Deal Near on Record Bond Plan : $1-Billion Highway Issue Would Be Voted On in June

Gov. George Deukmejian and legislative leaders have agreed to put the governor’s $1-billion transportation bond issue on the June 7 primary election ballot, bringing them “very close” to agreement on a record bond package of more than $5 billion, legislative and executive officials said Friday.

The agreement anticipates raising $1.6 billion in construction funds for public schools, with an $800-million bond measure going on the ballot in June and another $800-million proposal in November. It also includes bond measures to provide new construction money for clean drinking water plants and new prisons.

Since money from bond sales is not subject to the state spending limit imposed by voters in 1979, bonds have become an irresistible way to fund crucial needs. They are politically appealing to the conservative Deukmejian because they provide a way to raise money without raising taxes.

Talks Continuing

Negotiations on the bond package are continuing, but officials say final agreement is so close that there could be votes in the Assembly or Senate on individual bond measures as early as next week.

Agreement on the transportation bond package represents a victory for Deukmejian, who refused to yield to demands by Democrats in the Assembly that he finance the transportation bond proposal with taxes and fees levied on motorists and truckers.

The governor’s bond measure, if ultimately approved by voters, would represent a historic turn in the way California highways are financed. For the first time, general tax revenues would be used to make principal and interest payments, rather than gasoline taxes and highway user fees.

Democrats fought the measure on the grounds that bond repayments would take general fund tax money away from other areas such as public schools, prisons and health and welfare programs.

Gann Proposal

But another bond measure, an initiative sponsored by anti-tax crusader Paul Gann that would earmark at least $600 million in general tax revenues annually to repay highway project bonds, cast a giant shadow over the deliberations.

That measure already is set for a June primary vote and Deukmejian last week warned that he might support it if the Legislature did not agree to his bond measure.

Democrats in the Senate and Assembly said Friday that it was their understanding that if the governor gets his $1-billion bond measure on the June ballot, he will oppose the Gann highway funding initiative.

“It’s our understanding, from talking with Administration officials, that if the governor has the general obligation bond measure on the June ballot, he will also oppose the Gann initiative,” said Assemblyman Richard Katz (D-Sepulveda), chairman of the Assembly Transportation Committee, who participated in a private meeting with Deukmejian on Thursday when outlines of the agreement were reached.

The question of whether he will oppose the Gann measure reportedly did not come up during face-to-face talks between Deukmejian and legislative leaders.

Deukmejian Press Secretary Kevin Brett said the governor will not tip his hand until the Legislature approves his bond proposal.

“The bond package is not final. The determination on the Gann initiative is going to be made after the bonds reach the governor’s desk, and not before,” Brett said.

‘Very Small Band-Aid’

Katz, who was sponsoring a rival $3.3-billion transportation bond measure, said he still does not think the governor’s measure will provide enough money to adequately address the problem of traffic congestion on California highways.

“It’s a very, very small Band-Aid,” Katz said. But he said Deukmejian’s measure is better than the Gann measure.

“The governor’s proposal would cost the general fund about $100 million a year to repay the bonds, whereas Gann would cost $600 million. Of the two, the governor’s has much less impact on the general fund, and it is certainly preferable to those who want to ensure the adequate financing of schools, hospitals and cities and counties,” Katz said.

If agreement on the overall bond package is not reached, the plan to put the transportation bonds on the June ballot could unravel.

The question of the best way to finance new highway construction was just one of a number of issues that plagued the governor and lawmakers during a series of negotiating sessions spread out over several weeks.

The negotiating sessions reduced the bond package from more than $7 billion to just over $5 billion, a figure the political leaders hope will allow them to protect the state’s AAA bond rating.

First Installment

Deukmejian’s $1-billion highway funding proposal would represent the first installment on the $2.3 billion the governor ultimately hopes to raise for highway construction and mass transit operations. He wants to put a $1.3-billion bond measure on the ballot in 1990.

Also part of the tentatively agreed-on package is $600 million for housing, which represents a compromise between Assembly and Senate Democrats. This is one of the areas where there is continued disagreement. Negotiators are trying to combine a plan to provide low-cost housing to the poor and homeless by Senate President Pro Tem David A. Roberti (D-Los Angeles) with a proposal by Assembly Speaker Willie Brown (D-San Francisco) to provide money to rehabilitate earthquake-threatened residential housing.

The agreement also calls for $835 million to be spent on prison construction and expansion. Those pressing for expansion of the prison system had hoped for a bond measure in the range of $850 million to $1 billion.

Another compromise would provide $600 million for construction projects at the state colleges and the University of California system, down from $800 million sought by higher-education interests.

Other bond measures would provide $75 million to improve public libraries, $200 million for various clean-water projects and $150 million to aid in the fight to control toxic waste.

Other Measures

All of the bond measures would be repaid with general tax revenues.

In addition, there will be two other bond measures on the ballot this year. One would provide $510 million in home mortgages for California veterans. Another, put on the ballot as the result of an initiative sponsored by environmental groups, would provide $776 million for expansion of state and local parks.

Speaker Brown said after Thursday’s meeting that a major unresolved issue is his demand for affirmative action legislation that would steer a fixed share of bond business to legal and financial firms owned by minorities and women.

As it stood Friday, Brown was planning to put the affirmative action legislation in a separate bill, rather than incorporate it in each individual bond measure.