Assembly Passes School Funding : Budget: GOP continues to block tax hikes and other items. But Speaker Brown’s willingness to compromise on welfare cuts is seen as a sign that accord is nearer.

The Assembly on Thursday passed and returned to the Senate a package of bills to protect funding for public schools, but Republicans continued to balk at any tax increases and managed to stall critical elements of a plan to resolve California’s huge budget deficit.

Although the Assembly’s vote on the school finance package fulfills the constitutional guarantees contained in voter-approved Proposition 98, it failed to meet the demands of public educators. Nonetheless, the Senate, which already has approved similar legislation, is expected to pass the package as soon as today and send it to Gov. Pete Wilson, who is expected to sign it.

Despite continued resistance from Assembly Republicans, there were signs that the two parties were moving closer to resolving the dispute over the budget’s $14.3-billion projected deficit.

Assembly Speaker Willie Brown (D-San Francisco), who had strongly resisted Wilson’s call for reductions in welfare payments, said he is now willing to vote for a 4.4% cut in welfare grants and a suspension of cost-of-living increases for three years. That falls short of Wilson’s proposal to cut grants by 8.8% and eliminate the cost-of-living increases. But Democrats are hoping that if the compromise is brought to a vote, Republicans will support it and go along with tax increases that Wilson and Senate Republicans already have agreed to.

Late Thursday, a two-house conference committee all but completed work on a roughly $56-billion budget plan for the 1991-92 fiscal year. In addition to the committee’s earlier recommendations on tax increases and spending cuts, the plan proposes to slash salaries and benefits for state employees by $350 million, institute a $112-million cut in prison funds that is opposed by Wilson and eliminate nearly $20 million for two branches of the Legislature--the legislative analyst and auditor general’s office.

Some legislative leaders remain hopeful that a final vote on the spending plan could be cast by Saturday’s constitutional deadline for passing a budget.

The education finance measures passed by the Assembly on bipartisan votes would provide $18.4 billion for schools during the fiscal year that begins July 1--exactly the amount needed to meet the requirements of Proposition 98. But the legislation requires schools to repay the state $1.2 billion that they received in the current fiscal year above what Proposition 98 required, leaving them short of what their backers say is needed to keep up with enrollment growth and inflation.

“Schools are still not in good shape,” said Assemblywoman Delaine Eastin (D-Union City). “This is a short-term quick fix in a disaster. But some of us are happy to have a quick fix because if you do any more damage to schools they are going to go down the drain.”

The compromise came together Wednesday night after Wilson dropped his insistence that about $300 million of the funding package be generated by allowing schools to skip one year of payments into the pension fund for non-academic employees. That provision was opposed by school employees who feared it would reduce their retirement benefits and by education groups concerned that the move would be overturned by the courts, leaving the schools short.

Instead, the legislation merely states the Legislature’s “intent” to provide the $298 million but does not name a source for the funds.

Still, agreement on the fragile package was enough to drive one member, Democratic Assemblyman Steve Peace of La Mesa, to tears.

Peace choked up as he told his colleagues that he was “worried” and “scared” about the fate of his three sons, who attend public schools in San Diego County. He praised Wilson for backing down from his proposal to cut the growth in school spending by $2 billion and settling for a $1.2-billion reduction instead.

“Thank you, Gov. Wilson,” Peace said. “Thank you, people, for being tough.”

The bipartisan cooperation on the schools compromise was all that came of a brief window of goodwill in the fiercely partisan Assembly, where a stalemate developed between Republicans opposed to new taxes and Democrats unwilling to make budget cuts as deep as Republicans are demanding.

The Assembly Republicans’ refusal to vote for other pieces of the still-forming package intended to balance the state’s $55-billion-plus budget reflects their insistence that agreement first be reached on the level of health and welfare cuts to be included in the spending plan. With Republicans voting no or abstaining, several proposals to help close the budget gap were rejected.

One was a proposal to shift $2.3 billion in mental health, public health and welfare programs to the counties, along with the money to pay for it. The package includes a cap on spending for services to the home-bound elderly and payments to the homeless in the form of general assistance, the most basic form of welfare.

Several Republicans praised the concept but said they would not vote for it until Democrats agreed to reductions in welfare grants to poor women with children and other proposed cutbacks.

Among the funding measures tied to the so-called “realignment” of health and welfare programs was a proposal to increase vehicle license fees by $769 million. The bill would change the depreciation schedules so that the license fees, which decline each year after a car is purchased, would decrease at a slower rate.

For a 2-year-old car that was purchased for $20,000, the current fees are $340. Under the new fee schedule, the charge would be $360.

Another tax measure stalled by Republicans would increase taxes by $230 million on wine, beer and hard liquor. It has the same provisions as Proposition 126, which was defeated by the voters in November. The so-called “surtax” would add 16 cents to the cost of a gallon of beer and 19 cents to a gallon of wine.

Republicans also opposed Democratic-sponsored amendments to increase the top income tax rate on individuals earning $100,000 and couples earning $200,000 annually.

Time and again, Republicans warned their Democratic colleagues that no tax increases would clear the Assembly floor until the budget cuts demanded by Wilson and Republican lawmakers are at least in a form that could be voted on.

“We want to see structural reform,” said Assembly Republican Leader Ross Johnson of La Habra. “We mean the elimination entirely of some government programs that have outlived their usefulness and we mean changing the way we operate other government programs to make them more efficient and effective and reduce costs to taxpayers of California over time.”

The debate prompted Democratic Assemblyman Bruce Bronzan of Fresno to offer his own definition of the Republicans’ oft-repeated term, “structural reform.”

“While (Republicans) defend to the death multimillionaires from being taxed what they were three years ago, (they) want more cuts on people who are the most vulnerable,” Bronzan said. “That’s their definition of structural reform.”

The conference committee, made up of lawmakers from the Senate and Assembly, had hoped to finish its version of the spending plan Thursday night, to give enough time for the new budget to be printed and readied for a vote by Saturday. But, with only a few items left to vote on, the committee adjourned at the request of Wilson and legislative leaders, who still have not ironed out all their budget issues.

Before the committee adjourned, it approved a Wilson request to cut $350 million for state employee compensation. The money is the equivalent of 9,000 state jobs. But if Wilson Administration negotiators and state employee unions can reach agreement on salary or benefit reductions, officials said layoffs can be avoided.

Wilson has for two days chastised the Assembly for not moving forward, though it is his Republican colleagues who are holding up action. On Wednesday, he suggested that people tell their Assembly member to “get off your fanny” and start moving the budget bills forward.

Times staff writer Douglas P. Shuit contributed to this article