Judge Tells State to Release Welfare Funds : Budget: Legislative deadlock continues with no end in sight. Payroll missed for some state workers.

A federal judge, saying he was sparing thousands of welfare recipients from “great and irreparable harm,” ordered the state Friday to continue funding welfare programs while the Legislature resolves a budget stalemate that has paralyzed state spending since July 1.

Acting on a request by a coalition of welfare rights groups, U.S. District Judge Edward J. Garcia issued a temporary restraining order in Sacramento that prohibits the state from holding up $149 million in welfare benefits, mainly to single mothers and their children.

Had Garcia not issued the order, federal and state funds would have been withheld from the state’s 58 counties, whose agencies distribute family aid to 1.9 million Californians.

Most counties, including those in Southern California, had been prepared to draw on their own funds to meet welfare obligations at least temporarily. But five rural counties with about 50,000 welfare recipients--Tulare, Siskiyou, Mendocino, Mariposa and Yuba--had announced that unless the state released the funds, they could not afford to mail out benefit checks.

State Controller Gray Davis had said earlier that as long as the state was without a 1990-91 budget, his office was prohibited by law from releasing welfare funds. After the court ruling, a spokesman said Davis’ office would immediately wire the funds to the counties, and that people would receive welfare checks today or Monday.

“Oh, thank God!” exclaimed Stephanie Pratt, an unemployed Tulare County resident who is expecting a baby in August and depends on $225-per-month from the Aid to Families with Dependent Children program. Pratt feared that if she didn’t receive her mid-month check, she would be homeless by the time the baby arrived. “I won’t get kicked out of my house after all. I’m so glad to hear that!” she said in a telephone interview.

Although checks will be going out to welfare recipients, the state Friday missed a $6-million payroll for about 4,800 California Department of Transportation workers, and a $2.6-million payroll for 2,600 employees of the Legislature. Most state employees are paid only once a month, so they are not due to be paid until the end of July.

“I haven’t heard too many complaints from the men yet,” said Charles Wheeler, a Caltrans highways maintenance supervisor in Sacramento. “I have heard some grumbling. The people who live from paycheck to paycheck are going to be hurt.”

Kristen Rutter, a receptionist for the Assembly Ways and Means Committee, said: “I am one of the lucky ones. I have a little bit of money in savings. I’ll have to dip into my savings.”

The developments prompted Davis to ask the Legislature for a bill that would authorize him to continue making payments for essential services as the budget impasse drags on. As of late Friday, the state was holding up $1.2 billion in payments to doctors, hospitals and nursing home operators involved in Medi-Cal.

“Many of these missed payments are for local government and providers of services to the most vulnerable and needy members of our population. They should not be forced to bear the financial brunt of philosophical budgetary differences,” Davis said in the letter to Assembly Speaker Willie Brown (D-San Francisco) and Senate President Pro Tem David A. Roberti (D-Los Angeles).

Garcia’s order to release the welfare funds came in response to a suit filed Thursday by a coalition of welfare rights groups. Attorneys for Legal Services of Northern California and the Western Center on Law and Poverty charged the state with violating federal law by refusing to release state and federal welfare funds to the counties until the Legislature enacts a budget.

At Friday’s hearing, the welfare rights attorneys argued that the Social Security Act, which requires that payments be made “without delay” and “continued regularly,” takes precedence over the state Constitution, which requires legislative authorization before the state can spend money.

Deputy Atty. Gen. Barbara Haukedalen replied that the suit was premature because it was only “speculation” that some welfare recipients would not receive their benefit checks because of the budget deadlock.

Garcia said he believed “that great and irreparable harm would be suffered by welfare recipients if they don’t get the money they’re entitled to as soon as possible.”

Afterward, Haukedalen said that she would immediately seek an emergency stay of the restraining order from the U.S. 9th Circuit Court of Appeals in San Francisco. The appeals court was not expected to act on the motion before the welfare checks are mailed out.

A key legislator said the court ruling will relieve pressure on Democratic lawmakers to give in to Gov. George Deukmejian in the ongoing struggle to shape a state budget.

“Substantially, it’s correct, and politically it’s a plus, too,” said Assemblyman John Vasconcellos (D-Santa Clara), chairman of the Ways and Means Committee. “The million poor kids aren’t being held hostage anymore.”

In the Legislature, a two-house budget conference committee spent much of the day negotiating individual budget reductions. The painstaking work produced firm agreements on about $1 billion in cuts, but the amount is still well below the $1.7 billion that Republicans and Democrats in the Senate have agreed to eliminate from the budget.

The basic conflict, as it has been for six weeks, is whether the state will close a $3.6-billion revenue gap through a series of budget reductions, as Deukmejian is insisting, or through a combination of budget cuts and tax increases, which Democrats are bargaining for.

Vasconcellos, chairman of the conference committee, said he wants a 50-50 split between tax increases and budget cuts, meaning that spending rollbacks and tax hikes would each total about $1.8 billion.

Republicans on the committee have balked. “If you are looking for a 50-50 solution, it isn’t going to occur,” said Assemblyman William P. Baker (R-Danville).

The Assembly-Senate conference committee on taxes is scheduled to meet today and Monday in an effort to hammer out a bipartisan agreement.

Times staff writers Daniel M. Weintraub and Jerry Gillam contributed to this report.