NEWS ANALYSIS : State Budget Plan May Add to Business Woes : Economy: Wall Street remains wary over the issues California’s financial proposal leaves unresolved.

The $52.1-billion budget on Gov. Pete Wilson’s desk does nothing to improve California’s notorious business climate--and might eventually make it worse.

Expectations were low, and after last year’s prolonged budget debacle, business and state leaders reasoned that any budget would improve California’s tattered fiscal image.

“In a sense, what the budget actually contains is irrelevant,” said Cliff Allenby, a lobbyist for California developers.

From Wall Street, where there was widespread fear of another drawn-out budget crisis in California, early reviews were tepid when the 1993-94 spending plan was wrapped up last week. Claire Cohen, executive vice president of governmental finance at Fitch Investors Services, noted that the budget sets a November vote on extending the sales tax, which will prolong the uncertainty over state finances. And the proposed budget would not close the state’s $2.7-billion deficit for 18 more months.

“Clearly, to get the budget adopted in a timely fashion sends a message that they did deal with it. That is positive,” said Cohen, whose credit-rating firm gave its highest rating to California’s recent sale of $2 billion in revenue anticipation warrants.

“But the budget accord isn’t that different than what we expected. The larger question is whether they can achieve the budget,” she said, referring to the question of whether the battered tax base will generate as much revenue as the budget projects.

Though California’s tax, regulatory and other perceived burdens on business are widely criticized, the depth of the state’s fiscal crisis ruled out tax relief for business or any other group in this year’s budget. Business leaders said they did well to dodge new taxes.

“We consider that a victory,” said Allan Zaremberg, senior vice president of the California Chamber of Commerce.

One of industry’s priorities was put on hold because it could have cost the state as much as $1 billion. That was a sales tax exemption for equipment purchases, backed by the Republican governor and Assembly Speaker Willie Brown, a Democrat.

An even higher priority of the business community--reform of California’s much maligned workers’ compensation system, nominally a separate issue from the budget--remained out of reach, despite late-hour efforts.

That legislation received fresh impetus last week as a way to offset the budget’s effects on cities and counties that will lose tax revenue. Workers’ compensation reform would save local governments money by lowering payouts due their injured employees.

Behind-the-scenes talks on a reform package were to continue this week. Zaremberg said there appears to be broader support than there was six months ago.

“People on Wall Street aren’t just looking at the budget,” Zaremberg said. “If we were to follow it up with significant workers’ comp reform, people would say California is starting to get its act together. If we don’t, it will mitigate any benefit we get from a timely budget.”

The budget’s main impact on business may stem from a shift of $2.6 billion in property tax revenues away from cities and counties to the state. This would be partly offset by shifting up to $1.4 billion in sales tax revenues to cities and counties.

Critics say this budget shift will worsen a built-in bias in California for low-wage, retail-based jobs--jobs that generate sales taxes and are wooed by local governments--and against high-paying manufacturing jobs and housing development, which generate mainly property taxes.

“It was already lopsided,” said Rod Gould, city manager in Monrovia. He figures the local tax benefits of a manufacturing plant in his San Gabriel Valley town are about a third of what a retail business would bring. He said land-use planning is done accordingly.

“It’s very clear that if a city acts in its own economic interest, it will not be acting in the state’s overall economic interest,” Gould said. “Now, this bizarre disincentive to manufacturing and housing will be compounded.”

Business lobbyists also said the state revenue squeeze on localities is likely to trigger further hikes in fees charged by cities and counties, many of which are paid by businesses.

Monrovia, for example, boosted 126 fees for services, such as building permits and utility hookups, by $500,000 this year. It was necessary for the city to make ends meet and probably will have to be repeated next year under the new state budget, Gould said.