Lawmakers Strive for Consensus on Tax Rebate Plan

Negotiators struggled Wednesday to put the final touches on a $1.1-billion rebate for income taxpayers, low-income renters and senior citizens amid mixed signals whether the proposal would fly.

Gov. George Deukmejian, meanwhile, was reported ready to ratify any compromise that could win the support of both minority Republicans and majority Democrats in the Legislature.

“If there is a consensus, the governor is amenable,” said press secretary Kevin Brett.

The chief Assembly Democratic negotiator, Gary Condit of Ceres, insisted that, “We’re very close to concluding some arrangements for a tax rebate.”

But a more cautious Sen. Henry J. Mello of Watsonville, lead negotiator for Senate Democrats, voiced concern that he may have difficulty selling the program.

He said many Senate Democrats oppose mailing out a rebate check to Californians around Christmas, a politically alluring idea demanded by Assembly Republicans and preferred by Deukmejian.

Republicans like the check idea because, in their view, it probably would win points with voters and illustrate the benefits of the state’s newly activated spending limit. Many Democrats, on the other hand, want to soften the spending limit and spend more money on education and other programs.

“There is very little support, if any, for the check in my caucus,” Democrat Mello said.

Low Income Homeowners

The senator added that Senate Democrats also strongly believe that low-income elderly homeowners with little or no income tax liability should get a cut of the rebate. And he said Senate Democrats are likely to balk, too, unless a rebate agreement includes additional aid to big-city schools.

Basically, the proposed compromise would return $900 million of the budget surplus to income taxpayers and the remaining $200 million to low-income renters and senior citizens who filed a 1986 tax return but had no tax liability.

The tentative agreement would provide a maximum $100 payment to a single filer and $200 to a couple filing a joint return. Likewise, low-income renters and senior citizens would receive about $38 for single filers and about $76 for couples.

The mammoth $1.1-billion surplus cannot be legally spent by the state and must be returned to taxpayers under a 1979 voter-approved law that established limits on expenditures by state and local governments and school districts. The law was unexpectedly activated for the first time this year when revenues exceeded a formula based on growth in population and increases in inflation.

Deukmejian proposed in June that the entire sum be returned to income taxpayers because they accounted for most of the surplus. However, he recently agreed to try to reach a compromise with Democrats who had pressed for funneling it to public schools or to reducing the sales tax.

Participants in the rebate negotiations said Senate Democrats adamantly insisted that hard-pressed urban schools, such as the Los Angeles Unified District, receive about $87 million in state aid as the price for endorsing a rebate-by-mail plan. They termed this a “deal-closer.”

“We are going to insist that urban impact aid be part of the arrangements for a tax rebate,” Condit said. “My understanding is that we have an agreement on urban impact aid as a closer. I’ve found no opposition from the governor’s staff on that issue.”

But Jesse R. Huff, Deukmejian’s director of finance and one of the negotiators, indicated that inclusion of the school funds was “on the table” only for discussion.

“It is something on the list of unfinished business,” Huff said. Although only two days remain before adjournment of the current legislative session, Huff added: “There’s a lot of time left.”

Also talked about as other “deal-closers” were such unresolved issues as approval of $110 million in grants to county governments and up to $18 million for Deukmejian’s highly touted “Rural Renaissance” program for economically depressed rural counties.