Brown Calls for Assembly Tax Showdown

Assembly Speaker Willie Brown on Tuesday called for a series of showdown votes today on $2 billion in taxes that Gov. Pete Wilson says he must have to balance the state budget and eliminate a $14.3-billion deficit.

Wilson had threatened to veto by midnight the $56.4-billion budget that the Legislature sent to him earlier if the Assembly votes fail. Appearing at a Capitol Park barbecue sponsored by Brown, Wilson said he intends to follow through on the threat.

“If I didn’t get them, I’d have to,” the governor said, but he added that he believed the Assembly would pass the remaining budget bills.

Brown’s decision to call for an Assembly vote came as the governor and lawmakers from both parties were negotiating a compromise package that would include concessions to the Republican Assembly members and business groups on workers’ compensation.

The workers’ compensation proposal could be used to entice Assembly Republicans to vote for a Democrat-backed income tax increase on the wealthy.

Wilson, in putting off signing the budget, said he needed the extra taxes to bring proposed expenditures in line with expected tax collections.

But Wilson also was working against the midnight deadline, dictated by a requirement that he act on the budget within a fixed time. The deadline pressure could be lifted if lawmakers decide to call the budget back from the governor’s desk.

Although the state technically lacks authority to spend money without an approved state budget, officials foresee no fiscal crisis at least until July 15, when some state workers could go without paychecks.

Because Wilson has already signed more than $5 billion in tax bills to finance the budget, some Democrats are wondering whether the governor is bluffing.

Assemblyman Tom Bates (D-Oakland) said: “He wouldn’t veto the budget, would he?”

Speaker Brown said: “I would assume he can sign it because the revenues are there to run the operation for a long time. If he doesn’t sign it, I don’t know what he does with all that money he got through tax increases.”

On the other hand, it could be Democrats who are bluffing. In pressing for the income tax hike on the rich, they have rebuffed a $2-billion package of tax increases already approved by the Senate. Will they continue to reject the Senate plan and risk massive additional budget cuts in their pursuit of the personal income tax bill?

Or, given the stakes involved, will Republicans in the Assembly continue to refuse to vote on tax increases supported by the governor, including an unpopular 2% tax on users of electricity, water, telephones and cable television?

“Everything is still fluid. Nothing has been decided,” said Assemblyman Bill Jones (R-Fresno), who previously has supported Wilson-backed tax increases.

Wilson wants legislative support for a workers’ compensation reform bill that would limit compensation for job-related stress. The proposal has been linked by negotiators to a Democrat-backed plan to fight fraud in the system and a controversial plan to allow companies to combine their workers’ compensation and health insurance policies into one program.

“Workers’ compensation is one of the major factors that is causing job-producing businesses to locate outside of California,” said Bill Campbell, president of the California Manufacturers Assn. “Stress claims are the fastest growing portion of the program. If we don’t control it now, in another 24 months it will be totally out of control.”

Assemblyman Burt Margolin (D-Los Angeles), chairman of the Assembly Insurance Committee, called the proposal intriguing.

Margolin opposes Wilson’s plan to limit stress claims and he was instrumental in defeating similar provisions when they were pushed by business groups two years ago. But he said he is willing to look at the issue “with an open mind,” particularly because it includes the concept of combining health and workers’ compensation insurance.

This provision has the potential of cutting rapidly rising workers’ compensation premiums because health insurers traditionally have lower administrative expenses than workers’ compensation companies.

One drawback to the proposal from the workers’ point of view is that it might make it easier for employers and insurance companies to shift legitimate workers’ compensation claims onto the health insurance policy. This would take money out of the pocket of injured employees because workers’ compensation insurance pays 100% of medical claims while health insurance typically includes deductibles and co-payments that must be paid by the worker.

The part of the plan dealing with stress would require employees seeking disability payments for psychological reasons to prove that conditions in the workplace accounted for at least 50% of their stress. No compensation would be paid for stress arising from a legitimate personnel action on the part of the employer.

Margolin said he opposes these proposals because they would take away the rights of workers to obtain disability payments on legitimate stress claims.

Margolin authored a compromise 1989 bill that, among other things, forced claimants for the first time to prove that at least 10% of their stress was caused by the workplace. He said Tuesday that 10% is not a “magic figure” and that he would be willing to discuss increasing the standard. He added, however, that he doubts a higher standard would reduce fraud or eliminate the so-called “stress mills” that solicit disgruntled workers and encourage them to file questionable claims.

The problem is that the doctors who work for these clinics get paid simply for evaluating the worker, even if the claim is ultimately rejected. As an alternative, Margolin has proposed felony penalties for doctors and lawyers who participate in workers’ compensation fraud.

While the Assembly adjourned for Brown’s Capitol Park barbecue, the Senate remained in session and passed two more bills to help balance the budget. These would raise by 20% the fees charged to students by the California State University System and increase fees paid to the state by municipal and industrial waste dischargers.

Sen. Dan McCorquodale (D-San Jose), who opposed increasing student fees, complained that “it doesn’t make me very happy that I’m taking care of the business of the budget and the Assembly is out having a barbecue in the park.”

The student fee proposal, which has not been acted on by the Assembly, would raise $20 million. Half of the increase, or 10%, would be permanent. Sen. Rebecca Morgan (R-Los Altos Hills) argued that without the increase, faculty members would not be paid, crowded classes would be made worse and it would take even longer for students to complete their education.

Sen. Art Torres (D-Los Angeles) countered that the increase would be paid by the working-class parents of students, who, he said, already are being hit with higher taxes.

The Senate also voted 21 to 8 to approve a bill that would help finance clean water and water rights operations of the state Water Resources Control Board. The measure by Assemblyman Byron Sher (D-Palo Alto) would impose fees totaling $15 million on industrial and municipal waste-water dischargers, including the Los Angeles Department of Power and Water, which would pay a maximum $75,000.

Times Sacramento Bureau Chief George Skelton and staff writer Carl Ingram contributed to this story.