Brown Concedes That Tax Rebate Is All but Inevitable

Assembly Speaker Willie Brown conceded Monday that a rebate for California taxpayers is all but inevitable and said the only questions remaining are how much money will be sent back and what form the refund will take.

At the same time, Democrats and state Supt. of Public Instruction Bill Honig gave up on their demands that the entire $700 million proposed by Gov. George Deukmejian for an income tax rebate go instead to provide extra funding for public schools.

“It takes a spirit of compromise and that’s what I’m begging for,” said Honig, who until now has demanded that all $700 million go to schools.

Despite the talk of a compromise, however, it appears likely the state will begin the new fiscal year on Wednesday without a state budget.

Deukmejian and Assembly Republicans have blocked passage of a proposed $41.1-billion budget unless Democrats agree to the governor’s $700-million rebate proposal.

The $700 million is part of a state budget surplus of $1.1 billion. Deukmejian has concluded that the remaining $400 million of the surplus can be spent next year on state programs without exceeding a state spending limit approved by voters in 1979.

Under the spending limit law, however, the legislators and the governor must reach agreement by tonight or the entire $1.1-billion surplus will be subject to the rebate, and the $400 million now targeted for education and other programs would have to be returned to taxpayers.

Brown told reporters: “We have obviously made the effort to provide additional money for education. Come July 1, we will obviously have to consider alternatives. There hasn’t been any lack of dialogue or lack of consideration of means by which to return the money to taxpayers. The only question is how do you do that.”

Brown said he still opposes the governor’s income tax rebate plan. But he said he could support a refund proposal that helped schools by, for instance, eliminating the sales tax that school districts pay when purchasing goods.

On Sunday, the Speaker also proposed a temporary 4-cent reduction of the 6-cent general sales tax in December.

Assembly Republican Leader Pat Nolan of Glendale, who is serving as Deukmejian’s chief negotiator in the Legislature, said Republicans flatly reject any compromise that would not give all $700 million to taxpayers.

With the clock ticking toward the end of the fiscal year today, Nolan said Republicans would be delighted if the amount of the rebate grew to $1.1 billion.

Quick Rejection

The Republican leader rejected Brown’s proposed December sales tax reduction out of hand, saying that if the tax were suspended to coincide with the Christmas season, then many Californians would put off large purchases to take advantage of the reduced tax. He also said it would cause a hardship for retailers to change their cash registers, many of which automatically calculate the sales tax based on the current rate of 6 cents on the dollar.

“On the surface, it’s just plain silly,” Nolan said.

Nolan, who has been meeting privately with Democratic leaders, agreed with Brown’s assessment: “The issue now is how much to rebate and how to rebate it. The Democrats have conceded there ought to be a rebate, and now the question is how much and how we’ll do it.”

On the other side of the Capitol, Senate President Pro Tem David A. Roberti (D-Los Angeles) abandoned a second attempt to override Deukmejian’s veto of legislation that would have given the $700 million to schools. And he was not optimistic that lawmakers could reach agreement on a compromise before tonight’s midnight deadline for passing the budget.

“The problem is that neither the Administration nor the Assembly Republicans are in a mood to compromise and it’s very difficult to talk without having them at the table,” Roberti said. “If the governor doesn’t really want to talk, what can you do?”

Several Proposals

Brown said the December sales tax reduction is just one of several proposals that Democrats are discussing and presenting informally to Republicans.

Brown said another proposal is to give school districts a sales tax break on purchases of books and other supplies. Schools now pay sales tax, a matter that some lawmakers long have criticized because a portion of the tax is returned to them in the form of state financial aid. Brown said this proposal makes sense because it would involve both a rebate and extra financial aid for schools.

“There must be at least 10 different ways in which the idea of returning money to the taxpayers could be achieved,” Brown said.

Honig said he would favor splitting the $700-million figure and giving $350 million to education and the other $350 million in tax rebates and tax credits. Of the money going to schools under Honig’s proposal, $300 million would be earmarked for kindergarten through high school and $50 million would be spent on community colleges.

Plea for Schools

At a press conference earlier in the day, California School Boards Assn. President Dianne Jacob said schools need $200 million above the level in the governor’s proposed budget “just to maintain current educational programs.”

State Sen. Henry J. Mello (D-Watsonville) took the lead in the Senate to negotiate a compromise that would divide the money between schools, local governments and a “substantial rebate to taxpayers.”

Meanwhile, in the Senate, which has passed the state budget, Democrats on the Appropriations Committee began punishing Assembly Republicans by holding onto their bills while approving legislation sponsored by Assembly Democrats. One of the Republican victims, Assemblywoman Cathie Wright of Simi Valley, pleaded for help from Sen. Al Alquist (D-San Jose), chairman of the Budget Conference Committee. “Don’t come to me,” he snapped.