2 Lawmakers Draft Budget Compromise : Government: Plan would reduce education cuts and leave many details to be worked out later. It gets cool response from Wilson and legislative leaders.

Saying they are embarrassed and frustrated by the failure of Gov. Pete Wilson and legislative leaders to resolve the state’s budget impasse, an influential Assembly Democrat and a key Senate Republican offered a compromise plan Thursday that could help break the deadlock.

The plan, advanced by Democratic Assemblyman Phillip Isenberg of Sacramento and Republican Sen. Frank Hill of Whittier, sets broad policy for education funding, aid to local government, health and welfare programs and other issues but leaves the details to be worked out by Wilson and the leaders of the two legislative houses.

Its centerpiece is a $1.1-billion reduction in education spending from the $25-billion proposal Wilson offered in January. The governor wants to cut about $2 billion from his plan, while Assembly Democrats have agreed to cut only $605 million.

“This provides a framework that makes the decisions, if not easier politically, a lot simpler mechanically, and allows us to get a budget in short order and get out of here,” Isenberg said.

Hill said: “The time to act is now. We’ve waited long enough.”

The state is 17 days into the fiscal year. The treasury is out of cash and, without a budget, the state cannot borrow money. Instead, the government is paying its bills with IOUs, known as registered warrants. Two Wall Street credit rating agencies have downgraded California’s bonds.

“I am embarrassed,” said Hill, the Senate Republicans’ representative to the budget-writing conference committee. “The Legislature and the governor should be ashamed of ourselves.”

Hill and Isenberg, who have reputations as two of the Legislature’s most pragmatic members, took the budget impasse into their own hands after they tired of waiting for face-to-face negotiations to resume between Wilson and Assembly Speaker Willie Brown (D-San Francisco).

Wilson insists that the state must wipe out a $3-billion-plus deficit from the fiscal year just ended and balance the budget for the year to come without raising taxes. He wants to do this even as revenues are expected to decline for the first time in 50 years and school enrollments, welfare rolls and prison populations continue to soar.

Democrats have accepted Wilson’s demands on taxes and the deficit. But they want a smaller education cut than he proposes and they would balance the budget with more onetime devices than Wilson prefers, including accelerating the collection of income taxes from independent contractors.

Since direct talks between Wilson and Democratic leaders broke off June 25, the negotiations have been carried forward by surrogates, including rank-and-file lawmakers, staff members, and representatives of city and county governments, which seem certain to lose some of their funds in whatever deal is put together.

Hill and Isenberg said their compromise education cut would pay for new enrollment and eliminate the need for Wilson’s proposals to triple community college fees and block 110,000 4-year-olds from entering kindergarten on schedule in the fall.

As they did for schools, Hill and Isenberg proposed splitting the difference between Wilson and the Democrats on local government finance. Although both sides have agreed to begin phasing out the “bailout” of local government enacted by the state after voters passed Proposition 13 in 1978, they differ on how to do it.

Wilson has agreed to a partial reversal of the bailout but wants to exempt cities. His plan would generate $932 million for the state. The Democratic plan would take $1.4 billion from cities, counties and special districts in the first year. The Hill-Isenberg plan would take $1.2 billion in property tax revenue from cities, counties and special districts.

“There is general agreement on the principle that the bailout that occurred after Proposition 13 passed can no longer be afforded and has to come to an end,” Isenberg said.

The two lawmakers said they would leave to others the battle over what additional taxing authority, if any, to grant local governments so they can raise revenue to make up for what they lose to the state.

Similarly, the legislators proposed taking $300 million from redevelopment agencies around the state but said the particulars could be worked out later.

“You identify a dollar figure and acknowledge that has to fit into a puzzle,” Isenberg said. “The details will follow from there. It won’t be simple. It will be very complicated. But it can be done.”

The plan, which may be considered by the budget conference committee today, got a lukewarm response from the governor, Speaker Brown and Senate Leader David A. Roberti (D-Van Nuys).

“This proposal moves us somewhat closer to a framework which can be used to negotiate a real budget solution,” Wilson said in a statement distributed by his office. “However, major differences still exist between the proposal and an acceptable budget solution.”

Roberti called the new plan a “decent proposal.” But he said the Senate would be reluctant to vote for it unless the Assembly Democrats and governor can reach agreement first.

And Brown said he will resist cutting more from schools than he has agreed to. “I don’t know where you get enough votes for a $1.1-billion reduction in public education,” he said.

School officials and representatives from city governments also said they will oppose the plan.

Despite the resistance, Hill and Isenberg said they thought their ideas would catch on with rank-and-file lawmakers, building pressure on the leadership.

“People want to get this thing solved,” Hill said.

Isenberg said it will be possible to put together a coalition of two-thirds of the members in each house to enact the budget.

“It will be hard,” he said. “It will not be impossible.”