Wilson, Assembly on Collision Course Over School Funding : Finances: Lawmakers hear hundreds of bills as time for adjournment nears. Senate plan to cut health and welfare stalls in the lower house.

With the state budget still hanging in limbo two months into the fiscal year, Gov. Pete Wilson late Monday was on a collision course with the state Assembly over his plan to rein in the growth in education spending next year and beyond.

As hundreds of disabled protesters filled the hallways outside Wilson’s office demanding that he sign the budget, the governor told reporters inside that the Assembly’s version of the crucial education piece of the budget package was unacceptable and would prompt his veto.

Without a satisfactory education bill, Wilson said, he could not sign the budget that is on his desk because it would be out of balance.

Wilson insisted that the bill contain a provision to suspend the state’s constitutional protection for school funding in the event that a court strikes down his proposal to recapture $1.1 billion the schools got last year.

Wilson’s refusal to sign the budget--which the Legislature sent him on bipartisan votes 60 days into the fiscal year--heightened the tension in an atmosphere already charged by the normal end-of-session frenzy as lawmakers considered hundreds of bills Monday in their rush toward a scheduled midnight adjournment.

In addition to the public school funding issue, several other pieces of budget-related legislation were pending Monday. Without measures to cut welfare grants, reduce Medi-Cal benefits, raise student fees and shift property tax revenues from local government, the $57.6-billion budget passed by the Legislature could produce a deficit of more than $5 billion.

The Senate on Saturday passed and sent to the Assembly the budget and the so-called “trailer bills” needed to make it work. The Assembly also passed the budget bill and sent it to the governor. But members of both parties in the lower house objected to several provisions in the implementing legislation and have been rewriting those bills ever since.

The Assembly early Monday revised the Senate’s plan to shift $1.3 billion in property tax money from local government to help balance the state budget. The Assembly version would take less from counties and special districts and more from redevelopment agencies than the Senate bill. The Assembly bill was pending in the Senate late Monday.

The Senate’s plan to cut $1.7 billion in health and welfare services also stalled in the Assembly, at least temporarily. Members of both parties objected to a provision that would allow the state to capture federal money intended to provide cost-of-living raises in grants to the aged, blind and disabled. But even after that take-away was removed from the bill, a preliminary tally yielded just 36 votes for the measure--far short of the 54 needed for passage. Another vote was expected later Monday.

A bipartisan effort to soften the budget’s blow on higher education programs also was brewing in the Assembly, where Democratic and Republican lawmakers were trying to round up the votes for a package to cut bureaucrats’ travel, eliminate public relations officers and make other reductions in state operations. The savings would be shifted to the universities.

But it was the dispute over funding for kindergarten through community college programs that threatened to blow up the budget deal and force lawmakers to remain in the Capitol beyond the scheduled end of their two-year legislative session.

The fight over school spending for this year is settled: Lawmakers and the governor have agreed that the elementary and secondary schools should get the same amount per student as they did in the last fiscal year.

But a key element of the education bill would reopen last year’s books to make it appear as if the schools never received $1.1 billion they got in excess of the Proposition-98 guarantee. That has the effect of lowering the amount schools would get this year because Proposition 98 requires that each year’s education budget be built upon the base of what was spent the year before. There is doubt about whether the state can do this legally after the close of the fiscal year.

To address that legal uncertainty, Wilson wants to include in the education bill a “poison pill” that would be activated if the state’s accounting change is ruled unconstitutional by the courts. In that case, the bill says, Proposition 98’s minimum funding guarantee would be suspended and the school budgets reduced anyway.

Assembly Democrats have proposed an alternative that would not suspend Proposition 98 but would force the schools to give up $960 million in loans they are due to receive this year. Wilson rejected that approach Monday, saying that, without a suspension of Proposition 98, the guarantee would soar to the point that the state would have to pay the schools an extra $3.7 billion next year.

“We’re not going to do that,” Wilson said. “We can’t do that.”

Asked why he did not simply ask the Legislature to suspend Proposition 98, Wilson conceded that there was insufficient support to generate the two-thirds majority needed to set aside the constitutional amendment.

As Wilson spoke, members of both parties in the Assembly negotiated in search of agreement on the issue. The version Wilson supported got only one vote in the 80-member house Sunday night. When Wilson’s “poison pill” was put in a bill by itself, it failed on a vote of 42 to 6. The Democrats, meanwhile, had enough votes to pass their version but held off to allow negotiations to continue.

State Supt. of Public Instruction Bill Honig, a frequent critic of the governor, said Wilson was unfairly holding up the budget over the issue.

“Let the governor explain that he’s vetoing this budget because what he’s doing is illegal and he wants to prevent somebody from suing,” Honig said.

The subtleties of the school funding battle were lost on nearly 2,000 protesters who filled the corridors outside Wilson’s office Monday afternoon. The demonstrators, mostly disabled people and their families, called on the governor to sign the budget immediately so that the state can again make payments to nonprofit agencies that care for the disabled. Many of these centers are threatening to close their doors if they are not paid this week.

The protesters were faced with a daunting choice. The programs on which they depend are not being paid at all, but once a budget is signed, many of the same programs will have their annual funding cut.

“It’s really rough,” said Patty Gants, whose son Zachary had a stroke at birth and now depends on speech, vision and physical therapy. “It’s getting worse and worse.”

Times staff writers Virginia Ellis, Jerry Gillam and Dan Morain contributed to this article.

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