Governor Warns of Budget Veto : Finances: Brown says both parties want to change implementation bills. Wilson calls a plan to remove key education provision a ‘deal-killer.’

Gov. Pete Wilson threatened Sunday to veto a $57.6-billion spending plan on his desk unless the Assembly swiftly passes and sends him the remaining pieces of the budget package needed to implement more than $5 billion in spending cuts.

Wilson said the Assembly should approve about a dozen bills passed by the Senate, including three major measures to make cuts in health and welfare, education and local government. But as of midnight Sunday, the Assembly still had not passed any of the bills, although the house was still in session and Democrats began amending the measures with their own proposals.

The Republican governor described as a “deal-killer” the Assembly’s threatened plan to remove a key provision in the education bill meant to protect from legal challenge Wilson’s plan to recapture $1.1 billion that schools received last year.

Wilson said he will sign the budget and end the state’s impasse, now in its 62nd day, as soon as he gets all the related legislation. He urged the Assembly not to delay beyond its scheduled adjournment for the year at midnight tonight.

“This is a distasteful package for everyone,” Wilson said. “The fact of the matter is the options are very limited.”

The Assembly on Saturday passed and sent to Wilson the budget bill, which would erase the state’s $10.7-billion shortfall and leave a projected $200-million surplus. But two of the three major implementing bills were rejected and the third--on education--was not brought up for a vote Saturday.

Assembly Speaker Willie Brown (D-San Francisco) said Republicans and Democrats want to change those bills, which were drafted by Senate leaders as part of a bipartisan compromise that Wilson helped guide and has accepted.

Brown said he had to pressure his members to vote for the budget to ensure its passage. Many, he said, agreed to do so only on the condition that they could change the so-called “trailer bills.”

One example: The health and welfare bill, which cuts $1.7 billion from last year’s spending, includes an item that would reduce state aid to the aged, blind and disabled by $17 a month in January to offset a federal cost-of-living raise of the same amount. Democrats want to remove that provision and raise the necessary funds by increasing the amount the government gets from horse race betting at state-regulated tracks.

Wilson dodged a question about that issue, and most lawmakers believe that the governor would sign the health and welfare measure if it is sent to him with only minor changes. But a major battle was brewing over the education bill.

That measure, as it passed the Senate, would refigure the voter-approved Proposition 98 guarantee for schools, lowering the legal minimum for education this year by $1.8 billion. The schools last year received that amount in excess of the minimum guaranteed by Proposition 98.

To partially offset the loss, the bill also would advance the schools $960 million from state aid the Constitution guarantees them over the next two years. The transactions would save the state money while allowing elementary and secondary schools to spend the same amount per student this year as they did in the last fiscal year.

But the legality of this proposed shift is in question. So the bill contains a “poison pill” provision that would accomplish the same reduction in future school funding by suspending Proposition 98 if a court strikes down the accounting maneuver. The Legislature is loathe to suspend Proposition 98 directly because it is a symbol of the voters’ will to protect education spending.

Brown said the changes contemplated in the education bill were necessary because the bill lacked sufficient support to obtain the two-thirds majority needed for passage.

“Both caucuses determined that there are not 54 votes for the governor’s and the Senate’s version of the education piece,” Brown said.

Wilson said the “poison pill” was crucial to protect the budget’s bottom line in case of a successful legal challenge to the accounting maneuver.

“That would be a deal-killer,” Wilson said of Brown’s threat to remove the provision. “There’s no possible justification for them to do it.”

It was not clear late Sunday whether Assembly Democrats would back down in the face of Wilson’s threat. But late Saturday, Brown told reporters he did not intend to negotiate the final changes with the Administration.

The Speaker has been angry because Assembly Republicans, at Wilson’s urging, refused to negotiate with Assembly Democrats in the final week or so before the Senate’s passage of the budget deal. The Republican strategy was to force Brown’s members to accept whatever emerged from the more conservative Senate. Now, many Republicans have found items that they do not like in the Senate plan and are negotiating changes with Brown, much to his delight.

“This is a legislative body finally acting like a legislative body,” Brown said.

He said Assembly Republicans were unhappy with the local government bill, which would shift $1.3 billion from cities, counties and special districts to the schools. Those units of government in turn would lose the same amount from their state appropriation. Republicans reportedly want to lower the cut on special districts, which provide everything from fire service to sewage treatment plants.

Assembly Republican Leader Bill Jones of Fresno confirmed that his members wanted to make changes in the Senate package. He said he considered none of the bills untouchable as long as they made it to the governor in a form that would ensure that the budget is balanced.

“The only thing that is sacrosanct is making sure the budget and all the trailer bills are passed,” Jones said.

Brown said none of the changes his members were considering would take the budget out of balance.

“They have instructions to stay within the framework of the budget amount contained in the budget,” he said.

Times staff writers Dan Morain and George Skelton contributed to this story.

What Next on the Budget?

Here’s the status of the major legislation that comprises California’s emerging budget package:

THE BUDGET BILL

Background: Passed by the Senate and the Assembly, the $57.6-billion spending plan has been sent to Gov. Pete Wilson. But the budget bill is only the Legislature’s authorization to spend money in specific areas. Unless state laws also are changed, programs and services will continue to operate at their current levels and the state would end the fiscal year with a deficit of at least $5 billion.

Action Needed: Wilson says he will sign the budget only after the Legislature passes and sends to him the implementing legislation, known as “trailer bills.”

IMPLEMENTING LEGISLATION

Background: More than a dozen trailer bills have passed the Senate and most were pending in the Assembly late Sunday.

Action Needed: The Assembly can accept or reject the bills but cannot alter their content. Instead, the Assembly could try to draft substitute measures containing most of the Senate bills’ provisions with some changes. Those bills then would go to the Senate for final legislative action.

THE MAJOR TRAILER BILLS

Education: The Senate bill would refigure the Proposition 98 guarantee for schools, lowering the legal minimum for education by $1.8 billion. To partly offset the loss, the bill would advance the schools $960 million from future guaranteed state aid. The legality of this proposed shift is in question. Therefore, the bill contains a “poison pill” provision that would cut education spending by suspending Proposition 98 if the remainder of the measure is struck down by the courts. Assembly Democrats want to remove that protection from the bill.

Health and welfare: The Senate bill reduces health and welfare spending by $1.7 billion. Most cuts have sufficient bipartisan support for passage in the Assembly. But the Assembly opposes a provision that would allow the state to capture federal money meant to provide a January cost-of-living increase in grants to the aged, blind and disabled.

Local government: The Senate bill would shift about $1.3 billion in property tax revenues from local governments to schools. The schools would lose that amount in state aid. The Assembly has pledged to keep the total loss for local governments at $1.3 billion. But the specific cuts for each type of government could change. The Senate voted to shift $195 million from cities, $550 million from counties, $430 million from special districts and $120 million from redevelopment agencies.