Wilson Relents on Sales Tax Extension : Finance: Although Democrats, business leaders and law enforcement officials applaud his new flexibility, action may not be enough to save his budget proposal.

Gov. Pete Wilson reversed course Thursday and said he would support extending a half-cent state sales tax for six months. But the governor’s new position appeared to provide little immediate help to his embattled budget proposal.

County officials, law enforcement leaders and some of the state’s most influential business groups said they welcomed Wilson’s flexibility. But they and Democratic legislative leaders said Wilson needs to do a lot more to win them over.

Wilson said the half-cent levy should be kept on the books until voters can be asked in November whether to reimpose the tax as a local measure to fund county programs. The $700 million raised by the tax between July 1 and Dec. 31 should be dedicated to the support of local law enforcement, he said.

“Now the ball is in their court,” Wilson said of the counties. “They have the authority to go to their own voters and let the voters decide.”

Wilson has insisted for months that he could envision no circumstances under which the sales tax would continue beyond the June 30 close of the current fiscal year.

Wilson changed his stance, however, after a high-pressure campaign by his traditional allies in law enforcement and the business community threatened to torpedo the centerpiece of his budget proposal: a $2.6-billion shift of property tax revenues from local government to the schools.

The property tax transfer would allow Wilson to continue funding public schools at their current level of per-pupil spending without further depleting state resources.

But it also would leave a huge hole in local government budgets, which law enforcement officials have said would threaten public safety.

Los Angeles County Sheriff Sherman Block said Wilson’s latest proposal would make life easier for law enforcement if the governor’s property tax shift were enacted.

“It would soften the blow significantly, no question about it,” Block said. But, he added: “It does not change my position on the property tax shift. I do not support it.”

Others said Wilson’s proposal for a six-month extension of the sales tax amounted to a short-term fix that would only put off a comprehensive solution to the state’s ongoing fiscal crisis.

“This is ludicrous,” said Steve Swendiman, executive director of the California State Assn. of Counties. “They need to look at the structural integrity of the whole system. This is shortsighted politics over long-term public policy.”

Even some of Wilson’s strongest supporters in the business community were critical of the governor Thursday, saying that the proposal to shift property taxes from local government runs counter to Wilson’s stated intention of creating more jobs for California. They said the tax transfer would leave local governments with such a small share of the property tax that they would have little incentive to approve manufacturing and residential development.

“We need to avoid this self-inflicted wound,” Larry McCarthy, executive director of the California Taxpayers Assn., said in comments echoed by the California Chamber of Commerce and building industry officials. “My impression is that (Wilson) feels like this is the only option. That’s not good enough anymore.”

Wilson said late Thursday that the blow to economic development would be minimized in his proposal because counties take the brunt of the property tax shift while cities make most of the land-use decisions. Business leaders “are a little more worried about that than they need to be,” Wilson said.

Democratic Assembly Speaker Willie Brown (D-San Francisco) and Senate President Pro Tem David Roberti (D-Van Nuys) praised Wilson for showing flexibility but said they still want the governor to accept a multi-year plan without a $2.6-billion property tax shift.

Wilson’s latest plan, Roberti said, is “better than nothing. But (six months) is not enough and holding it out as a great hope is not enough. What we’re talking about is long-range structural (changes), not a six-month solution.”

But because most Republican lawmakers oppose an extension of the tax, there may not be sufficient votes for an alternative to Wilson’s plan. By dedicating the sales tax extension to local law enforcement, Wilson provides political cover to lawmakers who might otherwise be reluctant to vote for his property tax shift and the sales tax extension.

“This clearly helps him,” said state Sen. Frank Hill, a Whittier Republican who has advocated a more comprehensive approach. But, he added: “It may have the potential of slowing down the discussion about a real local government realignment piece.”

Wilson said in Los Angeles that the sales tax extension, coupled with his proposal to relieve local government of non-public safety state requirements, should ease the way for quick enactment of the budget. The state constitution requires the Legislature to pass a budget by June 15 and the governor to sign it by July 1.

“We’ve shown a willingness to compromise,” he said. “We need to enact this budget on time. I’m determined to see that we do that.”

Times staff writers Carl Ingram and Hector Tobar contributed to this report.