Senate Budget Takes Beating in Assembly : Spending plan: Negotiations go back to square one. Committees will try to hammer out some agreement over the weekend.

Making good on its threat, the Assembly on Thursday flatly rejected a bipartisan Senate-passed budget and returned the state’s fiscal negotiators almost to square one.

The action leaves the state in its 13th day without a budget. Until the Legislature passes and the governor signs a new spending plan, the state has no authority to pay its bills or send checks to local governments, welfare recipients, state employees and contractors working on state projects.

In a series of lopsided votes, Assembly Republicans opposed to higher taxes and Democrats objecting to spending cuts turned back the Senate plan. Leaders of both parties argued that the upper house’s proposal was a hastily drafted, unworkable concoction intended only to project the image that the Senate had done its job.

The Assembly also created two committees to negotiate over the weekend with the Senate on spending and taxes.

If the panels cannot forge an agreement by Monday, Assembly Speaker Willie Brown (D-San Francisco) said he is prepared to send Gov. George Deukmejian what he has demanded: a budget without new taxes. But Brown said the budget would not include changes in the law that Deukmejian needs to make the cuts he prefers, which would force the governor to slice deeply into programs that serve the middle class and the wealthy as well as the poor.

Republicans, however, said they would not vote for such a plan, which would require Deukmejian to cut $2.2 billion from about $11 billion worth of programs that are not protected by law, including the University of California, the California State University, mental health programs and the prison system.

Beneath the rhetoric, there were signs that the framework for a deal might be in the making. One proposal would include taking $800 million in motor vehicle license fees now going to the cities and giving it to the counties instead. The county money freed by the move would then be shifted to other state programs.

Combined with the $1.7 billion in cuts Democrats have already accepted and $900 million in new taxes they believe they can persuade the governor to approve, the transfer would leave negotiators just $200 million short of closing a $3.6-billion gap.

James Harrington, a lobbyist for the League of California Cities, said the cities are “very concerned” about the proposal. “That (transfer) would be disastrous to an awful lot of cities,” he said.

Meanwhile, a lawsuit filed Thursday in federal district court by a coalition of welfare rights groups charges that the state would be violating federal law if it does not approve the distribution of benefits for 1.9 million Californians receiving Aid to Families with Dependent Children. The suit is scheduled to be heard today.

At least five counties with a total of about 50,000 welfare recipients have announced that they lack the means to issue benefit checks due today and early next week. The lawsuit seeks, as a first step, a restraining order to prevent the state from holding up payment of $149 million in welfare benefits.

The Senate’s $50-billion budget, approved Tuesday night, included $1.7 billion in program cuts and $1.3 billion in new taxes and fees, and it left the door open for the governor to cut another $550 million to create a 3% reserve. The plan was contained in a package of 18 bills the Senate passed before leaving town for a summer break.

Assembly Republican Leader Ross Johnson of La Habra said the Senate move could be regarded as “grandstanding” because the package was passed with the full knowledge that it was opposed by the governor and the leadership of both parties in the Assembly. He said any successful compromise will have to be acceptable to all five leadership negotiators: the governor and the Democratic and Republican leaders of both houses.

“Two of the five parties cannot simply take their bat and ball and go home,” Johnson said.

Speaker Brown was more blunt, calling the Senate strategy “ludicrous” because it was not designed to produce 54 votes--the number needed in the 80-member Assembly to pass a budget with the required two-thirds majority. Brown said many of the bills in the package were “flawed.”

“They were clearly done in pursuit of image and image only,” he said.

Times staff writer Max Boot contributed to this story.