Counties Feel Fiscal Squeeze : Legislature: Failure to agree on a state budget is choking financial pipeline to local level. No progress is reported in breaking the stalemate.

The political impasse that has held up a new state budget has already hit with painful effect at the local level, but officials say things will get worse this week if welfare checks are held up.

The worst is yet to come, for Gov. George Deukmejian and the Legislature are considering budget reductions in the range of $1 billion to $3.6 billion--lasting cuts that will hit counties and human service programs the hardest.

County officials from throughout the state have had big pieces of the state budget problem dumped squarely in their laps because of the bitter political fight between Deukmejian and Democratic leaders over a new $50-billion-plus state budget. Monday marked the ninth day that the state operated without a budget, thus lacking the authority to pay its bills. That means that the financial pipeline that counties rely on for some of their largest operating revenues has been shut off.

Even though Controller Gray Davis announced Monday that he was ordering the immediate payment of $115 million in state bills to doctors, hospitals and others who contract with the state to provide medical services to the poor, those bills date back to June 8. Two subsequent payments have been held up, including a $176-million payment that should have been made Friday.

The budget stalemate continued Monday with little progress. Although both the Senate and Assembly held floor sessions, neither considered tax or budget bills.

A $198-million payment to cities and counties as their share of motor vehicle license fees will not go out today, as scheduled, because of the budget impasse. If there is no agreement by Thursday, the controller will not be able to distribute $330 million in sales tax money to local governments, or make a $119-million payment to Medi-Cal program providers, or a $139-million payout to counties for welfare grants to people on the Aid to Families With Dependent Children program. A day later, counties are owed $109 million from the state to help defray the cost of trial courts.

The possibility exists that legal aid lawyers, and attorneys for counties themselves, will go to court in an effort to force the state to go ahead with at least the welfare payments.

Davis seemed to invite such a suit: “In 1983, counties brought suit against the state and at least won a temporary restraining order. Clearly, that is an option available to them in 1990.”

Officials in Los Angeles, Orange and San Diego counties said they have enough county funds to cover this month’s AFDC payments.

But Tulare, Siskiyou and Yuba counties have already warned thousands of welfare recipients that they may not get their checks because the counties do not have the money.

That is not to say they are the only ones complaining.

Los Angeles County Chief Administrative Officer Richard B. Dixon said that “problems mount” each day the state fails to adopt a budget. “We have the cash,” Dixon said. “But when we use our cash, we are losing interest income. As the year goes on, we will have less money to spend to meet our health and social service obligations.”

In Ventura County, the Board of Supervisors today is to consider a $2.5-million emergency loan to permit payments to about 8,000 welfare families.

The budget crisis began to be felt locally July 1, when the controller held up paychecks for people providing in-home support care to ill and elderly shut-ins who qualify for state aid. People providing this service get around $4.25 an hour, the minimum wage, and are said to be ill-prepared to be able to cope with even a week’s delay in their pay. The state sends checks directly to them.

Lee D. Kemper, a lobbyist for the County Welfare Directors Assn., said that initially about 3,500 people were affected by the holdup of checks for in-home support service workers. If the impasse continues until Friday, paychecks for 130,000 more people will be held up, Kemper said.

Vaughn Jeffery, a spokesman for the San Diego County Department of Social Services, said: “San Diego County has 8,000 individual providers who care for 10,000 disabled adults and senior citizens through In-Home Supportive Service. For some of these people it’s a primary income and it’s a direct hardship on them.”

Larry Leaman, Orange County’s director of social services, said he fears the state’s failure to pay its bills may force many of the county’s 5,000 IHSS workers out of business.

“We’re concerned about how long the providers are going to be willing to wait before they decide they’ll have to eat and go out and get a job pumping gas,” Leaman said. “It could force institutionalization of some elderly and disabled, which is a social tragedy, first, and also a more costly approach to service.”

On top of the IHSS payments, the state has delayed two major payments to doctors, hospitals and nursing homes that contract with the state to provide medical services to the poor under the Medi-Cal program.

Lori Aldrete, a spokeswoman for the California Hospital Assn., said the state last Friday missed a payment of $176 million to Medi-Cal providers and owes for bills to have been paid June 22.

John Henning, administrator at Continana Convalescent Hospital in San Diego County’s National City, said the payments going out now for June’s bills are coming just in the nick of time.

In Orange County, Leaman said the holdup of checks comes at a time when fewer and fewer doctors are treating Medi-Cal patients. “They’ve been gradually dropping out and another black eye--late payments--is going to exacerbate the shortage,” Leaman said.

Meanwhile, county officials were worrying aloud about the day when the budget finally passes.

Kemper said at least $700 million is in jeopardy, including specific cuts targeted to trim 42,000 people cared for under the IHSS program, reduce or eliminate child-abuse prevention and children’s welfare services, roll back on funds going into mental health and hospital programs, and cut funds for family day-care licensing.

On top of that, Deukmejian wants to cut counties $150 million across-the-board, and take another $25 million out of a specially created program designed for the poor who do not qualify for Medi-Cal.

In San Bernardino County, Supervisor Larry Walker was steaming. “This may well be the year that counties say to the state, ‘OK, if we don’t get the money to run these programs, then we’ll shut them down,’ ” Walker said.

Contributing to this story were Times staff writers Jenifer Warren in San Bernardino County, Richard Simon in Los Angeles County, Rose Ellen O’Connor in Orange County, Richard A. Oppel Jr. in San Diego County and Daryl Kelley in Ventura County.