Legislators Hoping to Spread Around $2.5-Billion Windfall

The general framework for a budget compromise emerged in the Capitol on Thursday as legislators sought to use part of the $2.5 billion in newly found revenues to avert proposed cuts in health and welfare programs.

Under current law, the lion’s share of the windfall would go to public schools and community colleges because of provisions of Proposition 98, the school spending initiative approved by voters last November.

The Department of Finance estimates that public schools and community colleges are now in line to get about $1.9 billion of the $2.5 billion, with about $350 million available for taxpayer rebates and only about $250 million left to be divided up by the rest of state government.

Lawmakers said Thursday that is not enough because the governor’s $47.8-billion budget includes $750 million in health and welfare cuts. Lawmakers are particularly incensed because the cuts are proposed at a time when medical trauma centers are closing around the state, mental health programs are faltering because of past budget cuts, welfare mothers are squeezed by rising rents and food costs, and the number of Californians unable to afford health care is growing.

Negotiations on a possible budget compromise began almost immediately after Deukmejian announced the surprising windfall Wednesday. A group of legislators met Wednesday to discuss the possibility of suspending the voter-approved spending limit and Proposition 98 and another group met Thursday to discuss transportation budget issues.

According to a well-informed source, a veteran of past budget wars who asked not to be identified, Republicans have embraced a plan first outlined by Assemblyman William P. Baker (R-Danville) as their negotiating posture. Democrats said they are willing to listen and negotiate.

The GOP plan would incorporate a desire by Democrats to limit the schools’ share of the new money to 40%, or about $1 billion, and free up the rest for spending on other programs.

In return, Republicans are going to insist that Democrats suspend automatic cost-of-living increases to welfare recipients, something first proposed by Deukmejian and immediately criticized by Democrats. GOP lawmakers also want Democrats to agree to Deukmejian’s proposed transportation program, including a ballot measure asking voters to approve an immediate 5-cents-a-gallon increase in the gasoline tax, followed by four penny-a-year increases in the tax to a maximum of 9 cents.

GOP legislators are willing to support efforts to suspend the voter-approved Gann spending limit, but in exchange they want Democrats to agree to a constitutional amendment that would require all future tax increases to be approved by voters.

Democrats have said they favor a ballot measure to repeal a portion of the voter-approved spending limit and provide schools with the 40% split of the money--but none of the other items on the GOP agenda.

Both Senate President Pro Tem David A. Roberti (D-Los Angeles) and Assembly Speaker Willie Brown (D-San Francisco), who have been negotiating directly with Deukmejian, said they are optimistic about reaching an agreement with Republicans. They said Republicans, particularly Deukmejian, have not taken an absolute position on any particular issue and appear open to compromise.

For the first time this week, Roberti said he is willing to talk about suspending automatic cost-of-living increases on welfare and other government programs, something which he had never been willing to discuss before.

On Wednesday, Roberti said the stakes were just too high not to negotiate. “It would be a crime not to do anything about the problem (of health program cuts) when we have this money available,” the Senate Democratic leader said.

Speaker Brown said Deukmejian has made what he considers an unprecedented effort to involve Democrats in negotiations. “It is clearly an open dialogue process that appears to be meaningful,” Brown said.

Republican Assemblyman Baker, who came up with the original proposal, said, “I’m very optimistic that a compromise can be reached.”

‘Extremely Optimistic’

After meeting with Baker and other negotiators Thursday, Assemblyman Richard Katz (D-Sylmar) also said he was “extremely optimistic.” Katz added, “I’ve expressed optimism before, but this time I think something is going to happen.”

All parties to the negotiations cautioned that talks are still in their early stages and a formal agreement is far from certain.