Budget Passed by Senate, Faces Stiff Assembly Fight

In a move to break the impasse that has left the state without a budget for 10 days, the Senate passed a $50-billion-plus spending plan late Tuesday. But the package, which includes $1.3 billion in tax and fee increases, headed into a solid wall of opposition in the Assembly.

The main budget bill, also opposed by Gov. George Deukmejian, was approved by a coalition of Republican and Democratic senators on a 32-8 vote.

An assortment of companion bills authorizing tax and fee increases passed in a series of bipartisan votes by the required two-thirds margin or more. The budget passed after a $3-billion deal was struck that calls for $1.3 billion in tax increases and $1.7 billion in spending reductions.

However, many of the budget and tax proposals may enjoy only a short life.

Assemblyman Bill Baker (R-Danville), who has been representing Assembly Republicans in budget negotiations, said Deukemejian told lawmakers Tuesday morning that he would not sign the Senate-approved budget bill in its present form.

“It’s dead on arrival,” Baker said. “Democrats don’t like the spending cuts. Republicans don’t like the tax increases. They’ve had their chance, now it’s our turn.”

Similar objections were raised during the Senate debate on the spending plan. Senate President Pro Tem David A. Roberti (D-Los Angeles) said it was a budget he would not “normally vote for.”

But Roberti argued that the Senate had “to get the ball rolling” because of the growing state budget crisis and he said the compromise spending plan is the best he and other lawmakers could come up with. “It’s our duty to pass a budget. It’s our duty to compromise,” Roberti said.

The continued Assembly-Senate friction made it seem unlikely that the two houses could reach agreement on a budget by Thursday, when the state is scheduled to forward $139 million to counties so they can distribute checks to the state’s nearly 2 million welfare recipients.

As long as there is no budget, the state controller has no authority to pay the state’s bills.

During a meeting Tuesday between the governor and legislative leaders, Deukmejian again made it clear he is opposed to any budget plan that incorporates tax or fee increases. At the same time, the governor continued--unsuccessfully--to pressure legislators to approve his plan to suspend Proposition 98, the constitutional funding guarantee to schools, and cut $800 million in school budgets.

Despite the governor’s opposition, Senate leaders decided to force the issue with their vote Tuesday.

On Tuesday, two rural counties joined three others that have said they will be unable to send checks to welfare recipients July 15 because of cash-flow problems. The two, Mariposa and Mendocino, joined Tulare, Siskiyou and Yuba counties. About 65,000 people in the Aid to Families With Dependent Children program will be affected.

Large urban counties, including Los Angeles, San Diego and Orange, say they have enough cash to cover at least the July 15 checks. Others, like Santa Clara, have said they can cover the mid-July checks but will not have enough to make Aug. 1 payments to welfare recipients if the budget stalemate continues.

Also in jeopardy are mid-month paychecks to about 5,300 California Department of Transportation maintenance workers. The last time the state missed a Caltrans payroll was in 1983 during Deukmejian’s first year as governor, when a budget was not signed until July 21 because of a protracted fight over state finances.

“At this point, it appears unlikely that we will be able to pay (the maintenance workers),” said Edd Fong, a spokesman for state Controller Gray Davis.

The state Tuesday missed one other payment to local governments--this one a $198-million disbursement of motor vehicle license fees that cities and counties rely on to help meet payrolls and daily operating expenses.

As a result, the state now owes $627 million in missed payments over the last 10 days to cities, counties, welfare workers, and to doctors, hospitals, nursing homes and others who contract with California to provide medical services to the poor under the Medi-Cal program.

By the end of the week, the amount of unpaid state obligations will reach $1.3 billion if there is no budget.

“The state is good for the money and when there is a budget we will be able to send out the checks,” Fong said.

Deukmejian and lawmakers are so far apart that the governor canceled a scheduled trip to a meeting of western governors this weekend in Fargo, N.D., and dropped plans for a trip to Canada July 18-20 for economic and trade meetings in Ottawa and Toronto.

Meanwhile, finance officials at top New York bond-rating agencies said they are keeping a close watch on California budget developments, but for now have no plans to lower the state’s AAA bond rating, affecting investment returns on billions of dollars in state bonds.

Steven Hochman, of the government finance section of Moody’s Investors Service, said California’s perfect credit rating could be in trouble if the budget deadlock continues much longer.

“We understand that there are sometimes protracted delays in passing budgets, but if it goes on for a longer period we might reassess things,” Hochman said.