NEWS ANALYSIS : Wilson Held the Political Advantage and Gambled : Strategy: Seeing a one-time chance, he is risking his popularity now in hopes of regaining strength later.

Nearly 4 million Californians voted to elect Pete Wilson governor two years ago and many likely have been shaking their heads--if not their fists--wondering this summer what he has been up to.

As Wilson and the Legislature dragged out budget negotiations, state government has been forced to operate on IOUs, piling up almost $10 million in short-term interest costs for the scrip and an estimated $200 million in additional long-term debt for bond financing because of credit ratings gone sour. Merchants doing business with state government have been stiffed on their payments. So have providers of health care for the poor.

“It’s an abomination,” says veteran pollster Mervin Field, whose most recent statewide survey shows that Wilson’s job rating has sunk to an all-time low for a governor.

Those looking for logic in the State Capitol have found illogic. There seems to have been less strategy than stubbornness.

So what has been Wilson’s game?

The answer, based on interviews with the governor and his top aides, is that Wilson’s strategy has been to capitalize on what he sees as a onetime political advantage to achieve his goal of reining in state spending and staving off, once and for all, future budget crises--especially in 1994 when he runs for reelection.

“It’s bad politics, it’s bad government” to be confronted with yet another budget deficit when he is up for reelection, Wilson said in an interview Friday. “I mean, if this continues on, it is going to hurt California in terms of our ability to generate the economic base that is a necessity. And people don’t seem to grasp the connection between how we handle the budget and the economic climate.”

From Wilson’s perspective, the time was right for his budget reforms and never would be repeated:

* Unlike legislators, he did not have to face the voters in November and was better positioned than they to sustain the inevitable blows to his public popularity.

* Legislators were particularly vulnerable because many were running for reelection in strange districts, redrawn during the once-a-decade reapportionment.

* What’s more, in this year of anti-incumbency, more Democratic legislators were facing the voters than Republicans so the GOP was less at risk.

And on Monday night, as the Legislature and the governor jockeyed to complete a budget package now 63 days late, Wilson seemed on the verge of winning his biggest battle since being elected. Within his grasp was almost everything major he had demanded.

Yet, many speculated whether in the fierce, months-long fighting Wilson may have suffered wounds that ultimately will prove fatal politically.

“Anybody who thinks the governor has won in this thing is crazy,” asserted Senate Republican Leader Ken Maddy of Fresno during a Friday midnight floor debate. “None of us is winning. We’ve all lost in credibility.”

Maddy, who was Wilson’s most important ally during the budget battle, told a reporter that “this has hurt the governor bad. Whether he can recover from it I don’t know. But he cannot escape the fact that he’s been governor during this time. So it hurts him just like it hurts us.”

Pollster Field said that “this is a situation where anybody in the Sacramento Establishment is just going to be a villain. Here’s what would have to happen for Wilson to come out as something better: There’d have to be a vast turnaround in the economy so unemployment went down and people started feeling comfortable again about their own well-being.

“In two years, if things stabilize, he’ll be able to say, ‘I was Horatio at the bridge. I held the line. Just think how bad it would have been if I hadn’t!’ Every politican in Sacramento is going to be scarred and wounded. Wilson may be able to lick his wounds a little better than Democrats because he’s not running for reelection this year.

“Time will always heal wounds. But his prospects are not bright.”

Quipped one Wilson aide, “At least we stopped all the presidential speculation for ’96. We’re not even mentioned anymore (as a prospect).”

Another Wilson adviser theorized that in this fall’s election battle for party control of the Assembly, the budget gridlock will help Republican challengers beat Democratic incumbents. That would benefit Wilson. But the long, embarrassing stalemate, he said, also will make it more difficult for the governor to win reelection in two years.

This strategist also believes that the budget tardiness will hurt Wilson’s efforts to win voter approval of Proposition 165, his ballot initiative to sharply reduce welfare benefits and give the governor more power over the treasury during budget crises. Rather than prove the need for such a measure, the adviser said, the stalemate has further turned citizens against government and will prompt them “to vote against everything.”

But not every Wilson strategist agrees. Some note that one feature of the initiative is bound to be popular. It would deny all pay to legislators and the governor for each day that a budget is late. And they say this alone should result in the measure’s passage.

Some cynics--mainly Democrats--contend that Wilson orchestrated the budget stalemate to help Republicans wrest control of the Assembly and also to give his initiative a boost. The governor and his aides deny it. One said, “Is it bothering us that they--the Democrats--look so bad? No. But the primary strategy--if not the only strategy--is to get a balanced budget . . . . “The Democrats have been hanging themselves with their own rope. The governor’s not on the ballot, so he’s got two years to get his own noose off. They don’t.”

From last spring, Wilson insisted that the budget be balanced without raising taxes or rolling over any of the $10.7-billion shortfall into future years. He had lost substantial popularity last year, especially within the GOP right wing, by agreeing with Democrats to raise taxes by nearly $8 billion in order to balance a $14.3-billion shortfall.

In the Friday interview, Wilson called that tax hike “a mistake.”

“It was a mistake to the extent that we thought we had a onetime (deficit) situation rather than an ongoing situation,” he said. “This was already a high-tax state when we did that and a recession is obviously not a great time to increase taxes, making life more difficult for employers. . . . A sales tax increase is not a good thing for business.”

Wilson said he now wishes he had held out longer for deeper spending cuts last year. He added, “The Legislature doesn’t like cutting expenditures and they don’t like passing tax increases. They’re like the public. They like to have it both ways. But you cannot have it both ways. . . . We have been living beyond our means.”

Wilson learned his lesson. There would be no caving-in to tax increases this year. Democrats seemed to give up on that idea well before the July 1 legal deadline for enactment of a new budget. They also appeared to abandon any effort to roll over a substantial portion of the deficit.

Several Wilson advisers pleaded with the governor early on to “declare victory and get out”--accept a Democratic no-tax, no-rollover compromise. He refused, asserting he had not seen any Democratic plan that he trusted. And he especially did not trust Assembly Speaker Willie Brown, a fact that the veteran San Francisco Democrat acknowledged during a floor debate Saturday and largely blamed for the gridlock.

Brown told his colleagues: “There was always the snickering, somehow the belief (by the governor and other legislative leaders) that all Willie Brown wanted to do was get an opportunity to embarrass Pete Wilson. There was always the snickering that the more conservative members of the Republican caucus were waiting to pounce on Pete Wilson and somehow trash his ideas. . . . More than any other factor, that is what has caused us . . . to be late.”

Brown also contended that “there’s absolutely not one thing” in the final budget compromise “that wasn’t available” in June.

In fact, Brown had briefly proposed a school finance plan last spring that was very similar to the one Wilson and the Senate ultimately agree to last Friday.

“We should have grabbed it,” Senate GOP Leader Maddy lamented to a reporter. “We’d have been all through with this.”

But Maddy also was critical of Brown’s performance this year, unlike last year when the Speaker was the governor’s biggest ally in the Assembly. The relationship turned bitter later when Brown felt he had been burned by Wilson on redistricting, among other things. “I can’t figure out Willie,” Maddy said. “This is a different Willie than I’ve known all these years.”

Neither Brown, a staunch defender of schools, nor Wilson, who was adamant about cutting into education’s funding base, were in a compromising mood as the battle progressed. Wilson finally just seemed to be winning an old-fashioned game of chicken as Democrats saw themselves going over the precipice in November.

And what would Wilson say to some ordinary citizen who had innocently suffered through the summer shenanigans?

“I’d say I think it’s outrageous and inexcusable,” the governor said. “But I can’t yield to extortion. I am not going to allow the Assembly Democrats to extort tax increases or deficit spending that will be ruinous to this state simply because it is more convenient for them not to vote for spending cuts.”

Said the governor’s spokesman, Dan Schnur: “Let’s put it this way--Pete Wilson is the most hardline person in our office. He believes that if he doesn’t get reforms this year, they’re not going to come anytime in the 1990s. Last year, next year and every other year, the Legislature could afford to wait longer. This year they can’t.”