Accord Reached on Rebate: Check Will Be in the Mail

Gov. George Deukmejian and legislative leaders reached agreement Thursday on a delicate compromise to rebate by check the state’s $1.1-billion surplus to income taxpayers and those who do not earn enough to pay income taxes.

Later Thursday night, the Assembly approved the plan on an overwhelming 69-4 vote. The Senate intends to take up the bill today. For it to become law, the measure must be sent to the governor by midnight tonight when the Legislature adjourns for the year.

Accord on the income tax rebate, which state officials said could start Nov. 1 and extend through the Christmas shopping season, was informally tied to approval of an $87-million plan to provide extra state aid to school districts with large numbers of poor and minority children.

The Assembly also passed the school aid measure on a lopsided 67-5 vote and sent it to the Senate.

Under the rebate proposal, single income taxpayers who filed tax returns in 1986 would receive up to about $118 and couples would get a maximum of $236. Low-income single Californians who filed would receive $32 and couples would get $64, whether they paid a tax or not.

The package, agreed to by Deukmejian and legislative leaders of both parties at a meeting in the governor’s office, appeared to all but write an end to a summer-long wrangle over how to distribute the unexpected surplus. And it gave Deukmejian most of what he wanted.

The Legislature wasted no time in pushing the package toward approval once it was agreed to by its leaders and the governor. Two hours after the negotiating session, a six-member Senate-Assembly conference committee quickly endorsed the plan and sent it to the floors of both houses. The plan was amended into a bill sponsored by Assemblyman Gary A. Condit (D-Ceres).

Agreement between the governor and the legislative leaders was reached at the third meeting in as many weeks hosted by Deukmejian in a face-to-face effort to resolve major issues. These cordial sessions contrasted sharply with the bitter discord that marked relations between the governor and Democrats during previous years as the Legislature prepared to adjourn.

Democrats in both houses had insisted that the so-called urban impact aid to big city schools be part of any bargain to distribute the surplus. Los Angeles City Unified School District would receive about $31 million.

The urban aid bill, sponsored by Sen. Robert G. Beverly (R-Manhattan Beach), basically restored funds previously vetoed by the governor from the current state budget.

Although some of his fellow Democrats have bitterly opposed the rebate check proposal, Senate President Pro Tem David A. Roberti of Los Angeles said most Senate Democrats support the bill as the best compromise that could be obtained.

‘Issue Is Settled’

“The urban impact aid issue is settled,” said Assembly GOP leader Patrick Nolan of Glendale. “And the rebate issue is settled.’

An estimated 8.5 million Californians who filed an income tax return in 1986 would be eligible for a rebate of 15% of their taxes paid up to an estimated $118 for single filers and $236 for couples.

In addition, 3.5 million Californians, mostly low-income renters and senior citizen homeowners, who filed returns but did not pay an income tax in 1986, would be eligible for a rebate payment. In an effort to meet a Democratic demand that these people also get a share of the wealth, the agreement called for a $32 check.

Deukmejian originally proposed that the entire surplus be returned to people who contributed the most to it--income taxpayers. Democrats, at one time or another, proposed that the riches be returned to schools, that the sales tax be suspended during the Christmas shopping season to consume the surplus and that government entities be temporarily excluded from paying the sales tax.

During often intense negotiations between Administration representatives and legislative negotiators, those proposals fell off the table.

Spending Limits

In essence, the agreement reached by Deukmejian and the legislative leaders would direct about $900 million to Californians who paid income tax in 1986 and roughly $200 million to low-income persons who filed a return but paid no tax.

The unanticipated rebate occurred this year for the first time under a 1979 ballot initiative sponsored by anti-tax activist Paul Gann. The popular ballot measure established limits on spending by state and local governments and school districts.

The so-called Gann limit requires the state to return to taxpayers any revenue collected in excess of the amount allowed under a formula based on population growth and inflation. Many Democrats support an effort led by state schools chief Bill Honig to soften the limitation so more money can be made available for schools and other financially hard-pressed governmental entities.

Assembly Republicans have insisted that the rebate be made in the form of a check instead of a credit on tax returns due April 15. Basically, they maintain that a check would demonstrate to voters that the “Gann limit works” and that if left unchanged would provide additional rebates in the future.

However, the rebated checks, which would be signed by state Controller Gray Davis, a Democrat, would be considered income under the newly overhauled federal tax law.