Wilson Says Vendors Will Be Paid Interest : Debts: Governor acts after reports that the state would renege on late fees arising from budget impasse.

Reversing his Administration’s position, Gov. Pete Wilson said Wednesday that he will order state agencies to pay interest penalties to businesses whose payments for goods and services were delayed during the summer-long budget impasse.

“It looks like there was some cross-communication,” said Kevin Eckery, a Wilson spokesman. “The governor has had a chance to look at the issue and he definitely is going to be in support of interest payments for the vendors.”

Eckery said details of the policy will be worked out over the next few days and a letter sent to companies that do business with the state.

Wilson’s reversal was the second time the policy has been changed in a month.

The Department of General Services originally promised in an Aug. 10 memorandum to pay 8% interest on past-due rent to landlords who lease space to state agencies. Department of Finance officials said during the impasse that a similar policy would apply to other vendors doing business with the state.

But the pledge to the landlords was overturned in a Sept. 9 memorandum from General Services Director John Lockwood, who said the interest penalty provision in state law was meant to apply only when payments were late through some fault of state government. The budget deadlock, which kept the state without a spending plan from July 1 until Sept. 2, was, legally speaking, not the state’s fault, Lockwood said.

Wilson aides said the governor learned of Lockwood’s action only after a story on the dispute appeared in Wednesday’s editions of The Times.

“It is unfortunate that the department issued its ruling without consulting my office,” Wilson said in a prepared statement. “It was always our intent to ensure adequate payment for the delay. . . . Good faith and state law require us to hold up our end of the bargain by paying interest penalties to vendors faced with unreasonable delays.”

During the impasse, the state paid $3.8 billion in claims with IOUs known as registered warrants. But the warrants could only be used to pay bills left over from the last fiscal year or to make payments required by the courts and the state Constitution. Most bills incurred by the state after July 1 were not paid during the impasse.

Eckery said the state’s lawyers believe that the government may not be required to pay the penalties but can if it wants to. The Department of General Services estimates the interest penalties will total $250,000.

“The statutes really aren’t clear as to whose fault it is when payments are late or when there’s a problem like this,” Eckery said. “The late state budget isn’t an excuse.”

Dick Aronoff, a San Fernando Valley businessman who had complained about the policy, said Wednesday that he was pleased with the reversal.

“The state had told me that in cases of dispute they would rely on what made sense and what’s fair; that’s what this is,” Aronoff said. “This tends to refresh my belief on why someone should do business with the state.”