Assembly Moves to End Budget Impasse : Spending: Lawmakers approve a two-bill package that gives counties more leeway to cut health and welfare services. Governor says he will sign legislation.

Taking its first major step toward resolution of the state’s budget crisis, the Assembly late Thursday passed and sent to the governor legislation to give counties more freedom to cut health and welfare services to the poor.

Moderate Democrats joined Republicans in support of the two-bill package, which is expected to pave the way for the passage of legislation to shift about $1.3 billion in property tax revenue from local governments to help balance the budget.

Gov. Pete Wilson, who has pushed to give counties maximum flexibility in running their health and social service programs, said through a spokesman that he will sign the legislation.

“There’s still a long way to go, but this is a first significant step toward a budget settlement,” said Dan Schnur, Wilson’s director of communications.

The Assembly’s action on local governments came as several efforts were under way to reach a broader compromise to end the state’s 52-day budget stalemate.

Wilson is pushing for his version of the budget, even though it was rejected Wednesday in the Assembly on a vote along party lines.

Assembly Speaker Willie Brown (D-San Francisco) has a plan pending in the Assembly and is considering changes that he hopes will attract enough Republican votes to win the two-thirds majority needed for passage.

In the Senate, Democratic Leader David A. Roberti of Van Nuys and Republican Leader Ken Maddy of Fresno have been putting together their own compromise, which they hope to push through the Legislature’s upper house by Sunday.

And Republican Sen. Frank Hill of Whittier is working with Democratic Assemblyman Phillip Isenberg of Sacramento on their third effort to draft a budget that will attract the support of rank-and-file members even if it is opposed by Wilson and Republican leaders.

“It’s chaos,” said Hill, who spearheaded the effort to draft the local government compromise. “Now there is kind of a menu to choose from. Take your selection from the bad ideas. Choose your poison.”

More than two dozen bills are in the legislative hopper as part of one budget package or another. Only two are budget bills--item-by-item lists of proposed state appropriations. The rest are “trailer bills,” the measures that would change state law to make one budget or the other work.

For example, the budget bill might have an item reflecting a 4.5% reduction in total spending on the state’s biggest welfare program--Aid to Families With Dependent Children. But because the level of welfare grants is set in state law, a separate, companion bill must pass to cut the monthly stipend.

Thursday’s Assembly vote brought the local government issue to the verge of resolution.

The measures passed by the Assembly would give counties the right to cut general assistance grants, the welfare payments that mainly go to able-bodied single men. The legislation would allow counties, depending on their cost of living, to reduce the grants as much as 4.5% below the minimum payment to poor parents with children, which is $326 per month.

The bills also would impose a 15-day residency requirement for the program, allow counties to reduce grants to recipients who share housing, and permit counties to withdraw aid from recipients who fail to participate in job training or placement programs. The measures would set aside court decisions or settlements, including one in Los Angeles County, that set the general assistance payments at a level higher than the new cap enacted by the state.

On health issues, the measures would free counties from several restrictions on their ability to shut down medical clinics and reduce services to the poor. Counties are required to give 30 days notice of such reductions and hold hearings to determine if the cutbacks would have a detrimental impact on the poor. If there is a negative impact, the county must ensure that the poor continue to receive a level of care comparable to that available to private paying patients, known as the “community standard.”

These measures would shorten the notice period to two weeks and eliminate the requirement that counties determine the impact of their cuts on the poor. The legislation also would delete the “community standard.” Under separate law, counties still would be the caretaker of last resort for the poor, but that care would not have to meet any standard.

Supporters said the bills are needed to allow counties to cope with the loss of property tax revenue if the Legislature, as expected, shifts about $1.3 billion from cities, counties and special districts to help balance the budget.

The cut, depending on how it is distributed, would represent a reduction of 5% to 10% of the property tax collected by each of the affected levels of local government.

But some Democrats complained that the legislation would allow counties, the traditional caretaker of last resort, to curtail services to the poor.

“This is a horrible day for California because it says we don’t care,” said Assemblyman Tom Bates (D-Oakland), who voted against the measure. “We don’t care about the least among us. We don’t care about the poor. When we look back on this day people are going to say this was one of the worst days in California’s history.”

Both bills got 54 votes, the exact number needed for passage of urgency measures.

If the local government package comes together, the negotiators will move on to two other thorny issues--schools and health and welfare.

While there is widespread agreement that elementary, middle and high schools should get enough money this year to keep pace with enrollment, there is no consensus on community college funding or on how the schools budget will be crafted. At issue is how much the schools would be guaranteed in the future under Proposition 98, the voter-approved constitutional amendment that sets guidelines for education funding.

On health and welfare, there is general agreement on a reduction of about $1.6 billion. The Democrats have agreed to a one-year, 4.5% cut in AFDC grants, while the governor wants a permanent 10% cut immediately and an additional 15% reduction for families with an able-bodied adult on the rolls after six months.

Wilson kept a low profile Thursday after holding a morning news conference with about half a dozen of his department directors to describe the latest effects of the budget impasse. Administration officials said community clinics are closing down, centers for the developmentally disabled are curtailing services and the homebound disabled and elderly are in risk of losing the services of low-wage workers who perform chores to help them remain independent.

Wilson said he has ordered his Health and Welfare Agency to compile daily reports describing the human cost of the budget impasse.

But many of the services cited by Wilson and his directors, while facing temporary hardships because there is no budget, would face deep, permanent reductions if the Legislature passes what Wilson is proposing.

The in-home services program, whose workers are going without pay, would be cut 20% under Wilson’s proposal. Although some developmentally disabled people may have their services suspended if a budget is not passed within the next few days, Wilson’s spending plan calls for extending the waiting period for those services from 60 days to 120.

Brown criticized Wilson for his recent media events designed to turn up the heat on the Legislature.

“It’s time for the governor to get off the press conference circuit and concentrate on the job he was elected to do,” Brown said.

Times staff writer Carl Ingram contributed to this story.