Budget Deadlock: A Matter of Viewpoint : State: The governor sees a healthy, robust economy and refuses to raise taxes. Democrats see a different picture, with the burden falling on the poor, the frail and the mentally ill.

Gov. George Deukmejian surveys the state he has governed for nearly eight years and sees a robust economy made possible by his refusal to raise taxes. As for those who have missed out on the boom, the son of Armenian immigrants recalls that his parents would have been too proud to accept the kind of government assistance handed out to California’s chronic poor.

The Democrats who control the Legislature see a different state, where the rich keep getting richer and the poor, the frail, the mentally ill keep getting a cold shoulder.

Deukmejian would close the state’s $3.6-billion budget gap by holding the growth in spending in line with current tax revenues, a feat that probably cannot be accomplished without repealing or suspending the automatic cost-of-living raises the law provides for the aged, blind, disabled and welfare recipients.

The Democrats, on the other hand, would raise taxes and fees to minimize cuts in services.

Until one side or the other yields significantly, the deadlock will continue and the state will be without a budget for the fiscal year that begins Sunday.

Michael Frost, Deukmejian’s chief of staff, said the gulf between the governor and the Democratic leaders is showing no signs of shrinking.

“We are obviously very, very far apart,” Frost said. “There are some deep-seated philosophical differences.”

Deukmejian has made it clear he does not intend to budge from his position that the fiscal crisis is the fault of state laws that guarantee increases in funding for schools and health and welfare programs even if tax proceeds are not rising fast enough to pay those bills.

But the Assembly’s chief budget writer, Democrat John Vasconcellos of San Jose, said Deukmejian is ignoring the fact that, even without benefit increases, the number of schoolchildren and poor people who must be served is growing faster than the state’s revenues.

“It’s cruel,” Vasconcellos said of Deukmejian’s latest proposal. “It is a formula for a callous California. That’s not my California. I’m a native. I’m proud of this state, its people, its generousity, its foresight.”

Despite the apparent chasm, some moderates held out hope Thursday that the rhetoric would subside soon and the leaders would do what they have always done in the past: cut a deal.

“This is an impasse between political hyperbole and governmental reality,” said Assemblyman Phillip Isenberg (D-Sacramento). “Everybody is waiting for the magic formula to emerge where nobody is going to get blamed for doing what they all know they have to do. It doesn’t take a genius to figure out that you’re going to have a mixture of increased revenue and serious cuts.”

Although Isenberg’s analysis may prove correct in the long run, the short-term chances for a breakthrough look bleak. In the Assembly, conservative Republicans who have allied themselves with Deukmejian for seven years are standing firm with the governor against taxes. Liberal Democrats say they will not vote for a budget that cuts deeply into programs.

“The far right thinks that if it all falls apart they are going to build a smaller government out of the ashes,” said Assemblyman Richard Katz (D-Sylmar). “The far left believes in an activist government meeting needs and raising whatever revenue it takes to get to that point. Those in the middle who are trying to solve the problem are just getting whipsawed by the extremes.”

In addition to taxes, the major issue blocking consensus is Deukmejian’s proposal to scrap the cost-of-living increases that would give welfare recipients--mostly single women and their children--a 4.6% increase next year. The boosts would also go to aid for the aged, blind and disabled and the state Medi-Cal program, which provides health care for the poor.

In a recent meeting with reporters, Deukmejian seemed to complain that seeking public assistance no longer carries the “stigma” it did early in this century.

“When my parents came to this country, and a lot of other people who were in their position, it would be frowned upon to have to go and seek assistance from the government,” he said. “The more these programs were expanded, greater numbers of people immediately began to go looking for that kind of help rather than trying to find other ways of supporting themselves and dealing with it.”

Deukmejian has sought fundamental changes in the welfare system since he took office in 1983, and he figures this is his last chance to fight for his convictions, said Senate Republican Leader Ken Maddy of Fresno.

“He feels very strongly about the issue,” Maddy said.

Republicans said Deukmejian emphasized during a briefing he gave them in May that he did not want to leave office with a trail of red ink.

They said the governor did not want to give his successor the chance to blame him for the state’s financial woes after he leaves office, just as he blamed former Gov. Edmund G. Brown Jr. for the 1983 fiscal crisis.

“He does not want to use smoke and mirrors to solve this thing, then have everybody come back saying, ‘Look what this guy left us,’ ” Maddy said.

Aside from the question of personal blame, Republicans said Deukmejian made it clear that he would not wish the troubles he inherited from Brown on either Republican Pete Wilson or Democrat Dianne Feinstein, who are running to succeed him.

In 1982, when Deukmejian first ran for governor, the state faced a $1-billion deficit, a problem due largely to a recessionary plunge in tax receipts. Just as they are doing now, Democrats pressed, unsuccessfully, to pass a major tax increase.

When the tax measure failed, Deukmejian was handed the problem of dealing with the deficit, which was to grow to $1.5 billion by the spring of 1983. Just a month or two into his term, Deukmejian found himself engaged in marathon negotiating sessions with Democrats, who were out to test the new governor.

Deukmejian also had to deal with suspicious Republicans in the Assembly, who remembered that he had carried a huge tax increase bill for Ronald Reagan when Reagan first became governor. Most of the Assembly’s Republicans had backed Deukmejian’s opponent in the GOP primary, Mike Curb, a former lieutenant governor, partly because they feared Deukmejian would give in to another tax increase.

“His first year was so difficult he wouldn’t wish that on anyone,” said Sen. Bill Leonard (R-Big Bear).

But Democrats argue that Deukmejian is seeking to do just that. The $800 million he proposes to withhold from education programs this year would, by law, have to be made up next year. They also contend that cuts in mental health funding, and programs meant to keep disabled persons and the elderly out of nursing homes, cost the state money over the long run.

“He has a whole different way of looking at life, at people, at institutions,” Vasconcellos said of the governor. “He lives in the same world his parents came over in. That’s not today’s world. That’s the sad truth at the heart of it all.”