGovernor, with respect to welfare, the Democrats claim that in\nin order to give you the kind of reform that you have asked for, it would\nbe necessary either to cut additional services to people who are truly\nneedy or make the county pay for the difference. Now, isn't the dispute\nreally over how many people are truly needy and how much money for them\nrather than over whether there's a tax increase?\n-10-\nA\nNo. I do.. t think SO. I think that the almost year-long study\nthat our people went through and the task force on this revealed that\nfirst of all the eligibility requirements need tightening and I think\nthat the fact that for three months in a row now we have had a decline\nin the caseload indicates that just the talk alone about this has served\nto improve the interpretation of eligibility requirements. Our program\nalso calls for reducing---perhaps putting a ceiling on the earnings that\na person can have and still be eligible, and this is a large percentage\nof the people, and in turn increasing the grants as we have already done,\nto those who are totally destitute, totally needy. But this, a better\nmeans of eligibility requirement, a better means of apprehending those\nwho are illegally on welfare, this, plus an increased effort to get\nfathers, I think you will notice that last week or the week before (I\nlose track of time up here) that Los Angeles County made its sweeping\narrest of two hundred and sixty-six working fathers who were not\ncontributing to the support of their children or who were on welfare.\nThat was the first step in a continuing process. There are two hundred\nand thirty thousand some odd fathers of that kind in California. Now,\nthat alone, if you could get, as I've said before, if you could get\nhalf of those fathers to pay seventy-five dollars a month, it means a\nhundred million dollars in the cost of welfare.\nQ\nOnce again, why can't you accomplish this admdnistratively?\nWhy do you need the legislature at all?\nA\nOh, we are going forward with administrative reforms. There\nare reforms that we can and are implementing. But, there are other\nreforms that require statutes. Some of the adverse court decisions that\nwe have suffered in welfare have not been on the basis of what we tried\nto do, but on the basis of what we tried to do had to be supported by\nstatute, could not be done administratively.\n0\nThe four hundred and thirty million dollars that the budget is\nout of balance can you save by administrative welfare reforms?\nA\nNone. That is counted in. We are counting out administrative\nreform. What we're counting in that 432 million is 108 million that's\ndependent on legislation---about 149 million for Medi-Cal. The balance,\nthen, comes over in the shortage of revenues.\nQ\nWell, are the county supervisors being less than truthful when\nthey say they are going to get stuck with some money even with the\nadministrative changes?\n- 11 -\nA\nThey are e. her being less than truthi. or they have been\nburned so many years that they can't believe that anybody means it up\nhere when they say they are trying to take the burden off their backs.\nIt is true that for years, state government has had a tendency to solve\nsome of its problems by mandating things on the counties and leaving\nthe counties to pay for it. We have tried to follow a different course.\nto\nI could call your attention/the fact that in the mental health program,\nthe state, in spite of the law that said we were to put up 75 percent for\nlocal mental health centers, we were, in many instances, most of them\nonly furnishing 50 percent. We have increased that to 90-10. Now we\nput up 90 per cent. One item that we left in the budget in augmentation\nthis time because we found that even in doing that, there had been some\nmis-estimate of about eightmillion dollars that the counties were out\nand we left that in the budget to reimburse them. Now, we have given\nthem every assurance we can. We amended our own program to meet their\nneeds. More than half of the county supervisors in the state have\nanalyzed those and have endorsed our plan and say that they are now\nconfident that we will not cause them any cost. I have gone beyond it\nand said, if by some million to one chance we are wrong in our estimates,\nwe will not impose the cost of that mistake on the counties. We have\nsworn to them, pledged to them, that they will not have an added cost,\nand some of them, as I say, whether it's just that they have been burned\nbefore and they don't want to take the word, or whether some of them\njust don't want to cooperate, I don't know. But, they have to answer\nthat, and frankly, I think some of them are being very stupid.\nQ\nGovernor, on the same subject.\nA\nGo ahead\nQ\nWhat happens to the counties, however, under the present\ncircumstances? We have a restricted amount of money in the budget and\nno real prospect of the type of welfare reform you are talking about.\nSupposing the session ends with that situation with the status quo on\nwelfare and on the budget. Don't the counties then get an extra burden\nhrown on them if the state does not have the money to pay the costs?\nA\nWell, they are envisioning the state running out of money and\nthen making no effort to make this up. They are having then to put\npeople on their own county relief. Again, I don't think that is going\nto happen.\n- 12 -\nQ\nAnother subject. A few questions ago you were talking about\nthe advantages of withholding. I believe at that time you mentioned\nthat one advantage is that you could get at those people who are\ncurrently avoiding their taxes. Would you mention more about that?\nA\nWell, yes, we have, in all the talk that we have had about\nwithholding and back from the time when I smashed the concrete about\nmy feet. There has been a great deal of misinformation given to the\npeople of California that all of the increased revenue you would get\nfrom withholding is due to catching that much from cheaters. Well, if\nwe had that big a loss to cheaters, there would long since have been a\nreorganization of our tax collecting facilities. The actual loss has\nbeen estimated for us by the people that have been collecting those taxes\nfor years at around twenty million dollars. We have a very high rate\nof efficiency in collecting taxes.\nO\nCheaters is your term, but what does it really amount to?\nWhat are these cheaters doing?\nA\nThese are people who come in and work for a while in the state,\nand then leave the state. Or, these are people who have come in and\nthey move around and they earn money, and they just don't report an\nincome tax. And as I say, we have had a very high rate of collection.\nWe go after people that leave the state, but there comes a breaking point\nin that in which to try for one hundred percent collection can get as\ncostly as the money you are trying to collect. But, it's a good record,\nand so that is a part of the money that you would now get.\nQ\nWhen you use the word cheaters, are you strictly talking about\nthose who are violating laws?\nA\nThat's right cheaters the people who are actually violating\nthe law, who are not filing a tax return, who leave the state with an\nunpaid income tax.\nQ\nGovernor, do you have any fear that the group that filed recall\npapers for your recall do you have any fear that they will succeed\nthis 18-year-old voter group?\nA\nYou know, if you had asked me that question the other night\nwhen we were sitting here half the night working on the budget, I would\nhave wished them well.\n(Laughter)\n- 13 -\nA\nThat is up D the people of California\nQ\nGovernor, do you see the possibility of the legislature\noverriding some of the vetoes that you made?\nA\nI don't anticipate that. I would be surprised, because again,\nanyone who votes to override a veto is voting for a tax increase; it is\nas simple as that. There's no way to fuzz it up or no way to hide it.\nAny vote for any spending of any kind in addition to this budget or any\nrefusal to vote for those other improvements that I've mentioned is\nvoting for a tax increase on the people of California.\nSQUIRE:\nAny more questions?\nQ\nHow do you intend to placate the restless highway patrolmen,\nstate employees, and faculty members who are unhappy because you vetoed\ntheir pay raises?\nA\nI know they are unhappy, but at the same time I have never\nlost faith in the quality of the people---the kind of people we have\nworking for the state. I think, sure, they are unhappy. I don't blame\nthem. If we had been able to reform some of the things like welfare a\nlong time ago, it might not be necessary to do what we have had to do in\nthis economic crunch that we are in. But, I just have faith that the\nvast majority of them are going to perform their tasks, and they know\nthat will be fair.\nQ\nOne more back there, Governor.\na\nGovernor, would you be good enough to respond very quickly\nagain to the proposal yesterday, or the charge yesterday, that Senator\nMills made that he is going to take you to court, and are you looking\nforward to going to court?\nA\nWell, no one ever looks forward to going into court. If they\nso,\nchoose to do why then there will be a court test. We are confident of\nour legal position.\nSQUIRE:\nThank you, Governor.\n- 14 -\nPRESS CONFERENCE OF GOVERNOR RONALD REAGAN\nHELD SEPTEMBER 7, 1971\nReported by\nBeverly Toms, CSR\n(This rough transcript of the Governor's press conference\nis furnished to the members of the Capitol press corps for their\nconvenience only. Because of the need to get it to the press as\nrapidly as possible after thecconference, no corrections are made\nand there is no guaranty of absolute accuracy.)\no0o\n(Whereupon Governor Reagan read Rèlease No. 514)\n(budget)\nQ\nGovernor, it now appears that the revenue gap is three\nhundred million and you said the other day that withholding would\ntake two hundred million and then you go for another hundred to\nhundred twenty-five million. Your Finance Director has mentioned\nsin taxes on liquor and racing and so forth. Is that your program,\nto meet that extra hundred million?\nA\nNo, and I'll tell -- in the meantime let me just say that\nwe have used that figure based on the parts of the welfare reform and\nour estimates that we didn't get. I have asked, however, that we\ncontinue to look -- that we continue to evaluate the welfare reforms\nbecause the case load continues to decline, and to see if this is\nabsolutely necessary. I don't want to ask for a dollar more in\ntaxes than we have to have. And so I have asked that we see -- was\nthat roundhouse figure that we used correct or is it possible that\nwe can reduce that on -- on better estimates and also on re-estimating\npossible revenues.\nQ\nGovernor, are you saying it may not be necessary to increase\ntaxes then other than by having withholding?\nA\nI'm saying that thewithholding, of course, is necessary for\nthe revenue gap that we had when the declining revenues we discovered\nwas.in about that amount. As to the additional amount I'm not\nhard and fast on that figure. And whether it could be eliminated\nor not, I don't know. I'm inclined to believe it can. But I am also...\nI want tokknow for sure what is the best estimate we can make and\nit is possible with the continuing decline in welfare case loads,\nit is possible that we might not require as much as I -- as I have\nbeen using.\n-1-\n0\nGovernor, wasn't sure of one word, n't or can?\nA\nWhat?\n0\nYou are not inclined to believe that it can?\nA\nBe totally eliminated, the need. And then, of course,\nI think the amount will determine -- in answer to your question,\nthe amount will determine what's the most practical way of getting\nthe revenue if we need additional revenue.\n0\nDo you think that should be done by the Legislature in\nthis session or is there time for them to wait until January after\nevaluation.\nA\nOh, no, I think it should be done -- should be done right\nnow.\n0\nGovernor, what about tax reform? And what does the Supreme\nCourt ruling on school finance do to it? Does it jeopardize it?\nA\nWell, I don't think SO. I believe -- I think we have to\nhave tax reform. I want to go forward with tax reform as much as\nanyone else. The -- the Supreme Court ruling actually only said\nthat there will now -- that the legal case will proceed. I haven't\nhad time -- none of us have, to study that completely. There is a\ngreat controversy about what itmay say. But it would seem to me that\neven if you would envision the Supreme Court ruling standing, the tax\nreform would actually be a step in that direction. I'm\ninclined\nto go along with those that believe that we should deal with the\nSupreme Court ruling on that reform in the sessinn that begins in\nJanuary. And to take reforms now that reduce reliance on the income\ntax would not be counter -- would be in the direction of that --\nPAUL BECK: Property tax.\nGOVERNOR REAGAN: -- that ruling.\nPAUL BECK: Pardon me, Governor, the property -- in\nreliance on the property tax.\nGOVERNOR REAGAN: What did I say?\nPAUL BECK: Income.\nGOVERNOR REAGAN: Oh, reliance on property tax.\na\nGovernor, in other words, as I understand it, what you are\nc\nsaying is that you think any sort of massive billion dollar tax reform\nprogram is best not handled in this particular session now, when it\nwould be better off --\nA\nI haven't said anything about the amount. I'm saying that\nI think tax reform, in the sense of giving us a more equitable tax\n-2-\nstructure by raising other taxes to -- and using that revenue to\nreduce the property tax, the homeowner's tax, and -- to compensate\nthe renter likewise, we should go forward with this. Now, that\nthe amount or the size of that would be remains to be worked out.\nBut I don't think that should wait on the Supreme Court decision.\nButlIddon't think the matter of implementing the Supreme Court\ndecision should go forward at this time.\n8\nYou are saying the property tax relief, though, should come\nin this session or Intthe one beginning in January?\nA\nNo, in this session.\nQ\nThis session. Relative to withholding, Governor, there\nseems to be some kind of feeling in the Legislature that it should\nbe tied to the general tax reform. Are you asking by virtue of the\nstatement you made this morning that it be a separate item that be\npassed in the meantime?\nA\nIt seems to me that details as to how the revenue would be\nused of withholding could be worked out in connection with tax\nreform. But the issue of adopting withholding should go forward --\nshould be accepted or passed now so that the business firms in the\nstat e and the industries who are going to have to regear for with-\nholding, they need advance time, particularly in those that are\ncomputerized, to do this. And we passed the date in the last\nsession or in this present session by which we could have implemented\nthis in July, solve many ofour cash flow problems, save millions\nof dollars in interest eharges on tax anticipation notes had they\ndone it, and all that I'm asking is that this Legislature adopt\nthe withholding.\nQ\nWould you accept a withholding bill with the spending part\nof it tied to an upcoming tax reform?\nA\nWell, when I say as to the settling the details, as to the\ndisposition and the use -- for example, the windfall, that could\nthen be worked out in connection with tax reform, yes.\nQ\nBut you are saying withholding then is an issue that is\nseperable from other tax issues?\nA\nYes.\nQ\nAnd it can be passed independently?\nA\nYes, we know the need for the increased revenue that would\nresult to meet the deficit. We -- everyone seems to be in favor of\n-3-\nwithholding and W\nknow we need It for cash\n:\nW.\nAnd as I say,\nwe have had to add ten million dollars, at least, to our cost of\ngovernment right now by using tax anticipation notes in solving the\ncash flow problems. That's ten million dollars that we could have\nsaved had we adopted withholding earlier.\nQ\nGovernor, I'm not clear where you stand on that estimate of\na hundred million on top of withholding that you used last week.\nA\nWell, as I say, that figure was based on all of our estimates\nconcerning the welfare and Medi-Cal reforms and it was a rough estimate\nbased on the roughly 70 per cent of the reforms that we obtained\nin the compromise. I have asked, however, before we go to the\nbusiness of imposing on the people -4 or the money to pay for that,\nthat we come up with a better estimate, not just a -- a roundhouse\nguess, but that we actually -- accurate as we will be or as accurate\nas we can be as to what the need is. Then ask for that amount of\nof money and I'm hopeful that maybe it will be less ghan the\nhundred million that I've been talking about.\nQ\nGovernor, how do you think California should finance its\npublic schools now that the property tax is ruled unconstitutional?\nA\nWell, there is one part of that that I'm in agreement with\nand for two years have been trying to get in our own tax reform\nproposals and that is an equalization formula whereby we can\neliminate some of the differences between the so-called poor and\nthe rich districts. Incidentally, I think we could all together,\nall of us, be a little helpful to the people in straightening one\nthing out. We use rich and poor in talking about school districts\nand the impression that's been given is that we once again are\ntalking theuproblem of individual poverty, that children, lower\nincome families, are automatically in a lower financed school\nsystem. This is not true. When we use rich and poor in the\nterm of school districts, we are talking about some school districts\nwhere the individuals may come from very well to do and upper middle\nclass families but the district does not have a tax base that\nmakes it a rich school district. For ecample, we have one rural\ndistrict in the state here where they have very few students and\nnot from affluent families at all, but I guess they have more\ntax base than any other district in California because of large\nutility properties in the district. So I think that -- I think in\ndiscussing this and tho emotionalism that surrounds so many issues,\nwe would serve the people very well if we made it plain that we are\ntalking about a variance in the tax base of a district and not the\nwealth or poverty of the individual families of students.\nQ\nGovernor, a new subject.\n8\nNo, one more.\nGovernor, in -- to repeat Mr. Skelton's\nquestion again, should this court decision be upheld, how -- what\nwould you substitute for a local property tax?\nA\nWell, you are going to have to turn to the entire tax\nstructure to see if there are any new areas, and then you are -- I\nwould -- wehave a fairly well-balanced tax structure in California\nwith the exception of property tax.\nThere\naren't\nvery\nmany\nareas\nthat we haven't explored for revenues. We have taxed just about\neverything. So I would think that it would consist of an increase\nin existing taxes. And it would certainly be a sizable increase.\no\nGovernor, do you anticipate any difficulties that you must\novercome within the next two weeks in order to get a withholding\nbill to you, on the time you require?\nA\nWell --\nQ\nAnd if so, what might they be?\nA\nWell, I have -- I've already been informed by some that\nwith regard to tax reform that they have thought because the state\nneeds withholding now to meet its cash flow problems, and to pay\nfor the deficit, that somehow this makes 1t more my responsibility\nto get it than someone else's. And therefore, they would like to\nuse withholding as a -- as a purchase price. They'd like to use it\nto get some things that they might want in the matter of tax reform.\nI don't see it that way. I think that anyone who's been elected\nto office in California, whether in the Legislature or the Executive\nbranch, has a responsibility for the fiscal stability of the state.\nAnd that makes withholding absolutely essential, and for someone to\nhold up withholding -- what it means in cost to the taxpayers and\nto the state just because they think they could get me desperate\nenough to give in on some point I might not otherwise favor, that's\nbeing pretty irresponsible and I just can't believe that anyone in\nthe Legislature is going to be that irresponsible.\n0\nGovernor, who arethese people you named as \"they\"?\nWho are these people? You say \"they.\"\nA\nWhat?\n8\nYou say \"they,\" who do you mean?\nA\nThere's been controversy throughout the years, you know,\n-5-\nover the matter of tax reform, the form it should take. And over\nthe matter, also, f whether we should have additional spending\nfunded by additional taxes, and some of those who, -I'm quite sure,\nare sincere intheir belief that we should take that route, some\nof them in conversations have made it plain that because the state\nreeds withholding they would like to use that and make me perhaps\naccede to some thing I otherwise would oppose.\nQ\nWho are \"they\"?\nA\nWhat?\nQ\nWho are \"they\"?\nWho are the ones?\nA\nYou remember what I told you a long time ago about naming\nnames on that, never anger the mother alligator till you crossed\nover the river.\nQ\nGovernor, would you expect to meet with legislative leaders\non this specific subject in the next --\nA\nI hope to, very much, yes. I think the success we had\nwith welfare reform would indicate that perhaps we ought to follow\nthe same tactic.\nQ\nHave you invited them, sir, or --\nA\nWell, we all just got back here today. But I'm going to\nbe seeing some legislative leaders. I don't know whether it is\nscheduled for today , but very soon, to get at these matters.\nQ\nGovernor, a gentlemen tried stop you in the hall to sign\na petition to roll back elected officials' salaries. How do you\nfeel about that?\nA\nWell, I don't think that's exactly the way for me to settle\nthe issue, to sign a petition of that kind. I -- this is probably\none of the hardest subjects and the most difficult, certainly\nthere is more emotion surrounding the 1dea of public employees'\nsalaries than any other. Lately there has been a great deal of\ndiscussion, which I think has been unfair, particularly with regard\nto the Legislature's salaries in referring to them as salary\nincreases and ignores the fact that a couple of years ago by a vote\nof the people we reorganized or restructured California government\nand went from a part-time legislature with virtually token salary\nto a full-time legislature. And when that was voted the salary\nscale was not voted for the individuals holding office, it was voted\nto go into effect with -- following the next election. In other\nwords, everyone had to run for election for those offices on that\nnew basis. And I know I have not proposed -- while I proposed no\n-6-\ntax increase -- no salary increase, I have not proposed a salary\ncut for any of our state employees and I just -- I don't know that\nthat's the way to go at this.\n8\nGovernor, the San Francisco School District opens next week\nand they are going to be opening under, as you know, a court-imposed\nbusing plan. Thousands of parents have said they are going to keep\ntheir children home, they are going to boycott the school and\nothers categorize it as an explosive situation. I'm wondering\nwhether your office planned, or you personally have proposed to\nstep into this congroversy, what your feelings are on that busing\nplan.\nA\nYou know what -- I feel very strongly about local control\nand local school districts having autonomy. I have resisted efforts\nof the state to step in and dictate, so I would still hope that\nthis is a matter that can be settled in local distritts by the\npeople of those districts. I have made no secret of the fact that\nI don't believe that massive busing programs are the answer for the\nproblem they are trying to solve. I'd be in favor of busing if\nit improves educational quality for all students. I just -- I\njust personally think that -- and where it has been tried it\napparently has caused more trouble, more 111 feeling than can be\nmatched by any solution to the problem.\n0\nGovernor, do you think, though, that in this case pasents\nwho are under court orders to bus children for purposes of inte-\ngration are justified in not going along with that court order and\nwithholding their children from school?\nA\nWell, of course then they run afoul of the law unless they\nare planning on sending their children to some other school.\nNow, I can't condone breaking the law. Never have.\n8\nGovernor, to get back to the Supreme Court decision for a\nmoment, some Republicanllegislators have criticized the ruling\nbecause they say it threatens local control if the statewide\nproperty tax, for instance, is -- is imposed. Last tear when\nyou proposed a statewide property tax in your program, were you\nconvinced that this did not endanger local control of schools?\nA\nNo, because this tax was -- Would have been collected\nlocally and then redistributed on an equalized basis. This is one\nof the factors that makes me very concerned as little as we have\nbeen able to go into -- in the court decision. I don't know whether\nthis would end, _f we accept the idea that, as some people have\nsaid, have interpreted this ruling to mean, that there was a ceiling\nand that all school districts must be totally equitable and no school\ndistrict can on its own finance and go to any higher quality oreadd\nanything in their district, I wonder if this -- how this can stop\nat a state line. Wouldn't this also then follow that we would move\nup to the next echelon and that a state could say we must come up\nto the level of other states and pretty soon you've got a national\nschool system. I'd be opposed to a state school system; I'd be\nopposed to a national school system.\na\nBut a statewide property tax for equalization purposes,\ndo you feel differently about it now than you did a year ago?\nA\nNo, no, I think that a portion of the tax we -- we propose\nthat.\nWe could find another source of revenue, Y'd be amenable\nto that, but I see no alternative than to the state being the agency\nfor the redistribution to make sure that it is given back equally.\nQ\nHave you received any word, either encouraging or discouraging\non theappeal in the federal courts by California of the Serrano case?\nHave any other states contacted you with regard to the federal appeal?\nA\nNot to my knowledge as yet. It's all been so recent, I do\nknow that there were a couple of Supreme Court decisions in earlier\ncases involving Illinois and Virginia, which -- not so much in a\npolicy ruling, but by the thing they ruled against would have\nindicated that the U. S. Supreme Court took the contrary position.\nQ\nNew subject, Governor.\nA\nYes.\nQ\nHave you seen any signs that the President's wage-price freeze\nhas helped the California economy?\nA\nOh, I don't know that anything has happened in our economy\nthat I could pin down to the wage-price freeze. I think that the\nwhole program -- that psychologically has been of great value. I\nthink that there is public support for this idea and there is a\nfeeling now -- well the stock market reflected that, -- a feeling\nthat we have a chance of curbing inflation which was running away\nwith us.\n8\nHow do you view the argument of the labor leaders that\nthis program has rewarded the rich and punished the poor?\nA\nWell, I think that's kind of cheap demagoguery on the part\nof some of them because to say that the tax or the business invest-\nment tax credit that will allow plants to improve their -- their\n-8-\nplants, their productive facilities, their machinery in order to\ncreate more jobs, to call that a tax benefit for the rich just\ndoesn't make sense at all. But then for a long time I have felt\nthat a great many labor leaders, not all bytany manner or means,\nno blanket indictment, but a great many of them are out of step with\nthe rank and file membership of the unions and if I have to chose\nbetween I'll put my faith in the rank and membership.\n0\nDo you think, however, there should be profit controls,\nGovernor? At the same time of the wage and price controls.\nA\nFrankly, I don't think at the moment they are necessary.\nI think that the -- you have a price control, you have a wage\ncontrol also, I don't see the need -- I think this again is a\nkind of demogogic thing of trying to find -- is nitpicking.\nYou control the price, you know how much it cost to make the\nproduct, there isn't any -- any possibility of a great runaway\nwindfall for any industry in this situation. And I'm sure if\nthere was, then you would solve that by the matter of probably an\nexcess profits tax, something of that kind.\n0\nGovernor, I have a question on another subject.\nA\nAll right.\nQ\nYou have purportedly told the Young Americans for Freedom\nthat they should -- excuse me, they should wait and see what the\neffects of President Nixon's trip to China might be before they\ndecide whether to withhold.their_ support for him. Are you waiting\nto see what the effects of that trip will be? Are you assessing\nthe situation or do you support him wholeheartedly?\nA\nWell, I dirin't exactly use the term about waiting at all,\nbut I said that for someone today to immediately jump to the\nconclusion that because the leader of this nation has said he is\nwilling to go to and talk to the leaders of a potential enemy force\nor a nation that has announced itself as an enemy, that this auto-\nmatically means that we are going to appease or give something away\nthat is in our best interest. It is hardly fair in the case of\nthis particular President and his record and very bluntly I also said\nthat I could understand where there would be concern if some other\nindividuals were president and had made this decision, because\nthere is a record of this kind of appeasement among other individuals.\nBut I said that this President has shown a firmness, he has announced\nthat we are not going to make atchoice between Red China and our old\n-9-\nally Chiang Kai ( K , and I also reminded e young people that\nin Moscow with television and the press covering it, and faced\nwith Kruschev who blustered some boasts -- boasts about what the\nSoviet Union might do to the United States, the Vice President\nNixon at that time told Mr. Kruschev publicly that if he -- they\ntried it, his exact words were, \"We will kick hell out of you,\" and\nI think that someone is entitled to the benefit of the doubt.\nD\nGovernor, new subject. It is reported out of San Diego\nthis morning, Governor, that the man that you've appointed as the\nhead of the Department of Motor Vehicles is purportedly under\ninvestigation by the County Grand Jury in connection with something\nhe may or may not have done before you appointed him as a member\nof the County Supervisors. Is your administration planning\nany kind of interim action, such as a temporary suspension pending\nthe outcome of the Grand Jury investigation?\nA\nNo, he met our requirements certainly with regard to any\nconflict of interest,, and we will be watching that. We know no\nmore than you know other than this investigation that's been\nannounced of three men -- and this is for something when they were\nSupervisors, supposedly, of San Diego County and so we will just wait\nand see.\nSQUIRE: Any more questions?\n8\nGovernor, State Senator Gordon Cologne has asked that you\nappoint him to the bench either in Inyo Superior Court or to the\nDistrict Court of Appeal. Has any decision been made on his\nrequest?\nMR. MEESE: No comment on judicial appointments before they\nare made, I believe, Governor.\nA\nNo, we don't, because as you know we have a system in which\nwe are bound and go by the committee -- the various committees\nthat we have set up. In other words, the judicial merit system\nof appointmant that we tried to get included in our state Constitution\nand failed, I voluntarily go by this. So there is no comment on\nmy part.\nSQUIRE: Thank you, Governor.\no0o\n-10-\n10/5\nà\nPRESS CONFERENCE OF BOVERNOR RONALD REAGAN\nHELD OCTOBER 5, 1971\nReporter by\nBeverly Toms, CSR.\n(This rough transcript of the Governor's press conference\nis furnished to the members of the Capitol Press corps for their\nconvenience only. Because of the need to get it to the press as\nrapidly as possible after the conference, no corrections are made\nand there is no guaranty of absolute accuracy.)\nGOVERNOR REAGAN: I'm sorry to have kept you waiting.\nI've beenin a meeting on the same general subject that I think\nbrings us together here. I don't have a statement prepared.\nThat is, as to a script for you. I would like to just say a few\nwords to begin with about the subject that has now been discussed\nand is being discussed of tax reform. In an effort to resolve this\nissue yesterday we offered a final plan. When I say final, I say\nthat in the sense that after sixteen days of continuous negotiations\nand as you well know it went on usually all day and sometimes into\nthe evening, and then in addition we all had our own meetings on\nvarbus sides and various issues that were discussed, but we had felt\nthat we had -- were coming to a point inwhBch there had been speeches\nand we seemed to be on dead center and no one ever seemed -- there\nnever seemed to be any resolving or agreement on a point. It was\njust that, well, yes, everyone would find something that they found\nthat that might be possible, butnever did we come as we should have\nand as we wid in the welfare reform negotiations to where someone\nsaid, oh, all right, we buy this, one way or the other.\nNow, yesterday the major differences had boiled down to a\nfew, and the few were a difference in the total amount of property\ntax relief. We had conceded our position and had gone to theirs\nas to formula even though we felt very strongly about it, we had\ndone that earlier in an effort to get some kind of agreement and\nget started. And in their desire for the greater emphasis to be\non the income tax with no reliance on the sales tax, now this was\nnot a position from the Assembly side, the Democrats in the Assembly,\nbecause this was in the Gonsalves-Moretti Bill earlier, that they\nwould rely also on sales tax, they would have added a one per cent\nto each of the income tax brackets in the present system, and\nunfortunately, this is being talked about as a one per cent income\ntax increase, and it sounds pretty harmless. I don't suggest\ndeception in this, it is just an easy semantic trap to fall into, but\nI would like to point out that a one percant addition to each one\nof the brackers almost amounted to a doubling along with other areas\nthat were being changed in the tax, a doubling of the present income\ntax.\nThe total revenue under that system would have gotten 1.1\nbilliondollars and the present income tax only gets 1 billion 4\nmillion dollars. So yesterday in our proposal we met the difference\nin the sum they wanted to return to the property owners and we\nconceded to their amount and their position. We did propose,\nhowever, we continue to rely on the income -- or on the sales\ntax for a portion ofthis replacement revenue, and we proposed instead\nof a one cent addition, a six-tenths of one per cent addition. The\ndifference was that they would have raised 1.1 billion. The income\ntax under our proposal would have raised 700 -- about 725 million.\nThe income tax of a half a cent that we proposed would only have\nadded 255 million, so the ratio was still three to one emphasis on\nthe income tax.\nThe objection to the sales tax had come from the Democrats\nin the Senate who claimed that that tax must be withheld and held\nover here sacrosanct for some eventual education use. In an\neffort to meet their position we then offered an additional half cent\nof sales tax to go into effect next July and to be ear-marked\nspecifically for restructuring and use in the -- in the state's\nsubvention or underwriting of the public school system, K through\n12. This came out to virtually the same package which they had\nproposed as to amount, and as I say was three to one emphasis on\nthe income tax. It was after presenting this proposal that we\nwere astounded when one of the representatives on their side of\nthe hable -- when the issue came up of expenditure controls, to\nensure that the homeowner would continue to get the relieve that\nwe were trying to give him in this package in return for the\nadditional taxes we were taking -- that one of their representatives\nsaid with some surprise that he didn't understand that we were\ntrying to give permanent property tax relief. Well, I don't know\nanyother kind. We have had two experiences in California of\ngiving property tax relief, and seeing it disappear. The first\ntime, a number of years ago, was with the adoption of the sales\ntax. It was sold toethe people on the basis that it would\nsubstitute for their property tax. Today they have a back-breaking\nproperty tax and they have the sales tax.\nA couple of years ago we gave the $750 exemption to the prop-\nerty taxpayer, the homeowner, and it took less than 18 months for\nlocal government to wipe that out. And today their taxes are\nhigher than when we set out to give them relief, and really all\nthe exemption amounts to is that local government is now being\nsubsidized an additional few hundred million dollars by the State,\nin the pretense that it is property tax relief. So we have felt\nthat there had to be expenditure controls to keep the property\nowner from finding that in a couple of years that he has the same\nproperty tax relief that he has now, plus upwards of a billion\ndollars in additional taxes that would be passed to -- to give\nhim this -- this relief that would only be temporary. So this\nwe think isa must, and we are adament on it.\nNow, one last point, I know the Speaker has explained that\nit was not his belief that I walked out, but others have said that\nI stormed out of the room. I had a plane to catch and I made that\nvery plain and explained it. I did say, however, that we believe\nthat we had now made an offer that went so far into conceding\ntheir position that from here on -- if we were to have property\ntax relief and tax reform, it was up to them. And I left\nhoping that when I came back there would be another meeting scheduled.\nI explained that I could not be present this morning because I was\nin Los Angeles, and that I would be back this afternoon.\nQ\nGovernor, Mr. Moretti said this morning that he was not\nopposed to the concept of expenditure controls, but his hangup was\nhe was unable to get any precise language from your side.\nA\nNo, nor did I believe that we ever had any issue with the\nSpeaker on this. Now, this came from another part of the team.\nThe language -- and it isn't all that confusing -- the language that\nis in the Gonsalves and Moretti Bill, to begin with, isthe same\nlanguage that wound up in Assembly bills 1000 and 1001, our own\ntax reform proposal of last year. But if you will look at that\nyou will find that it wound up in 1000 and 1001, the controls got a\nlittle watered down in its journey through the various committees\nupstairs, to where we ourselves did not feel that they were the\nstronger controls that the property owner was entitled to, SO what\nwe had suggested was that we take the controls that had been proposed\nin 1000 and 1001 before all the amendments and we recognize there\nhad to be some amendments, but that we around the table, as we had\nwith the rest of the package, that we straighten this out and find\nout what changes -- minor changes that we felt were necessary and\nthen that be the language and as I say it seemed to me that should\nhave been the easiest point of agreement since they themselves had\nput basically this format in their own bill and so had we last year,\nand it came within one point of passage.\nQ\nGovernor, at this point what do you -- what indications\ndo you need, what do the Democrats need to say to you to get you\nto open up negotiations again?\nA\nIt is not a case of me opening up again. I'm here ready to\nmeet and they have been so informed. I informed them of that\nbefore I left yesterday. And the only thing that we have to say\nis that finally we believe that we have come so far from our\noriginal positions that -- in an effort to finally get someone to\nsay we agree to this, we didn't hold anything back for bargaiming.\nYesterday we said, here is a plan, we won't play around and\ndicker from your $2,250 sremptien versus our $2,000 exemption and\nsay well, let's go 21 -- let's go -- any of this. We said, O. K.,\nwe will go your $2250, you've got it. There it is. And then we\nsaid on the sales -- on the income tax, we said you offered the one\ncent bracket, we claim it is too much. That it throws the whole\ntax structure out of balance. We said we will go six-tenths of one\nper cent. We had previously tried to stay at a half of one\nper cent. We went to six-tenths, of one per cent, which we believe\nwas as far as we could go without throwing the income tax completely\nout of balance. It is already a very severe tax in California,\nand this coupled with the half a cent came within, as I say, our\nfigures -- well, the total of income tax, you can add 255 million\nand the -- and 725 million, and see where this comes out with\ncomparison to their one billion one.\nQ\nGovernor, you said just now that you are here ready to meet.\nMr. Moretti said this morning that he's here ready to meet.\nWhy\ndon't you meet?\nA\nWell, I have spoken to him about this and -- I have proposed\na -- at his request, he has asked that we send him, ssoehe can look\nat it in writing and show to his people, just what it W8S we had in\nmind about expenditure controls, and we are going to send him that\nand then we will wait for his reply.\n0\nDoes that make youroptimistic, you think there will be more\nnegotiations, there will be tax reform this year?\nA\nI don't know. I have to say this, I am convinced that\nthere are those in the Legislature who don't want tax reform and who\nhad no intention of bringing it about. That is not the Speaker.\nThat is not Joe Gonsalves. I think the Speaker tried as hard as\nwe did in good faith to arrive at a program that would give meaning-\nful tax reform to the people of this state.\n8\nSir, how then do you see the status of the tax issue\nright now\n?\nWhat can happen between now and Thursday, when you\nleave for your trip, to settle the matter?\nA\nIf you really look at these figures that we presented\nyesterday, and the expenditure controls, it can be settled between\nnow and tonight. It can be settled right now. We offered a very\nlegitimate program that has been hashed up one side and down the\nother for sixteen days. And in most instances we have come to\nmeet their positions because we have felt so strongly about this.\nQ\nGovernor --\nA\nIt is that easy.\n8\nGovernor, who are the Senators who torpedoed the thing then?\nA\nWhat?\nQ\nWho are the Senators who torpedoed the -- the negotiations?\nA\nWell, I -- I was just not confident that Senator Moscone\nreally shared the Speaker's determination to get property tax reform.\n8\nAre you saying that Senator Moscone doesn't want tax reform?\nA\nYou'd have to ask him that.\n8\nYou said there were those in the legislature --\nA\nI just said -- say I didn't feel that he shared the same\ndete-mination.\n8\nWere there any others you felt the same way about?\nA\nNo, one will do for now, won't it?\n(Laughter)\n8\nYou said there were some, are there some Republicans as well\nas Democrats that perhaps don't care for it?\nA\nI don't know, there was -- not in that -- not in those meetings.\nI must say there were quite a divergent viewpoint represented on\nour side of the table with the Senate and the Assembly members who\nwere there, we never came into the table once that we had not met\n-5-\nbeforehand and arrived at agreement on whatever position we were going\nto take We at least could guarantee that our side of the table\nwas -- was behind anything we proposed.\nQ\nGovernor, are you suggesting that Senator Moscone is\nresponsible for the fact that the tax --\nA\nNo, no, I'm not. I'm simply -- I've told you that -- I\njust don't think he shares our enthusiasm for the necessity of\nproperty tax relief.\nQ\nGovernor, it doesn't seem to be a problem of dollars, it\nseems to be a problem of philosophy, as I understand it. The\nsales tax intends to be regressive and affects the poor whether or\nnot-the income tax is progressive, and those that can afford to pay\nit could pay it.\nA\nWell, as I have said, itiis still three to one emphasis on\nincome tax. But let me point this out about the sales tax beaause\nthis was discussed a great deal. It is not true that the sales tax\nhas the regressive features that are constantly bandied about by\nthose who philosophicallyooppose it. It would, ifyou had it\napplied to necessities. But under our system where the necessities\nare left out, you have a tax that has very little regressivity\nand this is moresthan compensated for by the steep progression of\nour income tax. Now, I've heard other states quoted and the\nSpeaker quoted some this morning, as to show differences in philosophy\nbetween us and he mentioned ten other states, but what he didn't\nmention is that in a lot of those other states they don't have a\nprogressive income tax. They just have a few cents of -- few per\ncent of income tax across the board. So it is very easy for them\nto do things with regard -- capital gains, for example, and not make\nany allowance, but we have this -- up to ten times as high bracket,\nwe go from one te ten in the present structure, in our bracket.\nThe sales tax, the other thing that we kept pointing out is that the\nsales tax also gets us money from people who don't live in California.\nThere is a sizable sum of money that with our great tourist industry\nbenefits the State of California because we collect from others who\nare not Californians. That cannot be dismissed. There is a\nsecond point, the income tax has a greater growth rate than the sales\ntax, but the income tax by the same token in times of recession, such\nas we have just been through, has a greater nosedive. It responds\nmuch more pliably to the state of the economy than the sales tax.\nPeoplesseem, even in hard times, to go on and their buying is\nrelatively close to what it was, so this combination of taxing people\nwhere they earn it and taxing them when they spend it, is the best\ncombination. Neither one by itself should be the source of revenue.\n8\nGovernor, the Speaker Moretti indicated that you -- that\nyour side presented in effect, an 18-point program, and indicated\nthere was general agreement on ten of the points. Do you call\nthis your last offer and that there is no point that you could --\nyou feel you have gone as far as you can go in compromising?\nA\nNow, in answering this, of course I realize that I run the\nrisk of those who have charged everything that's happened, like\nlast year with the tax and so forth, is due to my stubbornness and\nunwillingness to give, and yet I have to tell you yes, in an\neffort finally to -- to resolve the issue and say let's cut through\nall -- and quit making all the speeches that we have been making,\nwe have heard each other, we know each other's views, here is a\nproposal and in the proposal, as I say, we made major concessions\nto their -- the major points of difference. And in return we\nasked for only one thing, that they include a half a cent of sales\ntax as part of themmeans of raising the revenue. That was the\nonly concession.\nNow, the fringes around the -- the bulk of this money we are\ntalking -- the Speaker has said that they are going to propese a\n1.3 billion dollar tax package for property tax relief. The\nproposal we made to them is $1,215,000,000. Now, it seems to me\nthat that's a very small difference over which to part company and\nsay there can be no relief, with that small a difference. The\nfringes, yes, had to do with some of the things that they called\nloopholes. I suppose it is in the eye of the beholder -- if you want\nto call them. There, too, there was no -- we did not refuse to\nrecognize these or change them. Our own proposals from the very\nbeginning have only differed from theirs in amount. In degree.\nBut again, we tried to keep in mind a balanced tax structure. That\nif you were going to reduce by going to a flat grant, instead of\na sliding saale, the relieve that you are going to give to the\nproperty owner, depending on the value of his home, then at the same\ntime you must be proportionate in the tax increases that you give,\nso that you don't wind up getting all the money in new taxes from\n-7-\nthose people that are not going to get any of the benefit of the\ntax reform. And we also have to keep in mind the business climate.\nCalifornia is a state now that has industries leaving California, not\nmoving in. Our unemployment rate indicates this. Part of this is\ndue to a kind of a bad business climate and is still based on the\nhangover of some taxes from the past and some approaches to business\nthat seem to think that business can be penalized and can be taken\nfor everything and an indication of this in the bank and corporation\ntax is that this year out of our whole tax structure the bank and\ncorporation tax is the only one that showed an actual net loss to\nus over the revenues we expected from that tax in a normal year.\nAll the other revenues had some growth rate, they weren't as high as\nnormal, they took a lower upswing, but the bank and corporation tax\nreflected the burden on business by actually nosediving and being --\nshowing a decline of 10.3 per cent instead of its usual about seven\nper cent increase.\nQ\nGovernor, you just used a phrase which probably points up\nthe major philosophical difference, you said business shouldn't be\npenalized. The Democrats are contending that business have been\ngetting an advantage, inordinate, and they just want to have the\nbusinesses brought up to pay what is their fair share. Can you get\ntogether ?on those two divergent points?\nA\nI'm sorry, but the divergent point is not borne out by the\nfigures. And the other point is that -- and they themselves recognize\nis that really when you talk about business and when I say penalize,\nbusiness isn't paying taxes. Business is only collecting it for\nyou.\nBut the thing where the penalty comes in is if you make\nbusiness collect so many taxes for you in the price of its product\nthat they become non-competitive with businesses in other states.\nThat is when you begin to lose industry and they move to another\nstate where they can sell their product at a lower price and be\ncompetitive because the tax burden isn't as high. Remember,\nbusiness taxes are incorporated in the price of the product.\nPeople pay taxes.\na\nGovernor?\nA\nWhat?\nQ\nDid I understand you to say previously, when you were asked\nif it was your last offer, that as far as you are concerned, the the\nDemocrats don't accept that last proposal that you made there won't\nbe any more negotiations or any tax reform?\nA\nI do not bèlieve that we can -- we can go another point\nbeyond which -- we did this:with a calculated risk. You know, in\nnegotiations normally you hold something back, you -- knowing that your\nare apart on your demands in an effort to get at a meeting you\nsay, well, suppose we would go to such and such a point, and you hope\nthat maybe they will come and say, well, we will go here, and gradually\nfeel yourselves out to where you find a point that you can buy\nand swallow and you know they have to swallow hard, and they can\nswallow and you have agreement. There does come a point, as I felt\nit was yesterday, when you take the calculated risk of saying,\nlook, let's -- and we did, we soul-searched in our own caucus in our\nown group and said, let's find out what is the -- how far can we go,\nwhat is the tax structure that we can envision that is satisfactory\nto us. Now, remember, we came in with abbelief on the part of our\nlegislators that we shouldn't go above a billion dollars. As a\nmatter of fact, we presented 800 -- a $850,000,000 program roughly.\nWe are now back and offering a 1200 -- a 1.2 billion dollar package,\nwhich shows some of the extent of how far we moved. And I have\nto say that I believe the concessions onthe major points were mainly\nfrom our side. And we did take that calculated risk. We went\nall the way, held nothing back for future bargaining, and said\nhere, here it is.\nD\nGovernor, in view of that, in view of what appears to be\na fixed Democratic party position on this, insofar as what they\nterm deep philosophical differences, be they right or wrong, how do\nyou really feel that the chances are for accomplishing some tax\nreform this year?\nDo you think there is any real possibility of\nsettling these differences?\nA\nWell, I'll tell you, they better start thinking there is\nwith\ngoing to be some tax reform because/some of the things that are\nbeing suggested for the ballot next June, I think the people are\ndesperate enough that they can even vote for some that are very\nunwise, because some of those propositions call for such a tremendous\nupheavel and disruption oft the present tax structure, that I think\nthe legislature is going to be hard put if they are faced with one\nof those to -- to find the revenues that can pay for it.\nQ\nWell, would you flatly oppose then the idea of just\nbalancing the budget and perhaps enacting withholding and let reform\ngo for -- the legislature will still meet before next June.\n-9-\nA\nThis is our only alternative. Our only alte native is if\nthey won't go for property tax, of course -- as a matter of fact, I\nasked several times, I asked at the very beginning if they would,\nrecognizing that we had to find the 400 million, because of\nthe decline in revenuew, the principal amount to come from withholding,\nand everyone agreeing that we are going to have withholding, I asked\nthem for heaven's sake, can't we simply pass that and tell the Franchis\nTax Board that they can go ahead and have business gear up to begin\nwithholding, that we are going to have it? And I was told that\nthey thought that I had to have this so much that this was a bar-\ngaining point. And I said, \"Well, I don't know why I have to have\nit any more than anyone else in California, because California has\na great problem of -- of cash flow as well as the need tormake up\nthis deficit in revenues. And the $200 million e edoodd million\ndollars from withholding would not only solve the one problem of\nrevenues, but it would also solve the cash flow problem which is\nalready -- just since June 30 has cost us ten million dollars in\nadditional interest costs for the short term borrowing to meet the\ncash flow problem. There is ten million dollars that could go --\nthat's more than the difference between us on some of the items that\nthey are insisting on as tax increases, and it is ten million dollars\nthat's down the drain and there will he more before the year is out.\nD\nGovernor I understand you told the legislators that you were\nstill willing to meet, but apparently that's on the grounds that\nthey have something that they are willing to propose.\nA\nWell, yesterday, as I say, the only issue between us left\nwe are\nwas a minor issue,/down to here in the neighborhood of about 80\nmillion dollars out of a more than a billion package, except for\nthe controls. And this astounded us, because in one of the earlier\nmeetings we mentioned controls in just setting the stage for what --\nthe issues that had to be resolved, one of the very early meetings,\nand from both sides of the table, the Speaker from their side and\nmyself from our side, agreed that there was no real difference on\nthis because generally the same type of controls were already in\ntheir package as they had been in ours last year. So they said this\nis no issue. So yesterday, it was simply emphasized when we -- we\nmade itt plain to them what we were doing, that we were presenting\nthem with a package that represented now, no more bargaining, as far\nas we could go in meeting their points. We then said, this of course\n-10-\nis contingent u₁ 1 the controls to ensure t. It the property owner\ngets and keeps this relief and when' suddenly one of the delegates\nasks you, or says to you with raised eyebrows that he didn't know\nwe were talking about permanent tax relief, you know, you wonder\nwhat we have been doing for sixteen days.\n0\nGovernor, then you stillhhave a sales tax in your proposal?\nIsn't that still an issue with at least some of thennegotiators?\nA\nNo, they were --\nVOICE: I think they were willing to buy that.\nA\nThey were willing to buy that. The thing that -- the thing\nthat broke down the resistance to that was our willingness to earmark\nan additional sales tax next July for education.\nQ\nI just wanted to make one thing clear now, this final\npackage that you offered, that's it? Right? As far as you are\nconcerned.\nA\nYes. Yes.\nVOICE: Thank you, Governor.\nQ\nNew subject, Governor.\nPAUL BECK: Thank you, he's already cut it off. Thank you\nvery much.\n000\n-11-\nActing\nPRESS CONFERENCE OF LIEUTENANT GOVERNOR ED REINECKE\nHELD OCTOBER 20, 1971\nReported by\nBeverly Toms, CSR\n(This rough transcript of the Lieutenant Governor's press\nconference is furnished to the members of the Capitol press corps\nfor their convenience only. Because of the need to get it to the\npress as rapidly as possible after the conference, noccorrections are\nmade and there is no guaranty of absolute accuracy.)\nooo\nLT. GOVERNOR REINECKE: I have a statement to read, gentle-\nmen.\n(Whereupon Lt. Governor Reinecke read the first four\nparagraphs of a statement entitled \"Statement by Acting Covernor\nEd Reinecke at News Conference on Wednesday, October 20, 1971.)\nLT. GOVERNOR REINECKE: I have another announcement of\nan extremely important annomplishment which we have made here in the\nState of California, one which no other major state can match.\n(Whereupon Lt. Governor Reinecke read Release # 583)\n8\nMr. Reinecke, how do you account for the fact that welfare\nrecipients are decreasing nationwide as well as California?\nA\nOfconurse I have no -- no information on the figures else-\nwhere, but I think the principal reason is simply that so much\nattention has been focused on theproblem that the abuses are becoming\nless and less each day. Those that were previously willing to\ntake chances are no longer willing to take the chances because of the\npublicity that has been brought about and I believe to a great extent\nby the efforts of Governor Reagan.\nQ\nWould you --\nQ\nAre you saying then that the recipients who are not on the\nrolls who would have been otherwise are all people who have been --\nwould have been violators or abusers of the law?\nA\nNo, I didn't say that, but I believe there are marginal cases'\nof people who might apply if there were not controversial publicity\notherwise existing\nQ\nIf they are not all abusers or violators, who are the rest of\nthem?\nA\nPeople that have -- for their own reasons have chosen not to\ngo on welfare or because of administrative reforms that have been put\n-1-\nforth by the department that have no longer been found qualified for\nwelfare.\n8\nAre you satisfied that none of them are actually needy\npeople who ought to be getting welfare?\nA\nI don't have detaileby detail information. I think I'm\nreasonably satisfied, yes, that there is still a conscientious\nprogram to help those that really need 1t.\nD\nGovernor, in case after case in the Sacramento Superior\nCourt brought by various parties it would appear that one part of\nthe welfare reform program after another is being challenged success-\nfully in the lower courts, as for as relative to responsibility,\nstepfathers and that type of thing. Can you give us your views on\nthat and do you think the courts are undermining any reforms that\nwere accomplished this year.\nA\nWell, I think we can expect virtually all aspects of the\nnew law to be tested sooner or later by the -- the welfare proponent\nattorneys. But it should be noted that there is a real question\nas to whether or not these cases should even be taken to court.\nThere is a provision in the law to test the conformity issues, to\ntest the validity issues with the federal welfare -- with the\nfederal department of HEW, and that these steps should be taken\nfirst and then if resolution cannot be found between the federal and\nthe state government, then these matters might be taken to court\nfor final decision, but there is administrative relief in -- built\ninto the law and this we feel should be exhausted before cases are\ntaken to court. However, I think the facts are that we will con-\ntinue to see these court cases and we will test them as we possibly\ncan.\n8\nThe fact remains that apparently the state has been losing\ncases. at least the Sacramento courts.\nA\nI'm sorry, we are losing --\nQ\nWell\nA\nLosing cases?\nQ\nYes, the state has lost a couple of cases.\nED MEESE: Excuse me, Governor, we have.not lost any cases,\nthese have all been temporary restraining orders.\nA\nI think that's right, it is in the courts and some of the\ndecisions have temporarily been goingaagainst us, but there's been no\nfinal determination of any of these yet.\nQ\nI understand that, but the direction the courts are moving\nseems to be opposite that that the state wants them to move in.\nDoesn't that appear to be the case?\nA\nGenerally speaking, but as I say, we are -- we don't\nconsider these cases concluded. We are appealing most of them and\nwe are reviewing all -- all of the constraints or the injunctions\nas they come down.\nQ\nYou say the number of people on welfare has declined, but\nwhat about the expense of welfare?\nA\nThe expense of welfare has declined also. We are saving\nin the month of August, $18 million dollars. That's the total,\ncounting state and federal costs. The total savings to date for the\nlast six months amount to approximately $60 million.\nD\nSixty?\nA\nSixty, six zero.\nD\nIs that also total and not just state funds?\nA\nPardon?\nQ\nThats --\nA\nThat's total, county, federal, state.\nQ\nOver what period?\nA\nSix months.\nQ\nIf this trend continues, is it conceivable that the savings\nin welfare then might even out the hudget deficit?\nA\nWell, that's an optimistic thought. I don't think it is\nrealistic to think we are going to save $336 million within the\nnext year, though.\n8\nWhat are some of the major administrative reforms that\naccount for the decline?\nA\nPrimarily it is the tightening of eligibility requirements\nand the general administrative procedures. Bear in mind, the\ncounties are still administering this program and it is simply the\nguidelines that are being put forth by the Social Welfare Department,\nso it is not just state action alone, it is compliance of state\nregulations with the county administratinns.\ncreform)\nQ\nOn the matter of taxes, can we -- bring that up now? Are\nyou familiar with the strategy of the Democrats in this conference\ncommittee and this -- this new compromise program?\nA\nI'm not aware there is a succinct strategy, but I'm familiar\nwith some of the facts, yes.\n-3-\nQ\nWhat's your reaction to it?\nA\nIf you are speaking of the -- the most recent action to\nbring the Gonsalves bill out through the so-called conference\ncommittee, I think it is -- it is a very unfortunate situation\nbecause here the democratic portion of the legislature is attempting\nto foist onto the peoplesof California a massite tax reform bill,\n1.1 billion dollars, I believe, without any public hearings whatso-\never.\nGranted there have been hearings in the past, but not\nspecifically upon this bill or the combinations that are affetted\nby this bill.\nQ\nWell, isn't that in a sense what happened in the welfare\nreform program? It was sort of all hammered out in the Governor's\noffice.\nA\nThere were -- there were nuermous negotiations that were\ncarried out in the Governor's office, but thise was only after\nextensive hearings on each and every element of the bill.\nQ\nWhat's the difference, though, you said there have been\nextensive hearings on the tax bill also.\nA\nWell, because the tax reform -- tax shifts that -- has been\nproposed by the democrats are not in every case according to the --\non the orders of the same magnitude, let's say, that have been dis-\ncussed in the committee before. So I think there is a philosophical\nchange as to whether or not there should be expenditure limitations\nby the counties. There is a significant shift in the total amonnts\ninasome areas. There is a shift in emphasis between the high income\nand the low income groups. So these -- the tax reform package was\nto be looked at as a total package recognizing that we need to\nbalance the budget, we need to provide property tax relief for the\ntaxpayers of California. And only to increase taxes where those\ntwo functions were to be performed. But that doesn't seem to be\nthe emphasis that we are seeing now.\nQ\nGovernor the deadlines which have been stated before for\nenactment of payroll withholding seem to have changed several times.\nI wonder if you could define more specifically what you mean by\nacting quickly.\nA\nWell, we are -- we originally requested, I believe, an early\nAugust date of passage before the recess. We didn't get that and\nthen we felt that possibly we could do it by mid-September.\nThere\n-4-\nis a very real chance that many large corporations would not have\nbeen able to comply had we received the bill down here in -- by\nmid-September, and every day that goes by makes it that much more\ndifficult for large organizations to effect the necessary changes\nin their payroll procedures. And so now weaare down to the point\nof just over 60 days if the bill is to become effective on January\n1, and so this -- this creates a tremendous hardship on the\nadministrative procedures of any large organization, public or\nprivate.\n0\nSo by --\nA\nAnd there is a very real chance, as I say, that many\ncorporations and perhaps city and county and state organizations\nwill not be able to convert by January 1.\n0\nWould you say November 1 then was the out -- the latest\npossible date?\nA\nWell, I think -- if it is November 1, there will still be\ncorporations and organizations that will not be able to comply by\nthe first. And this will -- this will crowd the withholding then\ninto something less than twenve months if they could have made it\nNovember 1.\n8\nThen when you say there iss a chance it would have to be\npaid in nine monthly installments -- in nine installments instead\nof twelve, you mean for the whole year this would depend on the\norganization that you work for?\nA\nIt would depend --\nQ\nIf they were able to effect it by January 1, then that\nwouldn't be the case?\nA\nI think I said it is possible that -- we tried to emphasize\nthat there is no -- nothing firm by that April 1 date. But to what\ndegree there is delay in the legislature, there will be a correspond-\ning delay and therefore administrative chaos at various levels of\nprivate and public sector.\nQ\nHave you met with the legislative leadership to discuss this\nsince the Governor has been gone?\nA\nNot that specific point. We have met with them, yes.\nQ\nCould you not resolve this timing crotch (phonetics) by\nreturning to the concept of forgiveness for a partial -- a portion of\nthe tax year?\nA\nCertainly, we can always forgive, but that aggravates the\ndeficit which we are facing at the present time and therefore it would\nrequire that many more anticipation notes to be sold.\nQ\nGovernor, would you say it is no longer possible to have\nforgiveness?\nA\nIt is not desirable to have further forgiveness, because\nwe are just postponing the decision to balance the budget when we\ndo.\nAnd it is just the delinquency of the legislature that has\nput the state into this very critical financial condition.\nQ\nGovernor, you said it is not desirable --\nQ\nExcuse me, Ted, you said not desirable to have further\nforgiveness.\nA\nFurther from the statements that have been made in the past\nthat we are willing to work with it, but now -- now that we see\nthe imbalance of the budget, not that we are seeing the criticalness\nnf time, I don't feel that forgiveness is an acceptable answer at\nthis time.\n(withholding)\n8\nYou feel that forgiveness is not possible due to the time\nfactor?\nA\nYes.\nD\nGovernor, that was my question, too, but I'd like to ask it\nagain to get it clear, if I can. You are saying it is not desir-\nable to have further forgiveness, but you are still -- you are still\nholding with Governor Reagan who said previously about his percentage\nof forgiveness, that he would accept --\nA\nWell, I think we are getting into a very difficult period.\nWe were willing to accept forgiveness, but because, as I say,\nbecause every day that we go on without balancing the budget, the\ndeficit becomes that much greater and therefore the opportunities\nfor forgiveness become that much less.\n8\nBut are you saying 10 may -- you may be forced into a\ncorner where you can't give any forgiveness?\nA\nIt is possible.\nD\nHaven't you already been forced into that corner?\nA\nI personally feel we have, but I don't think we can really\nmake that decision until we see what tax reform bills are passed\nand on what dates. I think that's a decision that has to be made\nwith respect to time. But as of now I think we are right at the\nlast -- at the last mark.\nQ\nIn effect, then, that would mean that you would be using\n-6-\nthe one-time windfall to balance the budget, this is something the\nGovernor said absolutely shouldn't be done.\nA\nHe did not want to do it, that's right.\nD\nGovernor, you say taxpayers may be hit with three months of\ntaxes all due the same month. Are you saying there is a possibility\na man's paycheck in one month might be virtually wiped out by extra\nlarge withholding or would it almost certainly be spread out over\ntime?\nA\nWell, I feel -- certainly any organization would do its\nbest to spread that amount out, but the tax liability would be\nthere and it is quite possible that if the bill does not get passed\nuntil such time as the organization would take until April 1 to\nconvert its computers or whatever is necessary, that that tax\nliability might be due and if the company or the organization\ndecided at that point -- it is conceivable , yes. It would depend\nfrom there on on the administrative procedures of the particular\norganization. But it is -- it is merely a way of pointing out the\ncrisis of the time that we -- that we face.\n0\nWhat parts of the democrat's tax reform program do you\nfind is most objectinnable at this point?\nA\nWell, I think generally speaking what we are talking about\nis the fact that they are not willing to look for permanent property\ntax relief for the taxpayers. We are not looking for just\ntemporary relief, we are not looking for tax increase, we are trying\nto find tax reform and shift that will do the two things, balance\nthe budget and provide permanent tax relief for the people of\nCalifornia.\nQ\nTheirs does balance the budget and begin property tax\nrelief, does it not?\nA\nWell, it begins it but it places no -- no expenditure\nlimitations, no controlidanguage at all on expenditures by counties\nand therefore we feel that this will inevitably in a matter of two\nor three years absorb any -- any relief that's given by the state\nwill be reabsorbed by the counties and the net effect over a three-\nyear period will be simply a tax increase.\nQ\nHow do you look upon their proposed increase for the local\nschool support?\nA\nWell, I don't think it is -- it is any secret, we have long\n-7-\nsupported the need for increased aid to local schools, and we\ncertainly want to see this as a part of our package, but it must be\ndone in conjunction with the property tax relief and not simply as\na tax increase.\n0\nAre you speaking for yourself when you say that? I believe\nthe Governor said that he hasn't been convinced yet that local\nschools need additional funds from the state. There would be --\nA\nWell, I think -- I guess I'm speaking for myself on that case,\nyes.\n0\nGovernor, also are you speaking for yourself or for Governor\nReagan when you say that you may not be able to give any forgiveness?\nA\nWell, that's my own statement.\nVOICE:\nThank you, Governor.\nLT. GOVERNOR REINECKE:\nThank you.\no0o\n-8-"
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