Senate Passes Sales Tax Hike : Budget: The action would raise levy by 1.25 cents and lift some exemptions. The upper house also cuts monthly AFDC payments by $31 for a mother with two children.

Taking aim at the pocketbooks of the poor and virtually every Californian with a dollar to spend, the state Senate voted Sunday to hike the sales tax 1 1/4 cents and, in an unprecedented move, to sharply lower benefits to welfare recipients.

The upper house, acting to clear from the books a $14.3-billion budget deficit, voted not only to raise the levy on taxable purchases, but also to spread the increase to a long list of previously tax-exempt goods like candy, bottled water and newspapers.

Six Republicans joined 22 Democrats in sending the tax measure to the Assembly on a 28-10 vote during a rare Father’s Day session in the Legislature’s lengthening attempt to pass a $56.4-billion budget along with more than a dozen bills to balance it. The Legislature is already a day past its constitutional deadline to enact a budget and wide differences continued to slow progress. The badly divided Assembly met briefly, then adjourned Sunday without even trying to take a vote. As expected, Assembly Republicans said they were in no hurry to pass the tax legislation, which would raise $4 billion in new revenue during the 12-month budget year that begins July 1. It represents the largest piece of the $7.7-billion package of tax increases being sought by Gov. Pete Wilson and Senate leaders to help close a projected $14.3-billion deficit.

Because counties in California have a local option to raise sales tax rates on their own for specific purposes, the impact of the tax hike would be felt differently around the state. In Los Angeles and San Diego counties, the sales tax rate would rise to 8 1/4% on the dollar, in Orange, San Bernardino and Riverside counties to 7 3/4% and in Ventura County to 7 1/4%.

The Senate’s vote on welfare benefits, if ultimately approved by the Assembly, for the first time would force welfare benefits down instead of allowing them to rise with the increased cost of living. The law granting automatic increases to poor mothers with children in the Aid to Families with Dependent Children program would be repealed, with increases possible after three years, depending on the success of a program to toughen enforcement of collecting child support payments from fathers.

In the meantime, benefits would drop by 4.4%, amounting to a $31 per month cut in the $694 received by a mother with two children.

In another bill, the lawmakers voted to freeze for five years cost-of-living increases for aged, blind and disabled persons on a supplemental Social Security income program--but in the legislation provided for the recipients to receive inflation-related increases granted by the federal government. Thus, persons on the Social Security income program would get a 4.8% increase if the Assembly approves the plan.

Passage of the AFDC cuts occurred in an extraordinarily somber Senate, where members clearly were pained at casting their votes for the welfare reductions. Ordinarily, such a measure would have provoked heavy debate, but the budget compromise fashioned with Wilson seemed to have drained most senators of emotional energy.

Thirteen Democrats, 13 Republicans and one independent put the measure across. The no votes were all by Democrats.

The sponsor, Sen. Ken Maddy of Fresno, the GOP floor leader, simply asked for favorable votes on the legislation only on the basis that “this is part of the budget package.”

But Sen. Bill Lockyer (D-Hayward), in the only emotional speech, ripped his fellow lawmakers, arguing that reducing AFDC grants while giving more favorable treatment to the recipients of Social Security aid was a “disgraceful” political move aimed at softening any backlash at election time.

“The elderly vote,” Lockyer said.

Sen. Diane Watson (D-Los Angeles) said, “The people government is supposed to protect will be hurt the most. . . . This is the most Draconian of all the Legislation we have before us.”

The bill dealing with aid to the aged, blind and disabled was approved 32 to 0.

The votes in the Senate represented a big step toward ultimate solution of the budget problem. But the fate of the overall spending-and-tax increase package put together by Wilson and Senate leaders remains in doubt because of stubborn resistance in the Assembly and growing political problems in the Senate.

On Saturday night, the 31 Republicans in the Assembly refused to cast a single vote for the proposed $56.4-billion spending plan sent to them earlier in the evening by the Senate. The opponents contended it did not cut deeply enough into state government spending to justify the huge tax increases being sought by Wilson and Senate leaders.

Senate Republican Leader Ross Johnson of La Habra, maintaining his defiant stance Sunday night, vowed to continue to try to hold up budget legislation. “(Gov. Wilson) can make any deal he wants with the Senate. The last time I checked it was still a bicameral Legislature. . . . We are a wide, wide way apart.”

The rebellious mood seemed to spread to the Senate on Sunday, with one Democratic leader in the upper house saying some Democrats were in a mood for “war.” Party leaders from both sides, meanwhile, said serious hang-ups were developing over Wilson-backed moves that could result in massive state employee layoffs, reduced pension benefits, and a rollback on wages and benefits for state workers. Under the budget plan, the layoffs and salary rollbacks would be required even if the entire tax package is approved.

Senate Majority Leader Barry Keene (D-Benecia) said: “We’ve got members of our caucus who are prepared to go to war, and are prepared to man the barricades and renegotiate this from square one.”

Some Democrats were said to be incensed that Wilson either did not try or could not get a single Republican in the Assembly to vote for the budget they passed Saturday night. Others complained that they were being asked to vote on bills that were being rushed to the floor for action without proper background or analysis.

The tax bill was only one of more than a dozen bills needed to raise the money necessary to finance the spending in the new budget--or cut programs to keep the deficit from growing even larger. But it appeared to be the only one that Democratic leaders were confident enough to bring up for a vote.

Waving a single piece of paper that listed the budget bills awaiting action on the Senate floor--most of them with only two or three word summaries--Lockyer told reporters: “The general mood is that we’d like to know a little more detail about these matters before we vote for some of them.”

Referring to comments by Wilson and legislative leaders that they had hoped for quick votes on the budget package to both meet the constitutional deadline and generate momentum that would spread from bill to bill, Lockyer quipped: “That theory was premised on no one examining the bills.”

Adding to the problem was intense lobbying by public employee unions that were working to undo part of the budget compromise plan that would require layoffs and pension benefit reductions.

“We’re getting served up as the putty (in the budget deal),” said Brian L. Hatch, lobbyist for the California Professional Firefighters union.

Fighting the budget deal from a different side were school interests, upset that schools will not get enough money to avoid layoffs and other problems even though the budget deal agreed to last week by Wilson and Senate leaders would give schools full funding under Proposition 98.

Sen. Bill Leonard (R-Big Bear) said a squabble over $300 million of the $822 million in additional school funding that Wilson said would be provided if the entire budget deal is approved “seems to throw a big wrench into things.” The $300 million is linked to passage of a Wilson-backed plan to sweep up $1.1 billion in investment funds from the Public Employees’ Retirement System. School interests say they want a firmer guarantee that they will receive the money. They worry that if the pension plan is challenged and overturned in court they will lose the money.

But the Senate put aside those differences long enough to pass the sales tax increase.

The entire tax package would raise $4 billion during the next budget year--with $3.6 billion of it coming from permanent and temporary increases in the sales tax that would boost the rate by 1 1/4 cents.

One-half cent of the proposed increase, or $1.4 billion, would be handed over to counties to help pay for the state-to-county shift in mental health, public health and human services programs. That increase would be permanent, designed to provide on-going support to counties for the programs. Wilson would also like 1/4-cent of the tax hike to be permanent to provide on-going support for state programs.

The other 1/2-cent of the increase would be temporary and go into the state treasury to help wipe out the deficit. It would be lifted when the state eliminates its deficit and gets back on firmer fiscal footing. Plans now envision the tax being lifted in 1993.

In addition to the increase in rates, the legislation would raise another $462 million annually by extending the sales tax to newspapers and periodicals, a long list of snack foods and candies, leased equipment, fuel used by jets and ships, and bottled water.

One of the opponents of the measure, Sen. Art Torres (D-Los Angeles), said the tax package would hit blue-collar workers the hardest and complained that Wilson was using the sales tax to raise revenues to avoid an income tax increase on wealthier taxpayers. And, by singling out candy and snack foods and leaving other food items tax-exempt, Torres said political leaders were making a choice.

“I don’t see any Beverly Hills taxes here for caviar or other gourmet food products,” Torres said. “I don’t feel this is a fair bill for the working classes of California. If you are going to tax popcorn and bottled water, you better tax caviar.”

Senate President Pro Tem David A. Roberti (D-Los Angeles) said he did not like extending the sales tax to newspapers because he believes it constitutes “a tax on ideas.” But he urged other members of the Senate to vote for the measure because “it is necessary to fund the budget.”

Times staff writers George Skelton, Daniel M. Weintraub, Paul Jacobs, Jerry Gillam and William Trombley contributed to this story.