Budget Talks Going On--but Behind Scenes

Gov. Pete Wilson nods to Senate Republican Leader Ken Maddy. Maddy winks an hour later in a conversation with Sen. Frank Hill. Hill, a Republican, talks to Democratic Assembly Speaker Willie Brown. Brown signals to his troops on the Assembly-Senate conference committee. And the Legislature and governor move another step closer to resolving the state’s 24-day-old fiscal crisis.

Welcome to the Great Budget Negotiations of 1992.

Despite appearances of a stubborn partisan standoff since group negotiations between Wilson and the four legislative leaders broke down June 26, the Capitol’s budget talks never ended--they just moved to a different stage.

At times the negotiations have resembled the children’s game of “Telephone.” An aide to the governor says all the activity is “below sea level.” And one legislator compares the whole thing to Kabuki theater.

“It has all the earmarks of a spy novel set in Central Europe right before the start of World War I,” said Assemblyman Phillip Isenberg, “with various couriers and intermediaries skulking through corridors and hallways, passing obscure messages among themselves.

“Occasionally, people look out the window to see if there’s a smoke signal or some other marker--did the governor wear a carnation in his lapel today? No. I wonder what that means? What kind of car did the Speaker drive today? Does that mean he’s in a bad mood?”

The pace of these convoluted negotiations has been glacial at times. But they appear to be nudging the Republican governor and the Democrats who control the Legislature steadily toward a solution that will bridge the state’s $10.7-billion budget gap.

It seems to be common knowledge in the Capitol that education spending will be cut between $900 million and $1.3 billion below what the schools were expecting to receive for the coming academic year--even though Wilson publicly has not budged from his position in favor of a $2-billion reduction and Brown insists that the cut should not exceed $605 million.

Also widely expected to be part of a compromise are at least $2 billion in onetime measures--such as delaying a scheduled payment into the public employees pension fund and refinancing the state’s bond debt. Wilson has accepted these items, according to his staff, even though they appear to contradict his stand against rolling over part of the state’s deficit into another fiscal year.

These steps toward compromise have come despite a nearly monthlong absence of direct negotiations among Wilson, Brown, Maddy and two other members of the so-called Big Five--Senate Leader David A. Roberti of Van Nuys and Assembly Republican Leader Bill Jones of Fresno.

In recent years, these closed-door leadership talks have become the center of consensus-building on the budget, replacing the Assembly-Senate conference committee. The joint panel used to write the Legislature’s version of the spending plan but increasingly has been shunted aside as the task became one of spreading the pain rather than handing out the goodies.

But this year’s leadership meetings ended June 26 and the relationship between Wilson and Brown chilled after Assembly Democrats blocked a key part of the governor’s school finance plan on the eve of the new fiscal year, which began July 1. Wilson and Brown resumed face-to-face negotiations Wednesday amid much fanfare.

But even as Wilson was traveling the state unleashing highly partisan attacks on Brown, two of the governor’s most pragmatic aides were meeting regularly with a key member of the Speaker’s staff.

One of Wilson’s point men has been Finance Director Thomas Hayes, the former nonpartisan auditor general for the Legislature who never registered with a political party until then-Gov. George Deukmejian appointed him to a short-lived tenure as state treasurer. The other is Bill Hauck, a deputy chief of staff for the governor who is a registered Democrat and once was a top aide to former Democratic Assembly Speaker Robert Moretti.

Hayes and Hauck have been conferring almost daily with Samuel Yockey, a veteran state government numbers cruncher and onetime member of Gov. Ronald Reagan’s Administration. Yockey returned to the Capitol in February to head Brown’s Assembly Office of Research after a stint as finance chief for the city of San Francisco under former Mayor Art Agnos.

Adding to this mix were two lawmakers with reputations as deal makers: Hill and Isenberg.

Hill, a Republican from Whittier, was considered a conservative ideologue when he was in the Assembly but has emerged as a centrist since moving to the Senate in 1990. Isenberg, a former mayor of Sacramento, is a top lieutenant to Brown who is fond of building bridges between the liberal Democrats and conservative Republicans in the Assembly.

The pair made a big splash July 16 with a compromise plan that split the difference between Wilson and the Assembly Democrats on school funding and another sticky issue, local government finance. Although the proposal was portrayed as an independent offering, all the principal players knew about it in advance and signals from the governor and legislative leaders helped Hill and Isenberg decide what to put into their plan and what to leave out.

“It’s not just the two of us getting together and saying here’s how we would do it,” Hill said in an interview. “It’s our joint assessment of how far people are willing to go.”

Isenberg, similarly, said he speaks to Brown several times daily about the budget.

“I mostly tell him in advance the things I’m going to do,” Isenberg said. “He mostly grunts at me.”

Shortly after Hill and Isenberg published their plan, the Democratic-dominated conference committee abandoned two stopgap items that Wilson had said were unacceptable. One was a $900-million maneuver that would have shoved a month’s worth of Medi-Cal claims from one fiscal year to the next. The other was a $400-million proposal to accelerate the collection of income taxes from independent contractors.

At the same time, the panel added $500 million in revenue projected from a change in the law that would allow the Franchise Tax Board, without going to court, to settle cases for less than 100% of the amount in dispute. And the committee figured on getting $400 million by tapping into property taxes going to redevelopment agencies around the state.

“As a practical matter, the conference committee would not have made these changes if not for the fact that indirectly, without saying so but nonetheless agreeing, the governor and the legislative leaders have said OK,” Isenberg said.

Lately, the talks have focused on an all but certain move by the state to repeal its post-Proposition 13 bailout of local government. Until Brown and Wilson started seeing each other again, this issue was batted between the two through the shuttle diplomacy of the two organizations that represent counties and cities in the Capitol--the California State Assn. of Counties and the League of California Cities.

The county officials reported that Wilson and Brown peppered them with questions about each other’s position when they met back to back with the two leaders in mid-July.

“We go and meet and nibble a little here and a little there and keep dragging this bone back and forth,” said Karen Coker, a lobbyist for the counties. “We keep pulling people toward the middle. That’s what is happening.”