CALIFORNIA ELECTIONS : ‘Tax-the-Rich’ Plan Put Hex on Welfare Cutbacks : Initiatives: Both measures failed, but millions of dollars were diverted from backing Wilson’s proposed benefits overhaul.

Even in defeat, the authors of Proposition 167, the “tax-the-rich” initiative, were claiming success Wednesday because their proposal had diverted millions of dollars from Gov. Pete Wilson’s ballot measure to reduce benefits to the poor and give the governor new powers.

Now that voters have rejected the two initiatives, officials in both campaigns acknowledged the effectiveness of a novel political strategy.

Public employee unions had banded together to put a tax measure on the ballot so threatening to business interests that it siphoned money away from an initiative that those interests favor. That initiative, Wilson’s Proposition 165, would have empowered the governor in a fiscal emergency to cut certain state employee salaries and trim back the programs that employ them.

“I think Proposition 167 was put on the ballot simply to drain money from our initiative and also from Republican Assembly candidates. That’s why they did it. Yes, I think it was a very important contributing factor (to the defeat of Proposition 165),” said George Gorton, director of the Yes on Proposition 165 campaign.

Lenny Goldberg, the executive director of the California Tax Reform Assn. who helped write Proposition 167, acknowledged that the backers of his initiative had hoped to use it to fight Wilson’s Proposition 165, although he insisted their prime goal was to reform a tax system they believe is riddled with loopholes that favor the rich.

“I don’t think there’s any question (Proposition) 167 was part of a fight-back strategy . . . and I think we did make some contribution to defeating (Proposition) 165,” said Goldberg, whose organization is largely funded by employee unions.

He said he saw the two initiatives as intertwined because both were attempts to help solve the state’s financial problems--Wilson’s by cutting welfare benefits and Goldberg’s by increasing the taxes paid by upper-income individuals and large corporations. “We decided if he was going to attack the poor, then we were going to attack the tax loopholes that we believe” are really the source of the state’s problems, he said.

The fact that businesses and corporations contributed more than $10 million to an effort to defeat Proposition 167, Goldberg said, is strong evidence that it probably took contributions away from Proposition 165.

Although his proposition ultimately lost, Goldberg said it made a good showing despite the “tons of money” the opposition had to spend against it. He said proponents may try it again in a future election.

Likewise, a disappointed Wilson said he thought the vote to defeat Proposition 165 was close enough that he will ask a new Legislature to pass many of its welfare provisions. He blamed defeat on a “dishonest campaign” by his opponents, who, he said, inaccurately portrayed the budget provisions as a gubernatorial power grab.

“I think the power grab idea, although bogus, was probably successful,” he said.

However, children’s advocacy groups who fought the initiative insisted the electorate was sending a message that would reverberate across the nation that people do care deeply about the well-being of poor children and poor people.

“I think . . . it will give pause to those people who would use welfare bashing as a political tool,” said James Weill, general counsel for the Washington-based Children’s Defense Fund.

It was the second time in less than a decade that California voters defeated a welfare proposal. In 1984, they voted down a proposition that would have cut both health and welfare benefits.

Propositions 165 and 167 were among eight that went down to defeat on Election Day, as voters continued the recent trend of rejecting most propositions put before them.

One of the initiatives that felt the caution of voters was Proposition 161, which would have made California the only place in the world with a law explicitly permitting doctor-assisted suicide and euthanasia for terminally ill patients.

Both supporters and opponents agree that the concept has broad acceptance among voters here. But last-minute television and radio ads succeeded in raising fears that the measure lacked meaningful safeguards and could lead to death by mistake.

The same strategy was used to defeat a similar initiative in Washington state a year ago.

“Washington told us that if voters would take a close look, they would see the lack of safeguards,” said Chuck Cavalier, a political consultant who directed the No on 161 campaign. The defeat here could stall a movement, led by the pro-euthanasia Hemlock Society, to enact right-to-die legislation throughout the country, he said, adding, “California was to be their launch pad to go national.”

The authors of the California initiative, Los Angeles attorneys Robert Risley and Michael H. White, are not ready to take on the issue again soon. White said he will return to his solo law practice. Risley takes comfort in the fact that 4.5 million people voted for the initiative.

The defeat, Risley said, “will be a setback for the entire concept, although I still honestly believe it’s an idea whose time has come . . . and California did not reject it out of hand.”

One exception to the general rejection of propositions gave a clear victory to public employee unions. Voters approved the union-backed Proposition 162, which will prevent the Legislature from tapping into the public employee and teacher retirement systems in order to balance the state budget, a practice that has become commonplace in years of fiscal crisis.

While protecting the pension funds from legislative raiders, voters overwhelmingly approved one measure that is certain to add to the state’s budget woes. Passage of Proposition 163 will repeal the new state snack tax on Dec. 1, at a cost to government treasuries of as much as $450 million a year.

“It’s a chunk of change . . . another piece of the budget puzzle that we’re going to have to solve” next year, said Geoffrey Long, an Assembly Ways and Means Committee staff member.

No other measure on the ballot got as many yes votes, 66%, representing a strong expression of unhappiness with the newly imposed tax on cookies, chips, candy bars and bottled water. But the initiative provides no means for the state and local governments to make up the lost revenue.

State education officials, meanwhile, said passage of a $900-million school construction bond measure would go a long way in helping districts catch up with a growing student population.

“We were falling behind again,” said State Supt. of Public Instruction Bill Honig. “People still see the value of schools for their kids, and we’re grateful for that.”

Voters also approved Proposition 160, a constitutional amendment that permits the Legislature to grant property tax exemptions to surviving spouses of those who die while on active military duty.

Times staff writers William Trombley, Ralph Frammolino and Jerry Gillam contributed to this story.