Senate OKs Budget; Fights Still Expected : Legislature: Spreading the pain of cutbacks among local governments is the key unresolved issue.

The state Senate passed a $52.1-billion budget early Tuesday and sent it to Gov. Pete Wilson before turning its attention to a multi-bill package of legislation needed to implement the spending plan.

The key issue yet to be decided late Tuesday was how to spread the pain among local governments from a $2.6-billion property tax shift that is the cornerstone of the budget bill on Wilson’s desk.

But several other matters also remained in flux as legislators sought to fill in the details of a broad agreement reached over the weekend by Wilson and the leaders of both parties and both houses of the Legislature. A key Democratic senator predicted a “battle royal” over these bills.

“The governor will sign the budget as soon as the entire legislative package is on his desk,” said Dan Schnur, Wilson’s chief spokesman.

The Senate passed the budget bill at 2:43 a.m. on a bare two-thirds vote of 27 to 11, with 15 Democrats, 10 Republicans and two independents voting in favor. Republican Sen. David Kelley of Hemet, on a fishing trip to Alaska, was the only absentee. The Assembly had passed the same bill Monday.

The Senate’s action came seven hours after the first vote on the bill left it 12 short of the two-thirds majority needed for passage. But a concerted lobbying effort by Wilson, Senate Republican Leader Ken Maddy of Fresno and Senate President Pro Tem David A. Roberti (D-Van Nuys) managed to persuade a number of senators to switch their votes.

Among the last to turn around was Sen. John R. Lewis, an Orange County Republican. A staunch anti-tax conservative, Lewis initially voted against the package, but switched after a visit with Wilson and a concerted lobbying effort by Republican colleagues and Orange County officials.

“The governor was very desirous of my vote,” Lewis said. “He had warmer and fuzzier feelings toward the budget than I did.”

Lewis ultimately held his nose and voted for the document after colleagues convinced him that it was the best Orange County could hope for and raised the specter that further delays would only open the door to problems.

Other lawmakers from Orange County also panned the budget, although state Sen. Marian Bergeson (R-Newport Beach) joined Lewis in voting for the spending plan.

“We’re over the cliff now and we’re about to hit bottom,” Bergeson said. “This was bad, but next year is only going to be worse.”

Sen. Rob Hurtt (R-Garden Grove) said a provision that would put Orange County in a position to lose tax money if supervisors don’t support a half-cent sales tax extension on the November ballot amounted to “sophisticated extortion.”

Hurtt, who voted against the budget, said lawmakers need to abandon tax increases and start slashing. “We still haven’t cut enough,” he said. “We’re out of balance.”

Passage of the budget bill appeared to ensure that the state will have a new spending plan in effect when the fiscal year begins July 1. If so, it will be the first time that has happened since 1986. Last year, after a record 63-day stalemate, Wilson signed the budget Sept. 2.

The budget reduces state spending for the second consecutive year, but at the expense of local governments. Cities, counties and special districts would lose $2.6 billion in property tax revenues to schools, saving the state an identical amount it otherwise would be obligated to pay the schools from its treasury.

Local governments would recover part of that loss by receiving revenue from a six-month extension of a half-cent sales tax that was to expire June 30. In November, voters will be asked to make the tax permanent and dedicate the money to local law enforcement. It would raise $1.4 billion annually.

At the state level, welfare grants would be reduced 2.7%--bringing the total three-year reduction to 13%. Aid to the aged, the blind and the disabled also would be reduced by 2.7%.

Primary and secondary schools would be left with the same amount per pupil--about $4,200--as they got this year. The budget calls for higher fees for community college, University of California and California State University students.

The only major state program besides the public schools to escape cutbacks would be the prison system, which would get a 9% increase in funding.

With the budget bill on Wilson’s desk, the focus turned Tuesday to the so-called trailer bills, a comprehensive package of legislation involving taxes, welfare, local government finance and other issues.

“The trailer bills are going to be the battle royal,” Roberti said after the budget vote.

The first major trailer bill to clear both houses was the education measure. Approved Tuesday night, the measure would appropriate $4,187 per student to the schools, down about $20 per child from this year’s budget.

Although the bill allocated about 40% of the state’s general fund, it was one of the least controversial elements of the budget and passed easily. But several other parts of the leadership deal were coming under fire, mostly from Democrats.

Democrats had a certain amount of leverage because their party provided the lion’s share of the votes for the main budget bill, and it was common knowledge in the Capitol that Wilson dearly wanted to avoid another prolonged stalemate.

In return, Republicans were saying that they might not vote for the final elements of the package if the bills did not reflect the deal to which Wilson agreed. The standoff was expected to last well into the night if not for several days.

“If the governor thinks his people can threaten us that they’re going to blow up this budget deal after we provided the votes for it, they’ve got to be either smoking dope or snorting something,” said Assemblyman John Burton (D-San Francisco).

Similar trouble was brewing in the Senate, where a proposal to spend $40 million in tobacco tax revenue for prenatal care of undocumented immigrant women was encountering considerable opposition.

Democratic Sens. Tom Hayden of Santa Monica, Diane Watson of Los Angeles and Nicholas Petris of Oakland argued that diverting the money from tobacco-related research to health services would violate the intent of voter-approved Proposition 99, which raised the tobacco tax and allotted the new money to specific purposes.

“The people spoke,” Watson said. “They didn’t have that much faith in the Legislature and for us to turn around and denigrate their effort is the height of cynicism.”

Because it would supersede Proposition 99, the bill requires a four-fifths vote in both houses. That margin was clearly lacking in the Senate, so action on the measure was postponed Tuesday night.

Also in some doubt was the future of the renters tax credit. Although the leadership had agreed to suspend the credit for two years, Democrats sought Tuesday to link that suspension to passage of a constitutional amendment which, if passed by the voters, would reinstate the credit and protect it from being repealed.

On another front, there was discord over a part of the leadership deal that would allow counties to reduce welfare payments to single, able-bodied adults.

The original agreement would allow any county to eliminate the grants if the county could show that such welfare payments were causing significant financial distress and that basic county services could not be maintained.

But Democrats said Tuesday that they wanted the grants cut no more than 20%.

“There’s been a divergence of opinion,” said Steve Olsen, Wilson’s deputy finance director.

There also was disagreement over how the potential $1.4 billion in sales tax revenue would be divided among cities and counties and how its use would be restricted.

The leadership agreement stipulated that the money would go for law enforcement and called for a six-member panel, evenly divided between county and city officials, to divvy it up.

But county officials were trying to change the agreement as the details were being drafted into legislation. Some counties wanted to keep all the money in county coffers, but others were offering a formula that would give a limited amount to cities.

The counties were winning many converts among Democrats, but Assemblyman Richard Katz (D-Sylmar) said it was necessary to set aside some of the money for cities to give mayors and police chiefs an incentive to campaign for the sales tax measure on the November ballot.

“We need them to say, ‘Pass this sales tax, it will help pay for police,’ ” Katz said.

There also was an effort to create an urban impact aid package to help large cities and counties survive the loss of property tax revenue.

Orange County would suffer a net loss of $8.4 million from the county treasury. The county’s total budget hit, however, would rise to more than $60 million because of cuts to special districts, which fund everything from libraries to the maintenance of beaches and parks, and extra costs for law enforcement called for under the state spending plan.

Los Angeles County, meanwhile, stands to suffer a net loss of $273 million under the plan endorsed by the leadership and more unless voters pass the sales tax extension. That amount would be about half of the total loss to counties statewide.

Los Angeles County lobbyists were trying to get legislators to soften the blow, but the options were limited and likely to meet resistance from legislators who represent smaller cities and rural areas.

One idea was to shift revenue from a state tax on banks to local governments because the tax law prevents cities and counties from taxing financial institutions themselves. This so-called urban impact aid would only go to cities and counties with a population of more than 500,000.

Times staff writers Eric Bailey and Dan Morain contributed to this article.

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