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Ronald Reagan's Governor's Papers of the Press Unit
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Ronald Reagan Presidential Library
Digital Library Collections
This is a PDF of a folder from our textual
collections.
Collection: Reagan, Ronald: Gubernatorial Papers,
1966-74: Press Unit
Folder Title: Press Conference Transcripts -
07/07/1971, 09/07/1971, 10/05/1971, 10/20/1971
Box: P03
To see more digitized collections visit:
https://reaganlibrary.gov/archives/digital-library
To see all Ronald Reagan Presidential Library
inventories visit:
https://reaganlibrary.gov/document-collection
Contact a reference archivist at:
[email protected]
Citation Guidelines: https://reaganlibrary.gov/citing
7/7
PRESS CO! ERENCE OF GOVERNOR RONALD
AGAN
Held July 7, 1971
Reported by
Linda S. Gage, CSR
(This rough transcript of the Governor's press conference
is furnished to the members of the Capitol press corps for their
convenience only. Because of the need to get it to the press as rapidly
as possible after the conference, no corrections are made and there is
no guarantee of absolute accuracy).
(Whereupon Governor Reagan read Press Release #403)
PAUL BECK: Governor, there is a typographical error on the
fourth paragraph of the letter, "Therefore, we are requesting that the
Board of Forestry review its action." It should be "rescind."
d
Well, even so they say they are going to resubmit it. All
they are asking for is time to explain their plan, apparently. What are
you pleased about exactly? And you say here the following conversations,
but you only give us a letter. What was your end of the conversation
with them?
A
Well, you would have to ask Mr. Livermore that what it was.
But, the thing is where you say---the very fact that they are asking the
Board to rescind means that they will present this case and the Board
then would perhaps have a better understanding of what's involved and
will take whatever action.
Q
They are not indicating they have any different plan or purpose
to change their plans in any way?
A
Well, they have explained their position in the letter.
Q
Governor, is the implication of your involvement in this that
your administration feels that the plan of the Simpson Timber Company
would have been destructive to the Redwoods? Were you opposed to it as it
was approved by the Forestry Board?
A
I think that the
I am not equipped to say that. I know that
they believe that this was a plan that was in keeping with long-range
forestry plans but there never has been anything done quite on that
scale or over the period of years they had suggested and it seemed to
burst so on the people that again, part of the reason for doing this is
the very fact that I myself have to say I don't quite understand all the
ramifications of it myself.
Q
Did you ask them to withdraw their permit or did Mr. Livermore
askthem to do that?
- 1 -
A
I don't kn
whether he made an outrig
request for that or
not. He has been in conversations with them. They were most
cooperative. They have a good record, that particular company, in their
forestry practices, and they were cooperative enough to take the action
that was outlined in there.
Q
It is difficult to understand just what the rule of your
administration was. Was it your intention to get the company to withdraw
this permit? Did you want to terminate this plan
A
Why not take that up with Mr. Livermore as to exactly
I am not going to put words in his mouth. He didn't relate to me word by
word. He expressed his concern to them over the action
the way it
had been done
the decision that had been made and they immediately
offered to cooperate in the manner they have outlined in their letter.
2
Governor, in regard to the decision by the Forestry Board it's
my understanding that several years ago the legislature empowered you to
appoint two members to that board from the private sector in other
words, just normal citizens and that you have not as yet appointed any
citizens from the public sector to that board, that the board is composed
primarily of forest-industry people. Do you plan to appoint
conservationists or citizens to that board?
A
Well, I operate this thing on recommendations from the
Secretary and, as you know, we are undergoing, or we are working on,
some reorganization plans in the whole field of resources, and again,
this is a subject I think you would get better answers from Mr. Livermore.
Q
Will Mr. Livermore take the rostrum when you're through here
today then?
A
No---well, he is perfectly willing to. Do you want to have
him answer some questions now?
Q
I mean after you are through with the press conference?
A
Whichever way you want to do it. All right.
Q
Another related topic. Governor, a couple of weeks ago you
put out a statement regarding Round Valley and expressed your concern
with preserving it. There are several bills that will be before the
Senate Local Government Committee on Tuesday which would empower local
governments to more closely regulate these kinds of rural subdivisions.
I wonder if your administration plans to take a stand in support of that
legislation?
- 2 -
A
Well, again you are asking me to comment on legislation which
I normally do not do. We know that this is a problem. We have been
studying it ourselves. The mention about Round Valley was a concern
that had to do with the Water Control Board because the subdivision
that was envisioned
was going to call upon ground water and also
going to utilize septic tanks in lieu of the sewer system and we had to
know whether that big a growth in that kind of area is going to affect
the ground water whether it's going to draw down ground water from
the present users, and whether there's a possibility of pollution.
Q
It is my understanding that this legislation by Assemblyman
McCarthy seeks to do the kinds of things which you proposed in your
statement. I was just wondering whether you felt some leadership from
your office was necessary? The bill may run into some problems in
committee.
A
Well, we're going to have to find out. I am going to have to
see that I don't think we have taken a position on that legislation
as yet.
Q
Do you expect to take a position before it comes up in
committee?
A
Well, I am just trying to think of the schedule we have. I
am sure that we will. I just can't give you an answer on that because I
don't know what he's put in there yet.
Q
Another subject. Do you have any reaction to the disclosure
that a number of relatives and friends of state officials are being
given jobs under the Summer Jobs for Youth Program?
A
Yes. Lt. Governor Reinecke has been heading up this program
and he made it very plain that the first priority was to go to those
who had real need, that there was to be a priority given to those who are
going to be using such summer work to finance their future education.
I have no personal knowledge now of the situation that was brought out
in the paper about one department and what the individual cases might
be, but I am sure that those who are running that program under the
Lt. Governor are going to look into this.
Q
Another subject.
A
Well now, if I do that
I'll come back to you from Ray. He
had first call on the next subject.
Q
Governor, Democrats said yesterday they definitely plan to take
you to court on bluepencilling control language in the budget. Did you
seek legal advice prior to doing so, and if so, to whom did you speak?
- 3 -
A
Well, yes, had a ruling from the At. rney General on this,
that this was an interference with my constitutional right to line item
veto, have a line item veto.
Q
Do you welcome the chance to take the matter to court?
A
My batting record in court, so far, you approach this a little
if
bit like the last mile. Anytime /they choose to do that though, they can
do it. I felt that it was necessary to protect a constitutional right.
Q
My question is on a similar subject, The manager of San Mateo
County said yesterday he had hoped that property tax in his county would
go down, but now because of your budget he expects the property tax in
San Mateo County to go up 9 cents. What is your comment?
A
Well, I don't know just where he feels that he is going to have
to raise the tax because of things that we did in our budget.
Q
He was referring to welfare and Medi-Cal particularly.
A
Well, welfare and Medi-Cal---I think all of the counties should
recognize I still stand by the statement we are not ging to impose added
costs in the reforms we have sought for welfare. But I'd like to point
out to the counties if welfare and Medi-Cal are not reformed, they are
going to face a tax increase every year from here on out as well as a
federal increased cost and as well as a state increased cost. And the
answer to this is for them to recognize the need. They do recognize
the need for reform. They have tried to put together their own program.
or
Speaker Moretti said yesterday he had met with you last week
and had made some progress on Medi-Cal, tax and welfare reform, but not
on school finance. Do you feel that your meeting with him was fruitful,
and if so, does this mean you are going to get your welfare package
revived.
A
I don't know. The meeting we had was one in which he had
written me and I called him down and we discussed the necessity of getting
together, and finally, on what we have been talking about for six months,
attempting to work out in a bipartisan fashion these matters that must
be solved. And I pointed out to him that the most essential matters with
regard to the budget are the welfare and Medi-Cal reforms, and the matter
of tax reform, because I believe it is within the framework of tax reform
that we possibly have the best chance of getting withholding to make up
for the revenue shortage. But, the thing that has got to be understood
by the people of California is that the budget as finally signed by me,
is back where it was some time ago and before all of that time up there
in the conference committee.
- 4 -
It is a budget that IS some four hundred and thirty odd million dollars
out of balance, unless the legislature is willing to adopt tax with-
holding, welfare and Medi-Cal reform, and to go on talking about new
expenditures requiring new taxes--when the choice is clear cut before
them. They either give the people these reforms or they have got to
come up with four hundred and thirty million in new taxes now to balance
the present budget without squawking as they are about the new additions
to the budget that I vetoed out.
Q
Governor, if you should not get welfare reform that is
satisfactory this year from the legislature, would you be prepared to
try to get some kind of welfare reform on the ballot in 1972?
A
I haven't taken any steps. I am optimistic that we are going
to get this because I think the choice is so clear cut. I think the
legislature should be moving and moving very swiftly on this, because
the plain truth of the matter is that California's deficit increases a
two
million/every day that goes by without taking these steps to provide the
financing or the possibility fbalancing this present budget.
Q
If you reach an impasse with the Democrats, and that seems to
be the trend these days, would you be prepared to take welfare reform
directly to the people by some sort of ballot?
A
You know, I don't think that I would have to. I said this
about tax reform. I think the evidence is already there, that the people,
if once again this legislature breaks the pledge thatboth parties have
been making every year that they are going to give property tax relief
they're going to give tax. reform, and they don't do it again, no matter
how flimsy their excuse, or how good their excuse, I think the people are
going to put something on the ballot, and I could very well see wherein
the amount of publicity that has been given to the matter of welfare
reform, the need for it, the polls that show that as high as 85 percent
of the people in both parties want it, I could easily see that the same
thing would happen.
Q
Governor, when you spoke the other day when you signed the
saying
budget, I think you qualified your statement by
that taxes could
be avoided provided the legislature enacted total welfare and Medi-Cal
reform?
A
Yes.
Q
Do you still believe that total welfare and Medi-Cal reform
will be enacted this year, and if it isn't, doesn't that mean new taxes?
- 5 -
A
If it isn' then they have made the C. vice. The leadership
throughout
in the legislature, who have blocked these things
/
these several
months, have that choice to make and the choice is theirs. They can have
a balanced budget without increased taxes or they can simply disregard
these means of balancing the budget and opt for new taxes, and there is
no escaping that responsibility.
Q
Governor, do you honestly believe that they will enact total
reform though?
A
Well, I know what I'd do in their place. I would. I think
the people want it.
Q
What do you think they are going to do? What is your
assessment?
A
I am going to be optimistic that in these few weeks to come
that they will see their responsibility and do these things because I
overwhelmingly
think the sentiment of the people is
/
aginst a tax increase.
Q
Does total welfare and Medi-Cal reform translate to Reagan
welfare and Medi-Cal, period?
A
No, and contrary to what they have said, I have always been
willing to hear anything that might improve this. So far the only things
they talk about in the line of a compromise have been simply to just not
give the welfare reforms that would bring this cost within reason. And
all of this talk about the tax increases, as I've said before, if they do
not make these reforms now, they are going to be making a tax increase
virtually every year. The program is increasing in cost that fast.
Q
Mr. Moretti said if there is not a tax increase this year
that the situation will be so bad by next year that it will take at least
a billion or billion and a half in election year when people would rather
not raise taxes.
A
Well, I don't understand what Mr. Moretti is saying there. I
don't understand whether he is saying that if they give us the legislation
that will balance the budget, that we will still need a tax increase next
year, or whether he is saying that we are not going to have the welfare
reforms and withholding this year, then I can top him. I can trump his
ace. Because I'll tell him he's not only going to need a tax increase
next year, he is going to need one this year because the budget is out
of balance by four hundred and roughly thirty-two million dollars.
2
Governor, are you still opposed to the family assistance plan
as much as you were?
- 6 -
A
In principle, although I have not had the complete briefing
that we are going to have on HR 1. We have some briefings scheduled from
officials at HEW in the near future on that. But in principle, yes, I am.
the
In principle I think / feature that represents a guaranteed annual
income is a very dangerous principle, and it is going to enlarge the
welfare burden, not reduce it.
Q
Governor, last year you spent a lot of time talking about tax
reform. This year you have spent pretty much the same time talking about
welfare reform instead. Why the change?
A
Well, the welfare reform actually is an emergency situation.
This is the
with all of our economies that have put us in a very
unique position among all the states in the present economic troubles
now, all of those have been negated by the runaway cost that we could not
control of welfare and Medi-Cal. The other factor about tax reform is,
you
that no matter what they try to tell / from upstairs I told in the firs
few weeks we were here told the Democratic leadership that this was a
top priority, that we could not go through another session without giving
the people tax reform. But, that since last year on the basis of one
negative vote that we couldn't switch to "aye" in the Senate, 78 percent
of the legislature agreed upon a tax reform program, that is 78 percent
of both houses. But, rather than go through that exercise again, with
the change in the leadership and the change in the majority of the
leadership, I was willing to meet with them and see if we could not work
out an acceptable tax reform program that would then be acceptable to
both sides and be passed without the kind of struggle we had last year.
They apparently, in fact, they did accept that enthusiastically, and the
next step was they submitted their own tax reform program. I continued
to give in to Senators who were attempting on the Senate side to do what
I had asked, to work out a bipartisan program, until that Senate group,
unable to reconcile some differences, told me to go ahead and introduce
our own, and then that is why, belatedly, we introduced our own plan to
at least have one on the floor for whatever amending back and forth in
the legislative process could take place. But, this has never been
anything but a top priority. I just recognized a fact of life. They had
a majority and they had the leadership of the legislature and frankly,
they did not, in spite of their assurances, they did not join us, or
join me, in an effort to work out a bipartisan program.
- 7 -
a
You mean t. reason you are not talkin as much about tax
reform this year is because you didn't get any place with it last year?
felt I
A
No, I told you --I/wanted to approach this from a bipartisan
standpoint from the beginning. They agreed and then chose a different
course. Now, I have never retreated from the fact this is a number one
priority, and I am talking about it. I have talked about it in my most
recent speech in the Report to the People. And I have said before, I
think that within the framework of a tax reform can come now the with-
holding feature that can make us catch up with the latest blow and that
was the declining revenues.
Q
Governor, I want to be sure I understood your answer to an
earlier question. Do you reject the thesis of the county supervisors
that as things stand now, the state is not forcing a higher property tax?
A
Yes, I have to point out and they should understand this. The
legislature, in addition to sending down a vastly out-of-balance budget
with several hundred million dollars increased spending, attempted a
sort of, what I have to interpret was a partisan, political trick. They
reduced the budget for welfare down to the figure that we ourselves had
said could be reached or achieved with welfare reform. They did not send
down welfare reform. They put language in the budget which what it
really buried it in the budget, said was, we know that this amount of
money is not enough. We know that we will run out of money before the
end of the year and then the governor will have to come to us and ask
for a tax increase to finance welfare. And I just thought that we ought
to get their attention. They've submitted that figure. I could not
increase it. I could only plead again for welfare reform. So I simply
erased the language to say all right, your figure is the figure we have
for welfare. Now give us welfare reform. But it is one hundred and eight
million dollars less than will be needed without welfare reform.
Q
If the legislature does not send you welfare reform and instead
sends you a tax increase, what will you do?
A
They will have made a choice over which I don't have very much
control. If they have made that choice that they are going to refuse to
balance the budget in the ways they can balance it and they choose instead
to increase the taxes on the people of California, that is the choice they
have the power to make. I think it would be a choice that would lie
practically solely with the leadership of the majority party.
0
Then you would sign that into law?
- 8 -
A
What?
&
Then you would sign that into law?
A
If all else fails I would have to. They submitted a budget
that I vetoed. I could have done one more thing. I could have vetoed
the other four hundred and thirty-two million dollars out of the budget
without it would have been an irresponsible act because I know that the
budget is lean and I know that the budget will provide essential services.
There is no place to find the other four hundred and thirty-two million
by vetoing out of the budget and have a workable budget that would
meet the needs of the people of California.
Q
Governor, there is some conversation among the Democrat leaders
of also sending you again in separate appropriation bills some of the
items, particularly school aid, which would require now only 41 votes in
the Assembly, just a simple majority. Along with a revenue measure to
support them, would you view that then as in the same way as the
legislature having made a choice or would you perhaps veto those
appropriations again?
A
Well, again I just don't see if they are going to refuse to
give us the things that would balance the budget, then as I say, they
have opted for a tax increase to balance this present lean budget. I
just don't see how I could possibly accept new spending on top of that
tax increase.
Q
Governor, how can they balance four hundred and thirty-two
million? Welfare reform won't do it alone. Welfare reform plus with-
holding? Is that what you
A
The three big things Medi-Cal reform, welfare reform, and
withholding.
or
Governor, are you making any provision for restoring one
hundred million dollars to the schools which you took out of the budget ?
A
No.
Q
In the bill right now?
A
No.
0
Didn't the Department of Finance approve that hundred million
dollars going in the budget?
VERNE ORR:
No, what
Q
For California
- 9 -
A
What we ke
in last year was, last ye
we put in an $88
million item for the schools which was a cost-of-living increase and was
put in on a one-year basis. When we originally submitted this budget,
we ourselves decided to continue that eighty-eight million dollar
appropriation and to put it in this year's budget even though it was
only supposed to be a one-time item last year.
2
If withholding increases tax revenue by one hundred and seventy
million, why isn't that a tax increase?
A
Well, I myself have always called it that. It is, and I've
been very careful in talking about it now to say that it
provides
the revenue without increasing the rate of taxation. But, it is not a
total amount that is a tax increase on the people. It begins collecting
in advance reflecting the improved earnings of people as the economy
expands. It begins catching an advance from newcomers in the state who
come in and get jobs, and first job holders. Some of it is from people
who are avoiding their taxes. That is the smallest percentage. And the
other percentage, as I have explained so often, is literally, you would
have to call it borrowed money. It is money that we have and temporarily
used that people have overpaid by virtue of withholding and which we have
to give back, but by the time we give it back, that much more has come
in for our use.
Q
Governor, say if the recession should not completely recover
by next year and revenues continue to lag and there was another revenue
gap next year, would you be willing to consider a tax increase then to
cover that?
A
I think you have to when we start putting the budget together
on the basis of the estimates of revenues, of course, you have to face
the problems that may come up depending on the economy. There are
indications that we can have some reason to be a little more optimistic
on that. How fast the comeback will be, I don't know, but the
indications of bottoming out are there. We have estimated a decline in
revenues over the original estimate last January. The estimate now is
that they will be down one hundred and fifty million dollars the next
year.
Q
Governor, with respect to welfare, the Democrats claim that in
in order to give you the kind of reform that you have asked for, it would
be necessary either to cut additional services to people who are truly
needy or make the county pay for the difference. Now, isn't the dispute
really over how many people are truly needy and how much money for them
rather than over whether there's a tax increase?
-10-
A
No. I do.. t think SO. I think that the almost year-long study
that our people went through and the task force on this revealed that
first of all the eligibility requirements need tightening and I think
that the fact that for three months in a row now we have had a decline
in the caseload indicates that just the talk alone about this has served
to improve the interpretation of eligibility requirements. Our program
also calls for reducing---perhaps putting a ceiling on the earnings that
a person can have and still be eligible, and this is a large percentage
of the people, and in turn increasing the grants as we have already done,
to those who are totally destitute, totally needy. But this, a better
means of eligibility requirement, a better means of apprehending those
who are illegally on welfare, this, plus an increased effort to get
fathers, I think you will notice that last week or the week before (I
lose track of time up here) that Los Angeles County made its sweeping
arrest of two hundred and sixty-six working fathers who were not
contributing to the support of their children or who were on welfare.
That was the first step in a continuing process. There are two hundred
and thirty thousand some odd fathers of that kind in California. Now,
that alone, if you could get, as I've said before, if you could get
half of those fathers to pay seventy-five dollars a month, it means a
hundred million dollars in the cost of welfare.
Q
Once again, why can't you accomplish this admdnistratively?
Why do you need the legislature at all?
A
Oh, we are going forward with administrative reforms. There
are reforms that we can and are implementing. But, there are other
reforms that require statutes. Some of the adverse court decisions that
we have suffered in welfare have not been on the basis of what we tried
to do, but on the basis of what we tried to do had to be supported by
statute, could not be done administratively.
0
The four hundred and thirty million dollars that the budget is
out of balance can you save by administrative welfare reforms?
A
None. That is counted in. We are counting out administrative
reform. What we're counting in that 432 million is 108 million that's
dependent on legislation---about 149 million for Medi-Cal. The balance,
then, comes over in the shortage of revenues.
Q
Well, are the county supervisors being less than truthful when
they say they are going to get stuck with some money even with the
administrative changes?
- 11 -
A
They are e. her being less than truthi. or they have been
burned so many years that they can't believe that anybody means it up
here when they say they are trying to take the burden off their backs.
It is true that for years, state government has had a tendency to solve
some of its problems by mandating things on the counties and leaving
the counties to pay for it. We have tried to follow a different course.
to
I could call your attention/the fact that in the mental health program,
the state, in spite of the law that said we were to put up 75 percent for
local mental health centers, we were, in many instances, most of them
only furnishing 50 percent. We have increased that to 90-10. Now we
put up 90 per cent. One item that we left in the budget in augmentation
this time because we found that even in doing that, there had been some
mis-estimate of about eightmillion dollars that the counties were out
and we left that in the budget to reimburse them. Now, we have given
them every assurance we can. We amended our own program to meet their
needs. More than half of the county supervisors in the state have
analyzed those and have endorsed our plan and say that they are now
confident that we will not cause them any cost. I have gone beyond it
and said, if by some million to one chance we are wrong in our estimates,
we will not impose the cost of that mistake on the counties. We have
sworn to them, pledged to them, that they will not have an added cost,
and some of them, as I say, whether it's just that they have been burned
before and they don't want to take the word, or whether some of them
just don't want to cooperate, I don't know. But, they have to answer
that, and frankly, I think some of them are being very stupid.
Q
Governor, on the same subject.
A
Go ahead
Q
What happens to the counties, however, under the present
circumstances? We have a restricted amount of money in the budget and
no real prospect of the type of welfare reform you are talking about.
Supposing the session ends with that situation with the status quo on
welfare and on the budget. Don't the counties then get an extra burden
hrown on them if the state does not have the money to pay the costs?
A
Well, they are envisioning the state running out of money and
then making no effort to make this up. They are having then to put
people on their own county relief. Again, I don't think that is going
to happen.
- 12 -
Q
Another subject. A few questions ago you were talking about
the advantages of withholding. I believe at that time you mentioned
that one advantage is that you could get at those people who are
currently avoiding their taxes. Would you mention more about that?
A
Well, yes, we have, in all the talk that we have had about
withholding and back from the time when I smashed the concrete about
my feet. There has been a great deal of misinformation given to the
people of California that all of the increased revenue you would get
from withholding is due to catching that much from cheaters. Well, if
we had that big a loss to cheaters, there would long since have been a
reorganization of our tax collecting facilities. The actual loss has
been estimated for us by the people that have been collecting those taxes
for years at around twenty million dollars. We have a very high rate
of efficiency in collecting taxes.
O
Cheaters is your term, but what does it really amount to?
What are these cheaters doing?
A
These are people who come in and work for a while in the state,
and then leave the state. Or, these are people who have come in and
they move around and they earn money, and they just don't report an
income tax. And as I say, we have had a very high rate of collection.
We go after people that leave the state, but there comes a breaking point
in that in which to try for one hundred percent collection can get as
costly as the money you are trying to collect. But, it's a good record,
and so that is a part of the money that you would now get.
Q
When you use the word cheaters, are you strictly talking about
those who are violating laws?
A
That's right cheaters the people who are actually violating
the law, who are not filing a tax return, who leave the state with an
unpaid income tax.
Q
Governor, do you have any fear that the group that filed recall
papers for your recall do you have any fear that they will succeed
this 18-year-old voter group?
A
You know, if you had asked me that question the other night
when we were sitting here half the night working on the budget, I would
have wished them well.
(Laughter)
- 13 -
A
That is up D the people of California
Q
Governor, do you see the possibility of the legislature
overriding some of the vetoes that you made?
A
I don't anticipate that. I would be surprised, because again,
anyone who votes to override a veto is voting for a tax increase; it is
as simple as that. There's no way to fuzz it up or no way to hide it.
Any vote for any spending of any kind in addition to this budget or any
refusal to vote for those other improvements that I've mentioned is
voting for a tax increase on the people of California.
SQUIRE:
Any more questions?
Q
How do you intend to placate the restless highway patrolmen,
state employees, and faculty members who are unhappy because you vetoed
their pay raises?
A
I know they are unhappy, but at the same time I have never
lost faith in the quality of the people---the kind of people we have
working for the state. I think, sure, they are unhappy. I don't blame
them. If we had been able to reform some of the things like welfare a
long time ago, it might not be necessary to do what we have had to do in
this economic crunch that we are in. But, I just have faith that the
vast majority of them are going to perform their tasks, and they know
that will be fair.
Q
One more back there, Governor.
a
Governor, would you be good enough to respond very quickly
again to the proposal yesterday, or the charge yesterday, that Senator
Mills made that he is going to take you to court, and are you looking
forward to going to court?
A
Well, no one ever looks forward to going into court. If they
so,
choose to do why then there will be a court test. We are confident of
our legal position.
SQUIRE:
Thank you, Governor.
- 14 -
PRESS CONFERENCE OF GOVERNOR RONALD REAGAN
HELD SEPTEMBER 7, 1971
Reported by
Beverly Toms, CSR
(This rough transcript of the Governor's press conference
is furnished to the members of the Capitol press corps for their
convenience only. Because of the need to get it to the press as
rapidly as possible after thecconference, no corrections are made
and there is no guaranty of absolute accuracy.)
o0o
(Whereupon Governor Reagan read Rèlease No. 514)
(budget)
Q
Governor, it now appears that the revenue gap is three
hundred million and you said the other day that withholding would
take two hundred million and then you go for another hundred to
hundred twenty-five million. Your Finance Director has mentioned
sin taxes on liquor and racing and so forth. Is that your program,
to meet that extra hundred million?
A
No, and I'll tell -- in the meantime let me just say that
we have used that figure based on the parts of the welfare reform and
our estimates that we didn't get. I have asked, however, that we
continue to look -- that we continue to evaluate the welfare reforms
because the case load continues to decline, and to see if this is
absolutely necessary. I don't want to ask for a dollar more in
taxes than we have to have. And so I have asked that we see -- was
that roundhouse figure that we used correct or is it possible that
we can reduce that on -- on better estimates and also on re-estimating
possible revenues.
Q
Governor, are you saying it may not be necessary to increase
taxes then other than by having withholding?
A
I'm saying that thewithholding, of course, is necessary for
the revenue gap that we had when the declining revenues we discovered
was.in about that amount. As to the additional amount I'm not
hard and fast on that figure. And whether it could be eliminated
or not, I don't know. I'm inclined to believe it can. But I am also...
I want tokknow for sure what is the best estimate we can make and
it is possible with the continuing decline in welfare case loads,
it is possible that we might not require as much as I -- as I have
been using.
-1-
0
Governor, wasn't sure of one word, n't or can?
A
What?
0
You are not inclined to believe that it can?
A
Be totally eliminated, the need. And then, of course,
I think the amount will determine -- in answer to your question,
the amount will determine what's the most practical way of getting
the revenue if we need additional revenue.
0
Do you think that should be done by the Legislature in
this session or is there time for them to wait until January after
evaluation.
A
Oh, no, I think it should be done -- should be done right
now.
0
Governor, what about tax reform? And what does the Supreme
Court ruling on school finance do to it? Does it jeopardize it?
A
Well, I don't think SO. I believe -- I think we have to
have tax reform. I want to go forward with tax reform as much as
anyone else. The -- the Supreme Court ruling actually only said
that there will now -- that the legal case will proceed. I haven't
had time -- none of us have, to study that completely. There is a
great controversy about what itmay say. But it would seem to me that
even if you would envision the Supreme Court ruling standing, the tax
reform would actually be a step in that direction. I'm
inclined
to go along with those that believe that we should deal with the
Supreme Court ruling on that reform in the sessinn that begins in
January. And to take reforms now that reduce reliance on the income
tax would not be counter -- would be in the direction of that --
PAUL BECK: Property tax.
GOVERNOR REAGAN: -- that ruling.
PAUL BECK: Pardon me, Governor, the property -- in
reliance on the property tax.
GOVERNOR REAGAN: What did I say?
PAUL BECK: Income.
GOVERNOR REAGAN: Oh, reliance on property tax.
a
Governor, in other words, as I understand it, what you are
c
saying is that you think any sort of massive billion dollar tax reform
program is best not handled in this particular session now, when it
would be better off --
A
I haven't said anything about the amount. I'm saying that
I think tax reform, in the sense of giving us a more equitable tax
-2-
structure by raising other taxes to -- and using that revenue to
reduce the property tax, the homeowner's tax, and -- to compensate
the renter likewise, we should go forward with this. Now, that
the amount or the size of that would be remains to be worked out.
But I don't think that should wait on the Supreme Court decision.
ButlIddon't think the matter of implementing the Supreme Court
decision should go forward at this time.
8
You are saying the property tax relief, though, should come
in this session or Intthe one beginning in January?
A
No, in this session.
Q
This session. Relative to withholding, Governor, there
seems to be some kind of feeling in the Legislature that it should
be tied to the general tax reform. Are you asking by virtue of the
statement you made this morning that it be a separate item that be
passed in the meantime?
A
It seems to me that details as to how the revenue would be
used of withholding could be worked out in connection with tax
reform. But the issue of adopting withholding should go forward --
should be accepted or passed now so that the business firms in the
stat e and the industries who are going to have to regear for with-
holding, they need advance time, particularly in those that are
computerized, to do this. And we passed the date in the last
session or in this present session by which we could have implemented
this in July, solve many ofour cash flow problems, save millions
of dollars in interest eharges on tax anticipation notes had they
done it, and all that I'm asking is that this Legislature adopt
the withholding.
Q
Would you accept a withholding bill with the spending part
of it tied to an upcoming tax reform?
A
Well, when I say as to the settling the details, as to the
disposition and the use -- for example, the windfall, that could
then be worked out in connection with tax reform, yes.
Q
But you are saying withholding then is an issue that is
seperable from other tax issues?
A
Yes.
Q
And it can be passed independently?
A
Yes, we know the need for the increased revenue that would
result to meet the deficit. We -- everyone seems to be in favor of
-3-
withholding and W
know we need It for cash
:
W.
And as I say,
we have had to add ten million dollars, at least, to our cost of
government right now by using tax anticipation notes in solving the
cash flow problems. That's ten million dollars that we could have
saved had we adopted withholding earlier.
Q
Governor, I'm not clear where you stand on that estimate of
a hundred million on top of withholding that you used last week.
A
Well, as I say, that figure was based on all of our estimates
concerning the welfare and Medi-Cal reforms and it was a rough estimate
based on the roughly 70 per cent of the reforms that we obtained
in the compromise. I have asked, however, before we go to the
business of imposing on the people -4 or the money to pay for that,
that we come up with a better estimate, not just a -- a roundhouse
guess, but that we actually -- accurate as we will be or as accurate
as we can be as to what the need is. Then ask for that amount of
of money and I'm hopeful that maybe it will be less ghan the
hundred million that I've been talking about.
Q
Governor, how do you think California should finance its
public schools now that the property tax is ruled unconstitutional?
A
Well, there is one part of that that I'm in agreement with
and for two years have been trying to get in our own tax reform
proposals and that is an equalization formula whereby we can
eliminate some of the differences between the so-called poor and
the rich districts. Incidentally, I think we could all together,
all of us, be a little helpful to the people in straightening one
thing out. We use rich and poor in talking about school districts
and the impression that's been given is that we once again are
talking theuproblem of individual poverty, that children, lower
income families, are automatically in a lower financed school
system. This is not true. When we use rich and poor in the
term of school districts, we are talking about some school districts
where the individuals may come from very well to do and upper middle
class families but the district does not have a tax base that
makes it a rich school district. For ecample, we have one rural
district in the state here where they have very few students and
not from affluent families at all, but I guess they have more
tax base than any other district in California because of large
utility properties in the district. So I think that -- I think in
discussing this and tho emotionalism that surrounds so many issues,
we would serve the people very well if we made it plain that we are
talking about a variance in the tax base of a district and not the
wealth or poverty of the individual families of students.
Q
Governor, a new subject.
8
No, one more.
Governor, in -- to repeat Mr. Skelton's
question again, should this court decision be upheld, how -- what
would you substitute for a local property tax?
A
Well, you are going to have to turn to the entire tax
structure to see if there are any new areas, and then you are -- I
would -- wehave a fairly well-balanced tax structure in California
with the exception of property tax.
There
aren't
very
many
areas
that we haven't explored for revenues. We have taxed just about
everything. So I would think that it would consist of an increase
in existing taxes. And it would certainly be a sizable increase.
o
Governor, do you anticipate any difficulties that you must
overcome within the next two weeks in order to get a withholding
bill to you, on the time you require?
A
Well --
Q
And if so, what might they be?
A
Well, I have -- I've already been informed by some that
with regard to tax reform that they have thought because the state
needs withholding now to meet its cash flow problems, and to pay
for the deficit, that somehow this makes 1t more my responsibility
to get it than someone else's. And therefore, they would like to
use withholding as a -- as a purchase price. They'd like to use it
to get some things that they might want in the matter of tax reform.
I don't see it that way. I think that anyone who's been elected
to office in California, whether in the Legislature or the Executive
branch, has a responsibility for the fiscal stability of the state.
And that makes withholding absolutely essential, and for someone to
hold up withholding -- what it means in cost to the taxpayers and
to the state just because they think they could get me desperate
enough to give in on some point I might not otherwise favor, that's
being pretty irresponsible and I just can't believe that anyone in
the Legislature is going to be that irresponsible.
0
Governor, who arethese people you named as "they"?
Who are these people? You say "they."
A
What?
8
You say "they," who do you mean?
A
There's been controversy throughout the years, you know,
-5-
over the matter of tax reform, the form it should take. And over
the matter, also, f whether we should have additional spending
funded by additional taxes, and some of those who, -I'm quite sure,
are sincere intheir belief that we should take that route, some
of them in conversations have made it plain that because the state
reeds withholding they would like to use that and make me perhaps
accede to some thing I otherwise would oppose.
Q
Who are "they"?
A
What?
Q
Who are "they"?
Who are the ones?
A
You remember what I told you a long time ago about naming
names on that, never anger the mother alligator till you crossed
over the river.
Q
Governor, would you expect to meet with legislative leaders
on this specific subject in the next --
A
I hope to, very much, yes. I think the success we had
with welfare reform would indicate that perhaps we ought to follow
the same tactic.
Q
Have you invited them, sir, or --
A
Well, we all just got back here today. But I'm going to
be seeing some legislative leaders. I don't know whether it is
scheduled for today , but very soon, to get at these matters.
Q
Governor, a gentlemen tried stop you in the hall to sign
a petition to roll back elected officials' salaries. How do you
feel about that?
A
Well, I don't think that's exactly the way for me to settle
the issue, to sign a petition of that kind. I -- this is probably
one of the hardest subjects and the most difficult, certainly
there is more emotion surrounding the 1dea of public employees'
salaries than any other. Lately there has been a great deal of
discussion, which I think has been unfair, particularly with regard
to the Legislature's salaries in referring to them as salary
increases and ignores the fact that a couple of years ago by a vote
of the people we reorganized or restructured California government
and went from a part-time legislature with virtually token salary
to a full-time legislature. And when that was voted the salary
scale was not voted for the individuals holding office, it was voted
to go into effect with -- following the next election. In other
words, everyone had to run for election for those offices on that
new basis. And I know I have not proposed -- while I proposed no
-6-
tax increase -- no salary increase, I have not proposed a salary
cut for any of our state employees and I just -- I don't know that
that's the way to go at this.
8
Governor, the San Francisco School District opens next week
and they are going to be opening under, as you know, a court-imposed
busing plan. Thousands of parents have said they are going to keep
their children home, they are going to boycott the school and
others categorize it as an explosive situation. I'm wondering
whether your office planned, or you personally have proposed to
step into this congroversy, what your feelings are on that busing
plan.
A
You know what -- I feel very strongly about local control
and local school districts having autonomy. I have resisted efforts
of the state to step in and dictate, so I would still hope that
this is a matter that can be settled in local distritts by the
people of those districts. I have made no secret of the fact that
I don't believe that massive busing programs are the answer for the
problem they are trying to solve. I'd be in favor of busing if
it improves educational quality for all students. I just -- I
just personally think that -- and where it has been tried it
apparently has caused more trouble, more 111 feeling than can be
matched by any solution to the problem.
0
Governor, do you think, though, that in this case pasents
who are under court orders to bus children for purposes of inte-
gration are justified in not going along with that court order and
withholding their children from school?
A
Well, of course then they run afoul of the law unless they
are planning on sending their children to some other school.
Now, I can't condone breaking the law. Never have.
8
Governor, to get back to the Supreme Court decision for a
moment, some Republicanllegislators have criticized the ruling
because they say it threatens local control if the statewide
property tax, for instance, is -- is imposed. Last tear when
you proposed a statewide property tax in your program, were you
convinced that this did not endanger local control of schools?
A
No, because this tax was -- Would have been collected
locally and then redistributed on an equalized basis. This is one
of the factors that makes me very concerned as little as we have
been able to go into -- in the court decision. I don't know whether
this would end, _f we accept the idea that, as some people have
said, have interpreted this ruling to mean, that there was a ceiling
and that all school districts must be totally equitable and no school
district can on its own finance and go to any higher quality oreadd
anything in their district, I wonder if this -- how this can stop
at a state line. Wouldn't this also then follow that we would move
up to the next echelon and that a state could say we must come up
to the level of other states and pretty soon you've got a national
school system. I'd be opposed to a state school system; I'd be
opposed to a national school system.
a
But a statewide property tax for equalization purposes,
do you feel differently about it now than you did a year ago?
A
No, no, I think that a portion of the tax we -- we propose
that.
We could find another source of revenue, Y'd be amenable
to that, but I see no alternative than to the state being the agency
for the redistribution to make sure that it is given back equally.
Q
Have you received any word, either encouraging or discouraging
on theappeal in the federal courts by California of the Serrano case?
Have any other states contacted you with regard to the federal appeal?
A
Not to my knowledge as yet. It's all been so recent, I do
know that there were a couple of Supreme Court decisions in earlier
cases involving Illinois and Virginia, which -- not so much in a
policy ruling, but by the thing they ruled against would have
indicated that the U. S. Supreme Court took the contrary position.
Q
New subject, Governor.
A
Yes.
Q
Have you seen any signs that the President's wage-price freeze
has helped the California economy?
A
Oh, I don't know that anything has happened in our economy
that I could pin down to the wage-price freeze. I think that the
whole program -- that psychologically has been of great value. I
think that there is public support for this idea and there is a
feeling now -- well the stock market reflected that, -- a feeling
that we have a chance of curbing inflation which was running away
with us.
8
How do you view the argument of the labor leaders that
this program has rewarded the rich and punished the poor?
A
Well, I think that's kind of cheap demagoguery on the part
of some of them because to say that the tax or the business invest-
ment tax credit that will allow plants to improve their -- their
-8-
plants, their productive facilities, their machinery in order to
create more jobs, to call that a tax benefit for the rich just
doesn't make sense at all. But then for a long time I have felt
that a great many labor leaders, not all bytany manner or means,
no blanket indictment, but a great many of them are out of step with
the rank and file membership of the unions and if I have to chose
between I'll put my faith in the rank and membership.
0
Do you think, however, there should be profit controls,
Governor? At the same time of the wage and price controls.
A
Frankly, I don't think at the moment they are necessary.
I think that the -- you have a price control, you have a wage
control also, I don't see the need -- I think this again is a
kind of demogogic thing of trying to find -- is nitpicking.
You control the price, you know how much it cost to make the
product, there isn't any -- any possibility of a great runaway
windfall for any industry in this situation. And I'm sure if
there was, then you would solve that by the matter of probably an
excess profits tax, something of that kind.
0
Governor, I have a question on another subject.
A
All right.
Q
You have purportedly told the Young Americans for Freedom
that they should -- excuse me, they should wait and see what the
effects of President Nixon's trip to China might be before they
decide whether to withhold.their_ support for him. Are you waiting
to see what the effects of that trip will be? Are you assessing
the situation or do you support him wholeheartedly?
A
Well, I dirin't exactly use the term about waiting at all,
but I said that for someone today to immediately jump to the
conclusion that because the leader of this nation has said he is
willing to go to and talk to the leaders of a potential enemy force
or a nation that has announced itself as an enemy, that this auto-
matically means that we are going to appease or give something away
that is in our best interest. It is hardly fair in the case of
this particular President and his record and very bluntly I also said
that I could understand where there would be concern if some other
individuals were president and had made this decision, because
there is a record of this kind of appeasement among other individuals.
But I said that this President has shown a firmness, he has announced
that we are not going to make atchoice between Red China and our old
-9-
ally Chiang Kai ( K , and I also reminded e young people that
in Moscow with television and the press covering it, and faced
with Kruschev who blustered some boasts -- boasts about what the
Soviet Union might do to the United States, the Vice President
Nixon at that time told Mr. Kruschev publicly that if he -- they
tried it, his exact words were, "We will kick hell out of you," and
I think that someone is entitled to the benefit of the doubt.
D
Governor, new subject. It is reported out of San Diego
this morning, Governor, that the man that you've appointed as the
head of the Department of Motor Vehicles is purportedly under
investigation by the County Grand Jury in connection with something
he may or may not have done before you appointed him as a member
of the County Supervisors. Is your administration planning
any kind of interim action, such as a temporary suspension pending
the outcome of the Grand Jury investigation?
A
No, he met our requirements certainly with regard to any
conflict of interest,, and we will be watching that. We know no
more than you know other than this investigation that's been
announced of three men -- and this is for something when they were
Supervisors, supposedly, of San Diego County and so we will just wait
and see.
SQUIRE: Any more questions?
8
Governor, State Senator Gordon Cologne has asked that you
appoint him to the bench either in Inyo Superior Court or to the
District Court of Appeal. Has any decision been made on his
request?
MR. MEESE: No comment on judicial appointments before they
are made, I believe, Governor.
A
No, we don't, because as you know we have a system in which
we are bound and go by the committee -- the various committees
that we have set up. In other words, the judicial merit system
of appointmant that we tried to get included in our state Constitution
and failed, I voluntarily go by this. So there is no comment on
my part.
SQUIRE: Thank you, Governor.
o0o
-10-
10/5
à
PRESS CONFERENCE OF BOVERNOR RONALD REAGAN
HELD OCTOBER 5, 1971
Reporter by
Beverly Toms, CSR.
(This rough transcript of the Governor's press conference
is furnished to the members of the Capitol Press corps for their
convenience only. Because of the need to get it to the press as
rapidly as possible after the conference, no corrections are made
and there is no guaranty of absolute accuracy.)
GOVERNOR REAGAN: I'm sorry to have kept you waiting.
I've beenin a meeting on the same general subject that I think
brings us together here. I don't have a statement prepared.
That is, as to a script for you. I would like to just say a few
words to begin with about the subject that has now been discussed
and is being discussed of tax reform. In an effort to resolve this
issue yesterday we offered a final plan. When I say final, I say
that in the sense that after sixteen days of continuous negotiations
and as you well know it went on usually all day and sometimes into
the evening, and then in addition we all had our own meetings on
varbus sides and various issues that were discussed, but we had felt
that we had -- were coming to a point inwhBch there had been speeches
and we seemed to be on dead center and no one ever seemed -- there
never seemed to be any resolving or agreement on a point. It was
just that, well, yes, everyone would find something that they found
that that might be possible, butnever did we come as we should have
and as we wid in the welfare reform negotiations to where someone
said, oh, all right, we buy this, one way or the other.
Now, yesterday the major differences had boiled down to a
few, and the few were a difference in the total amount of property
tax relief. We had conceded our position and had gone to theirs
as to formula even though we felt very strongly about it, we had
done that earlier in an effort to get some kind of agreement and
get started. And in their desire for the greater emphasis to be
on the income tax with no reliance on the sales tax, now this was
not a position from the Assembly side, the Democrats in the Assembly,
because this was in the Gonsalves-Moretti Bill earlier, that they
would rely also on sales tax, they would have added a one per cent
to each of the income tax brackets in the present system, and
unfortunately, this is being talked about as a one per cent income
tax increase, and it sounds pretty harmless. I don't suggest
deception in this, it is just an easy semantic trap to fall into, but
I would like to point out that a one percant addition to each one
of the brackers almost amounted to a doubling along with other areas
that were being changed in the tax, a doubling of the present income
tax.
The total revenue under that system would have gotten 1.1
billiondollars and the present income tax only gets 1 billion 4
million dollars. So yesterday in our proposal we met the difference
in the sum they wanted to return to the property owners and we
conceded to their amount and their position. We did propose,
however, we continue to rely on the income -- or on the sales
tax for a portion ofthis replacement revenue, and we proposed instead
of a one cent addition, a six-tenths of one per cent addition. The
difference was that they would have raised 1.1 billion. The income
tax under our proposal would have raised 700 -- about 725 million.
The income tax of a half a cent that we proposed would only have
added 255 million, so the ratio was still three to one emphasis on
the income tax.
The objection to the sales tax had come from the Democrats
in the Senate who claimed that that tax must be withheld and held
over here sacrosanct for some eventual education use. In an
effort to meet their position we then offered an additional half cent
of sales tax to go into effect next July and to be ear-marked
specifically for restructuring and use in the -- in the state's
subvention or underwriting of the public school system, K through
12. This came out to virtually the same package which they had
proposed as to amount, and as I say was three to one emphasis on
the income tax. It was after presenting this proposal that we
were astounded when one of the representatives on their side of
the hable -- when the issue came up of expenditure controls, to
ensure that the homeowner would continue to get the relieve that
we were trying to give him in this package in return for the
additional taxes we were taking -- that one of their representatives
said with some surprise that he didn't understand that we were
trying to give permanent property tax relief. Well, I don't know
anyother kind. We have had two experiences in California of
giving property tax relief, and seeing it disappear. The first
time, a number of years ago, was with the adoption of the sales
tax. It was sold toethe people on the basis that it would
substitute for their property tax. Today they have a back-breaking
property tax and they have the sales tax.
A couple of years ago we gave the $750 exemption to the prop-
erty taxpayer, the homeowner, and it took less than 18 months for
local government to wipe that out. And today their taxes are
higher than when we set out to give them relief, and really all
the exemption amounts to is that local government is now being
subsidized an additional few hundred million dollars by the State,
in the pretense that it is property tax relief. So we have felt
that there had to be expenditure controls to keep the property
owner from finding that in a couple of years that he has the same
property tax relief that he has now, plus upwards of a billion
dollars in additional taxes that would be passed to -- to give
him this -- this relief that would only be temporary. So this
we think isa must, and we are adament on it.
Now, one last point, I know the Speaker has explained that
it was not his belief that I walked out, but others have said that
I stormed out of the room. I had a plane to catch and I made that
very plain and explained it. I did say, however, that we believe
that we had now made an offer that went so far into conceding
their position that from here on -- if we were to have property
tax relief and tax reform, it was up to them. And I left
hoping that when I came back there would be another meeting scheduled.
I explained that I could not be present this morning because I was
in Los Angeles, and that I would be back this afternoon.
Q
Governor, Mr. Moretti said this morning that he was not
opposed to the concept of expenditure controls, but his hangup was
he was unable to get any precise language from your side.
A
No, nor did I believe that we ever had any issue with the
Speaker on this. Now, this came from another part of the team.
The language -- and it isn't all that confusing -- the language that
is in the Gonsalves and Moretti Bill, to begin with, isthe same
language that wound up in Assembly bills 1000 and 1001, our own
tax reform proposal of last year. But if you will look at that
you will find that it wound up in 1000 and 1001, the controls got a
little watered down in its journey through the various committees
upstairs, to where we ourselves did not feel that they were the
stronger controls that the property owner was entitled to, SO what
we had suggested was that we take the controls that had been proposed
in 1000 and 1001 before all the amendments and we recognize there
had to be some amendments, but that we around the table, as we had
with the rest of the package, that we straighten this out and find
out what changes -- minor changes that we felt were necessary and
then that be the language and as I say it seemed to me that should
have been the easiest point of agreement since they themselves had
put basically this format in their own bill and so had we last year,
and it came within one point of passage.
Q
Governor, at this point what do you -- what indications
do you need, what do the Democrats need to say to you to get you
to open up negotiations again?
A
It is not a case of me opening up again. I'm here ready to
meet and they have been so informed. I informed them of that
before I left yesterday. And the only thing that we have to say
is that finally we believe that we have come so far from our
original positions that -- in an effort to finally get someone to
say we agree to this, we didn't hold anything back for bargaiming.
Yesterday we said, here is a plan, we won't play around and
dicker from your $2,250 sremptien versus our $2,000 exemption and
say well, let's go 21 -- let's go -- any of this. We said, O. K.,
we will go your $2250, you've got it. There it is. And then we
said on the sales -- on the income tax, we said you offered the one
cent bracket, we claim it is too much. That it throws the whole
tax structure out of balance. We said we will go six-tenths of one
per cent. We had previously tried to stay at a half of one
per cent. We went to six-tenths, of one per cent, which we believe
was as far as we could go without throwing the income tax completely
out of balance. It is already a very severe tax in California,
and this coupled with the half a cent came within, as I say, our
figures -- well, the total of income tax, you can add 255 million
and the -- and 725 million, and see where this comes out with
comparison to their one billion one.
Q
Governor, you said just now that you are here ready to meet.
Mr. Moretti said this morning that he's here ready to meet.
Why
don't you meet?
A
Well, I have spoken to him about this and -- I have proposed
a -- at his request, he has asked that we send him, ssoehe can look
at it in writing and show to his people, just what it W8S we had in
mind about expenditure controls, and we are going to send him that
and then we will wait for his reply.
0
Does that make youroptimistic, you think there will be more
negotiations, there will be tax reform this year?
A
I don't know. I have to say this, I am convinced that
there are those in the Legislature who don't want tax reform and who
had no intention of bringing it about. That is not the Speaker.
That is not Joe Gonsalves. I think the Speaker tried as hard as
we did in good faith to arrive at a program that would give meaning-
ful tax reform to the people of this state.
8
Sir, how then do you see the status of the tax issue
right now
?
What can happen between now and Thursday, when you
leave for your trip, to settle the matter?
A
If you really look at these figures that we presented
yesterday, and the expenditure controls, it can be settled between
now and tonight. It can be settled right now. We offered a very
legitimate program that has been hashed up one side and down the
other for sixteen days. And in most instances we have come to
meet their positions because we have felt so strongly about this.
Q
Governor --
A
It is that easy.
8
Governor, who are the Senators who torpedoed the thing then?
A
What?
Q
Who are the Senators who torpedoed the -- the negotiations?
A
Well, I -- I was just not confident that Senator Moscone
really shared the Speaker's determination to get property tax reform.
8
Are you saying that Senator Moscone doesn't want tax reform?
A
You'd have to ask him that.
8
You said there were those in the legislature --
A
I just said -- say I didn't feel that he shared the same
dete-mination.
8
Were there any others you felt the same way about?
A
No, one will do for now, won't it?
(Laughter)
8
You said there were some, are there some Republicans as well
as Democrats that perhaps don't care for it?
A
I don't know, there was -- not in that -- not in those meetings.
I must say there were quite a divergent viewpoint represented on
our side of the table with the Senate and the Assembly members who
were there, we never came into the table once that we had not met
-5-
beforehand and arrived at agreement on whatever position we were going
to take We at least could guarantee that our side of the table
was -- was behind anything we proposed.
Q
Governor, are you suggesting that Senator Moscone is
responsible for the fact that the tax --
A
No, no, I'm not. I'm simply -- I've told you that -- I
just don't think he shares our enthusiasm for the necessity of
property tax relief.
Q
Governor, it doesn't seem to be a problem of dollars, it
seems to be a problem of philosophy, as I understand it. The
sales tax intends to be regressive and affects the poor whether or
not-the income tax is progressive, and those that can afford to pay
it could pay it.
A
Well, as I have said, itiis still three to one emphasis on
income tax. But let me point this out about the sales tax beaause
this was discussed a great deal. It is not true that the sales tax
has the regressive features that are constantly bandied about by
those who philosophicallyooppose it. It would, ifyou had it
applied to necessities. But under our system where the necessities
are left out, you have a tax that has very little regressivity
and this is moresthan compensated for by the steep progression of
our income tax. Now, I've heard other states quoted and the
Speaker quoted some this morning, as to show differences in philosophy
between us and he mentioned ten other states, but what he didn't
mention is that in a lot of those other states they don't have a
progressive income tax. They just have a few cents of -- few per
cent of income tax across the board. So it is very easy for them
to do things with regard -- capital gains, for example, and not make
any allowance, but we have this -- up to ten times as high bracket,
we go from one te ten in the present structure, in our bracket.
The sales tax, the other thing that we kept pointing out is that the
sales tax also gets us money from people who don't live in California.
There is a sizable sum of money that with our great tourist industry
benefits the State of California because we collect from others who
are not Californians. That cannot be dismissed. There is a
second point, the income tax has a greater growth rate than the sales
tax, but the income tax by the same token in times of recession, such
as we have just been through, has a greater nosedive. It responds
much more pliably to the state of the economy than the sales tax.
Peoplesseem, even in hard times, to go on and their buying is
relatively close to what it was, so this combination of taxing people
where they earn it and taxing them when they spend it, is the best
combination. Neither one by itself should be the source of revenue.
8
Governor, the Speaker Moretti indicated that you -- that
your side presented in effect, an 18-point program, and indicated
there was general agreement on ten of the points. Do you call
this your last offer and that there is no point that you could --
you feel you have gone as far as you can go in compromising?
A
Now, in answering this, of course I realize that I run the
risk of those who have charged everything that's happened, like
last year with the tax and so forth, is due to my stubbornness and
unwillingness to give, and yet I have to tell you yes, in an
effort finally to -- to resolve the issue and say let's cut through
all -- and quit making all the speeches that we have been making,
we have heard each other, we know each other's views, here is a
proposal and in the proposal, as I say, we made major concessions
to their -- the major points of difference. And in return we
asked for only one thing, that they include a half a cent of sales
tax as part of themmeans of raising the revenue. That was the
only concession.
Now, the fringes around the -- the bulk of this money we are
talking -- the Speaker has said that they are going to propese a
1.3 billion dollar tax package for property tax relief. The
proposal we made to them is $1,215,000,000. Now, it seems to me
that that's a very small difference over which to part company and
say there can be no relief, with that small a difference. The
fringes, yes, had to do with some of the things that they called
loopholes. I suppose it is in the eye of the beholder -- if you want
to call them. There, too, there was no -- we did not refuse to
recognize these or change them. Our own proposals from the very
beginning have only differed from theirs in amount. In degree.
But again, we tried to keep in mind a balanced tax structure. That
if you were going to reduce by going to a flat grant, instead of
a sliding saale, the relieve that you are going to give to the
property owner, depending on the value of his home, then at the same
time you must be proportionate in the tax increases that you give,
so that you don't wind up getting all the money in new taxes from
-7-
those people that are not going to get any of the benefit of the
tax reform. And we also have to keep in mind the business climate.
California is a state now that has industries leaving California, not
moving in. Our unemployment rate indicates this. Part of this is
due to a kind of a bad business climate and is still based on the
hangover of some taxes from the past and some approaches to business
that seem to think that business can be penalized and can be taken
for everything and an indication of this in the bank and corporation
tax is that this year out of our whole tax structure the bank and
corporation tax is the only one that showed an actual net loss to
us over the revenues we expected from that tax in a normal year.
All the other revenues had some growth rate, they weren't as high as
normal, they took a lower upswing, but the bank and corporation tax
reflected the burden on business by actually nosediving and being --
showing a decline of 10.3 per cent instead of its usual about seven
per cent increase.
Q
Governor, you just used a phrase which probably points up
the major philosophical difference, you said business shouldn't be
penalized. The Democrats are contending that business have been
getting an advantage, inordinate, and they just want to have the
businesses brought up to pay what is their fair share. Can you get
together ?on those two divergent points?
A
I'm sorry, but the divergent point is not borne out by the
figures. And the other point is that -- and they themselves recognize
is that really when you talk about business and when I say penalize,
business isn't paying taxes. Business is only collecting it for
you.
But the thing where the penalty comes in is if you make
business collect so many taxes for you in the price of its product
that they become non-competitive with businesses in other states.
That is when you begin to lose industry and they move to another
state where they can sell their product at a lower price and be
competitive because the tax burden isn't as high. Remember,
business taxes are incorporated in the price of the product.
People pay taxes.
a
Governor?
A
What?
Q
Did I understand you to say previously, when you were asked
if it was your last offer, that as far as you are concerned, the the
Democrats don't accept that last proposal that you made there won't
be any more negotiations or any tax reform?
A
I do not bèlieve that we can -- we can go another point
beyond which -- we did this:with a calculated risk. You know, in
negotiations normally you hold something back, you -- knowing that your
are apart on your demands in an effort to get at a meeting you
say, well, suppose we would go to such and such a point, and you hope
that maybe they will come and say, well, we will go here, and gradually
feel yourselves out to where you find a point that you can buy
and swallow and you know they have to swallow hard, and they can
swallow and you have agreement. There does come a point, as I felt
it was yesterday, when you take the calculated risk of saying,
look, let's -- and we did, we soul-searched in our own caucus in our
own group and said, let's find out what is the -- how far can we go,
what is the tax structure that we can envision that is satisfactory
to us. Now, remember, we came in with abbelief on the part of our
legislators that we shouldn't go above a billion dollars. As a
matter of fact, we presented 800 -- a $850,000,000 program roughly.
We are now back and offering a 1200 -- a 1.2 billion dollar package,
which shows some of the extent of how far we moved. And I have
to say that I believe the concessions onthe major points were mainly
from our side. And we did take that calculated risk. We went
all the way, held nothing back for future bargaining, and said
here, here it is.
D
Governor, in view of that, in view of what appears to be
a fixed Democratic party position on this, insofar as what they
term deep philosophical differences, be they right or wrong, how do
you really feel that the chances are for accomplishing some tax
reform this year?
Do you think there is any real possibility of
settling these differences?
A
Well, I'll tell you, they better start thinking there is
with
going to be some tax reform because/some of the things that are
being suggested for the ballot next June, I think the people are
desperate enough that they can even vote for some that are very
unwise, because some of those propositions call for such a tremendous
upheavel and disruption oft the present tax structure, that I think
the legislature is going to be hard put if they are faced with one
of those to -- to find the revenues that can pay for it.
Q
Well, would you flatly oppose then the idea of just
balancing the budget and perhaps enacting withholding and let reform
go for -- the legislature will still meet before next June.
-9-
A
This is our only alternative. Our only alte native is if
they won't go for property tax, of course -- as a matter of fact, I
asked several times, I asked at the very beginning if they would,
recognizing that we had to find the 400 million, because of
the decline in revenuew, the principal amount to come from withholding,
and everyone agreeing that we are going to have withholding, I asked
them for heaven's sake, can't we simply pass that and tell the Franchis
Tax Board that they can go ahead and have business gear up to begin
withholding, that we are going to have it? And I was told that
they thought that I had to have this so much that this was a bar-
gaining point. And I said, "Well, I don't know why I have to have
it any more than anyone else in California, because California has
a great problem of -- of cash flow as well as the need tormake up
this deficit in revenues. And the $200 million e edoodd million
dollars from withholding would not only solve the one problem of
revenues, but it would also solve the cash flow problem which is
already -- just since June 30 has cost us ten million dollars in
additional interest costs for the short term borrowing to meet the
cash flow problem. There is ten million dollars that could go --
that's more than the difference between us on some of the items that
they are insisting on as tax increases, and it is ten million dollars
that's down the drain and there will he more before the year is out.
D
Governor I understand you told the legislators that you were
still willing to meet, but apparently that's on the grounds that
they have something that they are willing to propose.
A
Well, yesterday, as I say, the only issue between us left
we are
was a minor issue,/down to here in the neighborhood of about 80
million dollars out of a more than a billion package, except for
the controls. And this astounded us, because in one of the earlier
meetings we mentioned controls in just setting the stage for what --
the issues that had to be resolved, one of the very early meetings,
and from both sides of the table, the Speaker from their side and
myself from our side, agreed that there was no real difference on
this because generally the same type of controls were already in
their package as they had been in ours last year. So they said this
is no issue. So yesterday, it was simply emphasized when we -- we
made itt plain to them what we were doing, that we were presenting
them with a package that represented now, no more bargaining, as far
as we could go in meeting their points. We then said, this of course
-10-
is contingent u₁ 1 the controls to ensure t. It the property owner
gets and keeps this relief and when' suddenly one of the delegates
asks you, or says to you with raised eyebrows that he didn't know
we were talking about permanent tax relief, you know, you wonder
what we have been doing for sixteen days.
0
Governor, then you stillhhave a sales tax in your proposal?
Isn't that still an issue with at least some of thennegotiators?
A
No, they were --
VOICE: I think they were willing to buy that.
A
They were willing to buy that. The thing that -- the thing
that broke down the resistance to that was our willingness to earmark
an additional sales tax next July for education.
Q
I just wanted to make one thing clear now, this final
package that you offered, that's it? Right? As far as you are
concerned.
A
Yes. Yes.
VOICE: Thank you, Governor.
Q
New subject, Governor.
PAUL BECK: Thank you, he's already cut it off. Thank you
very much.
000
-11-
Acting
PRESS CONFERENCE OF LIEUTENANT GOVERNOR ED REINECKE
HELD OCTOBER 20, 1971
Reported by
Beverly Toms, CSR
(This rough transcript of the Lieutenant Governor's press
conference is furnished to the members of the Capitol press corps
for their convenience only. Because of the need to get it to the
press as rapidly as possible after the conference, noccorrections are
made and there is no guaranty of absolute accuracy.)
ooo
LT. GOVERNOR REINECKE: I have a statement to read, gentle-
men.
(Whereupon Lt. Governor Reinecke read the first four
paragraphs of a statement entitled "Statement by Acting Covernor
Ed Reinecke at News Conference on Wednesday, October 20, 1971.)
LT. GOVERNOR REINECKE: I have another announcement of
an extremely important annomplishment which we have made here in the
State of California, one which no other major state can match.
(Whereupon Lt. Governor Reinecke read Release # 583)
8
Mr. Reinecke, how do you account for the fact that welfare
recipients are decreasing nationwide as well as California?
A
Ofconurse I have no -- no information on the figures else-
where, but I think the principal reason is simply that so much
attention has been focused on theproblem that the abuses are becoming
less and less each day. Those that were previously willing to
take chances are no longer willing to take the chances because of the
publicity that has been brought about and I believe to a great extent
by the efforts of Governor Reagan.
Q
Would you --
Q
Are you saying then that the recipients who are not on the
rolls who would have been otherwise are all people who have been --
would have been violators or abusers of the law?
A
No, I didn't say that, but I believe there are marginal cases'
of people who might apply if there were not controversial publicity
otherwise existing
Q
If they are not all abusers or violators, who are the rest of
them?
A
People that have -- for their own reasons have chosen not to
go on welfare or because of administrative reforms that have been put
-1-
forth by the department that have no longer been found qualified for
welfare.
8
Are you satisfied that none of them are actually needy
people who ought to be getting welfare?
A
I don't have detaileby detail information. I think I'm
reasonably satisfied, yes, that there is still a conscientious
program to help those that really need 1t.
D
Governor, in case after case in the Sacramento Superior
Court brought by various parties it would appear that one part of
the welfare reform program after another is being challenged success-
fully in the lower courts, as for as relative to responsibility,
stepfathers and that type of thing. Can you give us your views on
that and do you think the courts are undermining any reforms that
were accomplished this year.
A
Well, I think we can expect virtually all aspects of the
new law to be tested sooner or later by the -- the welfare proponent
attorneys. But it should be noted that there is a real question
as to whether or not these cases should even be taken to court.
There is a provision in the law to test the conformity issues, to
test the validity issues with the federal welfare -- with the
federal department of HEW, and that these steps should be taken
first and then if resolution cannot be found between the federal and
the state government, then these matters might be taken to court
for final decision, but there is administrative relief in -- built
into the law and this we feel should be exhausted before cases are
taken to court. However, I think the facts are that we will con-
tinue to see these court cases and we will test them as we possibly
can.
8
The fact remains that apparently the state has been losing
cases. at least the Sacramento courts.
A
I'm sorry, we are losing --
Q
Well
A
Losing cases?
Q
Yes, the state has lost a couple of cases.
ED MEESE: Excuse me, Governor, we have.not lost any cases,
these have all been temporary restraining orders.
A
I think that's right, it is in the courts and some of the
decisions have temporarily been goingaagainst us, but there's been no
final determination of any of these yet.
Q
I understand that, but the direction the courts are moving
seems to be opposite that that the state wants them to move in.
Doesn't that appear to be the case?
A
Generally speaking, but as I say, we are -- we don't
consider these cases concluded. We are appealing most of them and
we are reviewing all -- all of the constraints or the injunctions
as they come down.
Q
You say the number of people on welfare has declined, but
what about the expense of welfare?
A
The expense of welfare has declined also. We are saving
in the month of August, $18 million dollars. That's the total,
counting state and federal costs. The total savings to date for the
last six months amount to approximately $60 million.
D
Sixty?
A
Sixty, six zero.
D
Is that also total and not just state funds?
A
Pardon?
Q
Thats --
A
That's total, county, federal, state.
Q
Over what period?
A
Six months.
Q
If this trend continues, is it conceivable that the savings
in welfare then might even out the hudget deficit?
A
Well, that's an optimistic thought. I don't think it is
realistic to think we are going to save $336 million within the
next year, though.
8
What are some of the major administrative reforms that
account for the decline?
A
Primarily it is the tightening of eligibility requirements
and the general administrative procedures. Bear in mind, the
counties are still administering this program and it is simply the
guidelines that are being put forth by the Social Welfare Department,
so it is not just state action alone, it is compliance of state
regulations with the county administratinns.
creform)
Q
On the matter of taxes, can we -- bring that up now? Are
you familiar with the strategy of the Democrats in this conference
committee and this -- this new compromise program?
A
I'm not aware there is a succinct strategy, but I'm familiar
with some of the facts, yes.
-3-
Q
What's your reaction to it?
A
If you are speaking of the -- the most recent action to
bring the Gonsalves bill out through the so-called conference
committee, I think it is -- it is a very unfortunate situation
because here the democratic portion of the legislature is attempting
to foist onto the peoplesof California a massite tax reform bill,
1.1 billion dollars, I believe, without any public hearings whatso-
ever.
Granted there have been hearings in the past, but not
specifically upon this bill or the combinations that are affetted
by this bill.
Q
Well, isn't that in a sense what happened in the welfare
reform program? It was sort of all hammered out in the Governor's
office.
A
There were -- there were nuermous negotiations that were
carried out in the Governor's office, but thise was only after
extensive hearings on each and every element of the bill.
Q
What's the difference, though, you said there have been
extensive hearings on the tax bill also.
A
Well, because the tax reform -- tax shifts that -- has been
proposed by the democrats are not in every case according to the --
on the orders of the same magnitude, let's say, that have been dis-
cussed in the committee before. So I think there is a philosophical
change as to whether or not there should be expenditure limitations
by the counties. There is a significant shift in the total amonnts
inasome areas. There is a shift in emphasis between the high income
and the low income groups. So these -- the tax reform package was
to be looked at as a total package recognizing that we need to
balance the budget, we need to provide property tax relief for the
taxpayers of California. And only to increase taxes where those
two functions were to be performed. But that doesn't seem to be
the emphasis that we are seeing now.
Q
Governor the deadlines which have been stated before for
enactment of payroll withholding seem to have changed several times.
I wonder if you could define more specifically what you mean by
acting quickly.
A
Well, we are -- we originally requested, I believe, an early
August date of passage before the recess. We didn't get that and
then we felt that possibly we could do it by mid-September.
There
-4-
is a very real chance that many large corporations would not have
been able to comply had we received the bill down here in -- by
mid-September, and every day that goes by makes it that much more
difficult for large organizations to effect the necessary changes
in their payroll procedures. And so now weaare down to the point
of just over 60 days if the bill is to become effective on January
1, and so this -- this creates a tremendous hardship on the
administrative procedures of any large organization, public or
private.
0
So by --
A
And there is a very real chance, as I say, that many
corporations and perhaps city and county and state organizations
will not be able to convert by January 1.
0
Would you say November 1 then was the out -- the latest
possible date?
A
Well, I think -- if it is November 1, there will still be
corporations and organizations that will not be able to comply by
the first. And this will -- this will crowd the withholding then
into something less than twenve months if they could have made it
November 1.
8
Then when you say there iss a chance it would have to be
paid in nine monthly installments -- in nine installments instead
of twelve, you mean for the whole year this would depend on the
organization that you work for?
A
It would depend --
Q
If they were able to effect it by January 1, then that
wouldn't be the case?
A
I think I said it is possible that -- we tried to emphasize
that there is no -- nothing firm by that April 1 date. But to what
degree there is delay in the legislature, there will be a correspond-
ing delay and therefore administrative chaos at various levels of
private and public sector.
Q
Have you met with the legislative leadership to discuss this
since the Governor has been gone?
A
Not that specific point. We have met with them, yes.
Q
Could you not resolve this timing crotch (phonetics) by
returning to the concept of forgiveness for a partial -- a portion of
the tax year?
A
Certainly, we can always forgive, but that aggravates the
deficit which we are facing at the present time and therefore it would
require that many more anticipation notes to be sold.
Q
Governor, would you say it is no longer possible to have
forgiveness?
A
It is not desirable to have further forgiveness, because
we are just postponing the decision to balance the budget when we
do.
And it is just the delinquency of the legislature that has
put the state into this very critical financial condition.
Q
Governor, you said it is not desirable --
Q
Excuse me, Ted, you said not desirable to have further
forgiveness.
A
Further from the statements that have been made in the past
that we are willing to work with it, but now -- now that we see
the imbalance of the budget, not that we are seeing the criticalness
nf time, I don't feel that forgiveness is an acceptable answer at
this time.
(withholding)
8
You feel that forgiveness is not possible due to the time
factor?
A
Yes.
D
Governor, that was my question, too, but I'd like to ask it
again to get it clear, if I can. You are saying it is not desir-
able to have further forgiveness, but you are still -- you are still
holding with Governor Reagan who said previously about his percentage
of forgiveness, that he would accept --
A
Well, I think we are getting into a very difficult period.
We were willing to accept forgiveness, but because, as I say,
because every day that we go on without balancing the budget, the
deficit becomes that much greater and therefore the opportunities
for forgiveness become that much less.
8
But are you saying 10 may -- you may be forced into a
corner where you can't give any forgiveness?
A
It is possible.
D
Haven't you already been forced into that corner?
A
I personally feel we have, but I don't think we can really
make that decision until we see what tax reform bills are passed
and on what dates. I think that's a decision that has to be made
with respect to time. But as of now I think we are right at the
last -- at the last mark.
Q
In effect, then, that would mean that you would be using
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the one-time windfall to balance the budget, this is something the
Governor said absolutely shouldn't be done.
A
He did not want to do it, that's right.
D
Governor, you say taxpayers may be hit with three months of
taxes all due the same month. Are you saying there is a possibility
a man's paycheck in one month might be virtually wiped out by extra
large withholding or would it almost certainly be spread out over
time?
A
Well, I feel -- certainly any organization would do its
best to spread that amount out, but the tax liability would be
there and it is quite possible that if the bill does not get passed
until such time as the organization would take until April 1 to
convert its computers or whatever is necessary, that that tax
liability might be due and if the company or the organization
decided at that point -- it is conceivable , yes. It would depend
from there on on the administrative procedures of the particular
organization. But it is -- it is merely a way of pointing out the
crisis of the time that we -- that we face.
0
What parts of the democrat's tax reform program do you
find is most objectinnable at this point?
A
Well, I think generally speaking what we are talking about
is the fact that they are not willing to look for permanent property
tax relief for the taxpayers. We are not looking for just
temporary relief, we are not looking for tax increase, we are trying
to find tax reform and shift that will do the two things, balance
the budget and provide permanent tax relief for the people of
California.
Q
Theirs does balance the budget and begin property tax
relief, does it not?
A
Well, it begins it but it places no -- no expenditure
limitations, no controlidanguage at all on expenditures by counties
and therefore we feel that this will inevitably in a matter of two
or three years absorb any -- any relief that's given by the state
will be reabsorbed by the counties and the net effect over a three-
year period will be simply a tax increase.
Q
How do you look upon their proposed increase for the local
school support?
A
Well, I don't think it is -- it is any secret, we have long
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supported the need for increased aid to local schools, and we
certainly want to see this as a part of our package, but it must be
done in conjunction with the property tax relief and not simply as
a tax increase.
0
Are you speaking for yourself when you say that? I believe
the Governor said that he hasn't been convinced yet that local
schools need additional funds from the state. There would be --
A
Well, I think -- I guess I'm speaking for myself on that case,
yes.
0
Governor, also are you speaking for yourself or for Governor
Reagan when you say that you may not be able to give any forgiveness?
A
Well, that's my own statement.
VOICE:
Thank you, Governor.
LT. GOVERNOR REINECKE:
Thank you.
o0o
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