NEWS ANALYSIS : Both Sides Can Use Budget Impasse to Claim Victory : Politics: Republicans and Democrats each won significant battles, helping their constituents and causes.

Neither Republicans nor Democrats are especially eager to claim victory in the wake of the state’s historic budget stalemate, an ugly 63-day stare-down that made California the subject of derision and pity, and further eroded the public’s confidence in government.

But whatever the verdict of voters in November, an analysis of the events since July 1 shows that both sides used the two-month delay to achieve significant victories for the causes and constituents they represent.

Republican Gov. Pete Wilson held out until he secured his long-sought reduction in the growth of future education funding, as well as other, less dramatic measures that will make it easier for him to balance next year’s budget and the one after that.

Democratic lawmakers, although generally portrayed as having been vanquished in the budget war, successfully defended this year’s education budget and fought off the deeper cuts in health and welfare programs that Wilson was seeking before the stalemate began.

In fact, if there was a central theme to the budget deadlock, it was this year versus next year.

Most Democrats, although willing to accept significant reductions in key programs, sought to build in triggers that would return the programs to their current levels at the end of this fiscal year. Their plan was to get through this fall’s elections before reassessing the health of the economy and, if need be, fighting the budget battle again--perhaps with the political climate more receptive to raising taxes on businesses or the wealthy.

But Wilson not only wanted deeper cuts in programs, he wanted them to be permanent. Blaming the state’s fiscal problems less on the recession than on changing demographic patterns, he sought to bring the budget’s expenditures down to match its stagnant revenues.

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In the end, the sides really split their differences. Wilson settled for fewer cuts than he at first demanded and the Democrats agreed to more long-term reductions than they had said they were willing to accept.

It even can be argued that most of what Wilson won Sept. 1 he had secured by July 1, when the fiscal year began without a budget. The Democrats by then had agreed to balance the budget without a tax increase and to accept significant budget cuts. And the general fund budget they had on the table that day was $500 million smaller than the one Wilson signed last week.

The major difference, and the issue that dominated the 63 days that followed, was the approach to education spending. Wilson insisted from the start that the state deduct from this year’s education budget $1 billion that schools received last year in excess of what was guaranteed by voter-approved Proposition 98. The Senate agreed, but the Assembly rejected that proposal on the night of June 30, triggering the stalemate.

Proposition 98, approved by voters in 1988, is the constitutional provision that guarantees schools a percentage of state revenues plus the lion’s share of future state tax surpluses.

By the end of the impasse, Wilson’s biggest achievement was to secure that recapture of education money. He won that concession from the Assembly Democrats only after offering to have the state borrow money and lend it to the schools so they could keep pace with rising enrollments.

Although the loan to the schools became the cornerstone of Wilson’s plan, the concept was first voiced in June by the governor’s chief legislative nemesis--Democratic Assembly Speaker Willie Brown. At that time, Wilson rejected the proposal and his aides labeled it deficit spending.

“We were willing to loan education money from future allocations in order to bring the budget stalemate to a close,” said Dan Schnur, Wilson’s chief spokesman. “If we had known in June that an advance to the schools from their future budgets could have closed the deal, we would have done it.”

Schnur said Wilson rejected the loan proposal at first because Brown suggested that a half-cent sales tax due to expire next June be kept on the books and used to repay the loan, holding schools harmless. Brown said Wilson could have rejected the link to the sales tax if it bothered him.

“That’s part of negotiations,” Brown said. “I make a proposal. In a democracy you say: ‘Half of your proposal is good, let’s figure out a way to do the other half.’ He rejected me out of hand. Then, two months later, he came to the conclusion that he couldn’t get the numbers to work without it. He embraced it. There’s no question he modified it. I guess I didn’t have the genius to think of the modification he would buy.”

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By the end of the impasse, ironically, Wilson appeared to be pressuring Brown to accept the new version of the Speaker’s own proposal. Meanwhile, Wilson had yielded ground on several fronts.

Consider some of the positions Wilson staked out July 1 compared to what he settled for last week:

* Wilson at first sought to reduce school funding by $200 million this year compared to last, even as 200,000 more students were expected to file into classrooms across the state. To deliver this blow without crippling the schools, he suggested postponing kindergarten for 110,000 4-year-olds and imposing a 20% budget cut in a wide range of special programs, including classes for gifted children and special help for children with reading problems.

He finally accepted a $1.1-billion increase for elementary and secondary schools and community colleges this year--about the same as the Democrats were seeking July 1. Kindergartners were let off the hook and the special programs took a 2% hit--a 10th of what Wilson had proposed.

* Wilson wanted to more than triple community college fees, from $180 a year to $600 for a full-time student taking 15 units. And under the governor’s proposal, about 200,000 students with three years of credits would have had to pay the full, $3,400-a-year cost of their education--a price higher than that paid by students attending the University of California. Even with the fee increases, the colleges would have had to absorb a year-to-year reduction of $12 million.

In the final deal, the Legislature raised basic fees to $300 a year--half of what Wilson wanted. The fee for students with more units was limited to those with bachelor’s degrees and set at $1,500 a year. Counting their advance from future funds, community colleges will get a year-to-year increase of $100 million.

* The governor sought an immediate 10% reduction in welfare grants and a 15% cut after six months for families with an able-bodied adult. He also wanted to eliminate grants to children conceived by mothers on welfare.

On July 1, Democrats were offering to cut grants 4.5% but wanted the stipend to return to its current level at year’s end.

The final budget calls for an average grant reduction of 5.8%, with the grant scheduled to return to its current level in July, 1996. Wilson is to seek the remainder of his proposed cut with a measure on the November ballot.

* Wilson wanted to eliminate the homeless-assistance program, which gives individuals money to pay the first month’s rent and a security deposit on an apartment. And he wanted to scrap a variety of health services--including dental care and hospices for the terminally ill--which the state offers the poor but which are not part of the federally required package of benefits. Neither cut was included in the final agreement.

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So on the issues that mattered most to Democrats--health, welfare and education--Wilson agreed by September to spend far more than he had proposed in July. The budget Wilson signed included $550 million more for health and welfare than his July proposal, a 4% increase. And the school loan added nearly $1 billion to education budgets, also a 4% boost.

“I do think we won some stuff,” said Democratic Assemblywoman Delaine Eastin of Union City, who chairs the Assembly Education Committee. “It was worth fighting for.”

What did Wilson win after July 1?

He stopped a $400-million proposal to speed the collection of taxes paid by independent contractors. He prevented a bookkeeping change that would have postponed accounting for $940 million by tallying Medi-Cal bills at the time they are paid instead of when they are in the pipeline. He shaved about $400 million from the Democrats’ proposal to shift fee-supported special fund money into the general fund. And he locked in for several years the cuts in welfare and reductions in grants to the aged, blind and disabled that Democrats wanted to make temporary.

But most of those items had been agreed to by mid-July, when the Democrat-dominated budget conference committee adopted most of a proposal put forward by Republican Sen. Frank Hill of Whittier and Democratic Assemblyman Phillip Isenberg of Sacramento.

In the final six weeks of the stalemate, the only significant concession Wilson won was the recapture of the education money that he said was overpaid to schools last year. That victory will give Wilson additional flexibility as he writes future budgets because it will reduce the Proposition 98 guarantee by $700 million next year and by $1 billion the year after that.

“We have reined in education spending that was growing at a rate that even proponents of Proposition 98 never envisioned,” Schnur said of the governor’s success in refiguring the guarantee. “What we have been trying to accomplish is to give the people elected to run the state the opportunity to actually make spending decisions and not have those decisions made for them.”