NEWS ANALYSIS : Legislators Didn’t See Looming Budget Crisis : Finances: They failed to take the problem seriously enough soon enough, many of them now admit.

Bitter, weary and heavily criticized after creating havoc by missing the state budget deadline by six weeks, many legislators now admit they did not take their problem seriously enough soon enough.

“We failed early-on to recognize the depth of our problem and our limited number of options,” conceded Senate Republican Leader Ken Maddy of Fresno, echoing the view of many colleagues.

Forty-three days after they had been required by the state Constitution to pass a budget for the fiscal year that began July 1, the Legislature finally, grudgingly broke its record deadlock late Saturday night and sent a compromise $55-billion spending plan to Gov. George Deukmejian.

That tardy action, coupled with Deukmejian’s signing of the budget sometime before Wednesday, will assure the state government’s legal authority to again write checks and end the paralysis that has gripped the Capitol for a month.

In the end, the lawmakers passed a budget that looks very much like proposals that had floated around the Capitol for weeks. It will provide the full funding for education that is required in the state Constitution, but it cuts deeply into health, welfare and social programs. Business will pay higher taxes through changes in state income tax codes, and a variety of fees will hit everybody from out-of-state college students to campers at state parks.

The budget-cutting is not over yet. It is anticipated that Deukmejian will slice more than $400 million from targeted programs before he signs the budget.

With revenues failing to keep pace with the rising cost of operating the state, traditional political positions had to be altered to accommodate a new political reality. Republicans, including Deukmejian, had to accept tax increases and Democrats had to live with cuts in social programs. It was a hard shift that some lawmakers foresee continuing into the 1990s.

“What you see is a new approach to state budgeting for the next 10 years--substantial cuts and new revenues going hand in hand--that ultimately will lead to structural changes, but painfully and slowly,” observed Assemblyman Phillip Isenberg (D-Sacramento), who offered the outline of what became the final budget.

Maddy agreed. “Isenberg was right,” Maddy said. “He saw it (the problem) early. He helped convince me that Roberti (Senate President Pro Tem David A. Roberti of Los Angeles) and I should start talking.”

How did things get so out of control? Why were the Legislature and the governor unable to accomplish what ordinary citizens in private businesses routinely do every year in meeting a budget deadline?

There is no single answer, except perhaps for a shortage of leadership in the state Capitol. And there is no assurance that the budget-making process won’t bog down again in the future. Although the politicians failed to see the developing crisis, there were plenty of warning signs:

* There was no sense of urgency as the new fiscal year approached. Legislators believed they had been through all this before, many times. In seven of the previous 12 years, they had routinely ignored deadlines and caused state government to enter the new fiscal year without a budget. Government did not grind to a halt. Prison gates did not swing open. Freeways did not close. They got away with it. When necessary, courts came to the rescue and ordered the state to make benefit payments. Most important, no legislator was defeated at the polls because a budget had not been passed on time.

* There was the combination of an iron-willed Republican governor--insisting, in his last year in office, on two prisons in Los Angeles County and a mechanism to curtail automatic growth in welfare spending--versus a Legislature firmly controlled by combative Democrats. This prescription for deadlock is exacerbated by a requirement, which few other states have, that any budget or tax bill be passed by a two-thirds vote. Mixed into this quagmire are uncompromising, extremist politicians elected in gerrymandered districts designed to be safe havens for one party.

* During the critical month of May--as a $3.6-billion budget deficit emerged--key Democratic legislators turned their attention toward raising campaign money to defeat two Republican-backed reapportionment initiatives that threatened their ability to retain power. Major legislation, including the budget, was all but ignored. Meanwhile, Deukmejian devoted himself to campaigning for voter approval of an $18.5-billion transportation package.

* Legislators in recent years had become accustomed to a “May miracle,” when a looming, projected budget deficit suddenly was transformed into a surprise windfall of tax revenues. But no miracle occurred this year. The state’s fiscal situation only got worse. Faced with cutting programs and raising taxes, lawmakers procrastinated.

* Voters, using ballot initiatives, gradually have eroded the power of the Legislature and the governor to apportion tax money and raise revenues. This started with Proposition 13, which made it much harder to raise taxes, and continued with ballot measures imposing government spending limits and requiring that 40% of state general fund money be spent on schools. The result is that the flexibility of elected representatives has been substantially reduced.

* A Legislature does not operate like a private business that must make speedy decisions in order to survive. For instance, state legislators usually are in session only from noon Monday till noon Thursday; then they knock off for a long weekend.

Looking ahead, some legislators believe the budget deadlock may have sown the seeds necessary to help avoid a similar crisis in the future. They maintain that a new “trigger” device imposing automatic cuts when revenues do not meet expectations will provide the political impetus to head off a repeat disaster. The “trigger” was one of the Democratic concessions to Deukmejian in return for the governor’s support of tax increases.

Some Democrats also are talking about sponsoring a ballot measure to eliminate the two-thirds vote requirement for passage of a budget.

Despite all of the factors leading up to this year’s stalemate, if there had been stronger leaders able to recognize the danger signs, the crisis probably could have been avoided.

“The Democratic leadership failed to recognize the seriousness of the dilemma,” said conservative Assemblyman Tom McClintock (R-Thousand Oaks). “Our party failed to identify budget alternatives. The governor can be faulted for breaking a very emphatic campaign promise--’no new taxes.’ ”

On the other side, Assembly Democratic floor leader Thomas M. Hannigan of Fairfield agreed there was a shortage of leadership, particularly when talks between Deukmejian and legislative leaders broke off early. “It’s difficult to solve a budget problem when you do not have all the elements meeting to find a solution,” Hannigan said.

Another factor contributing to the stalemate was Deukmejian’s trademark hands-off style in dealing with the Legislature on budget matters. In the past, he usually would sit back and wait for the budget to reach his desk, then “blue pencil” veto any spending he opposed. This time, he needed the Legislature to pass separate bills authorizing certain program cuts--such as in health and welfare benefits--that he could not legally make on his own.

“The blue pencil didn’t work this time,” Republican Maddy noted. “The governor had to have us. I think that was a key.”

A chief obstacle to compromise was the deeply fractured Assembly composed of many die-hard ideologues, such as McClintock on the right and liberal Democratic Ways and Means Chairman John Vasconcellos of Santa Clara on the left. Both represent factions strongly committed to their views and resist compromise.

At one point, Assembly Speaker Willie Brown (D-San Francisco), frequently portrayed by his enemies as the ultimate big-spending liberal, blistered both left- and right-wingers. He called their refusal to compromise a “classic case in which two extremes can paralyze a democracy.”

Adding yet another hurdle to passage of a budget was the so-called “super majority,” or two-thirds vote requirement. This allows Republicans to block passage of the budget unless its demands are met because Democrats do not have a two-thirds majority in either house.

Charging that “a small, crazy band of anarchists dictate to a majority of the citizens,” Sen. Bill Lockyer (D-Hayward) announced that he will sponsor a ballot initiative to reduce the voting requirement to a simple majority. Lockyer and others noted that Congress enacts budget bills with a majority vote.

One hang-up in trying to reach a compromise was Deukmejian’s instance on “structural” reforms to eliminate the problem of revenues failing to keep pace with the spending habits of a rapidly growing state. He finally settled for the “trigger” device, a mechanism that pleased neither conservative Republicans nor liberal Democrats.

The compromise, patterned after the federal Gramm-Rudman law, automatically will enable future governors to cut up to 4% of most state programs when projected spending exceeds revenues by at least one-half of 1%.

Meanwhile, legislators reported that their telephone lines during the deadlock were burning up with angry calls from state employees, welfare recipients and others who depend on a state check for their livelihoods. But there was little response from other members of the public, they said.

Times Sacramento Bureau Chief George Skelton contributed to this story.

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