Tentative Budget Cuts Still Leave Big Deficit : Spending: Assembly negotiators agree to $863 million in reductions. That would be about $2.6 billion short of what is needed to close the revenue gap.

Assembly negotiators tentatively agreed to a package of $863 million in budget cuts Monday, but they were still roughly $2.6 billion short of what it will take to close a huge revenue hole in the state budget, officials disclosed Monday.

Assembly Speaker Willie Brown (D-San Francisco) announced the budget-cut proposal--in essence conceding to spending reductions first recommended by Gov. George Deukmejian--after a private session with Republican and Democratic lower-house leaders. He said negotiations were continuing. Several staff sources described the package of cuts as preliminary and said they are subject to change.

But Brown sounded optimistic when he told reporters: “We’re probably somewhere near $1 billion now in recommended cuts that I would support.”

In another development that could have important implications on the budget, an alcohol tax increase measure fell in a lopsided vote in the Assembly, but legislative leaders said they hope to be able to round up enough votes to ultimately win approval for the proposed constitutional amendment.

The tax proposal, which would require voter approval, went down on a 26-19 vote. It needed 54 votes, or a two-thirds majority, for passage. Backed by the beer, wine and liquor industry, it would raise taxes on alcoholic beverages by $200 million, just about one-quarter of the amount that would be raised by the much-tougher “nickel-a-drink” ballot initiative that will be offered to voters in the November general election.

Many of the votes cast in favor of the measure came from Republicans who are among the most ardent tax-increase foes in the Legislature.

One Republican, Assemblywoman Bev Hansen (R-Santa Rosa), who represents a sizable chunk of California’s wine country, said supporting the tax increase “is not an easy thing to do.” But she said that she thinks the proposal before the Legislature will be much less harmful to the wine industry than the initiative.

The Speaker said he was encouraged by the Republican votes. Brown immediately speculated that the liquor tax measure, even though it requires voter approval, could be linked to a proposed freeze in welfare benefits proposed by Deukmejian.

If voters approve the measure, then the money would be available for the benefit increases, Brown said. But if it is defeated, then the cuts would stand, the Speaker said.

Brown described linking the tax increase to the freeze in welfare benefits as a potential “deal closer” that might remove the final contested issue in a negotiated budget settlement between Deukmejian and Democrats.

If the $863-million package of cuts is ultimately agreed to by Deukmejian and Senate negotiators, it would still leave them $2.6 billion to $2.7 billion short of what they would need to balance the proposed $56-billion state budget for the 1990-91 fiscal year that will begin Sunday.

While leaving them still well short of their goal, agreement on even a preliminary package of cuts by Democrats was the first significant movement in weeks.

Already on the table is a list of $1.5 billion in proposed cuts made by Deukmejian.

In their proposal, Assembly Democrats agreed to go along with $50 million in cuts in county health services, but rejected another $100 million in county health program reductions sought by the Republican governor.

The Democrats also rejected a $24-million cut in family planning services sought by Deukmejian, and once again refused to go along with the $262-million savings that would be generated by the freeze in benefits to welfare recipients and aged, blind and disabled people receiving supplemental income payments from the state. They are in line for 4.6% increases.

The Assembly Democrats did agree to cut $95 million, the full amount sought by Deukmejian, from the state’s work program for welfare recipients, known as Greater Avenues for Independence.

Other significants cuts on the Democrats’ list included $72 million in aid to counties for programs mandated on local governments by the state; $12 million from the California Arts Council, more than half its budget; $10 million from various Deukmejian-backed programs such as the Rural Renaissance farm aid program.

The Democrats also agreed with Deukmejian on $99 million in cuts from the University of California budget, and $50 million in reductions from the California State University budget.

In addition, they supported Deukmejian’s proposal to eliminate $87 million proposed for merit salary increases for state employees.