On-Time Budget Marks a Turnaround : Finance: Expected completion of spending plan results from renewed cooperation between Wilson and Brown. Memories of last year’s debacle are still fresh.

If Gov. Pete Wilson, as expected, signs a new state budget into law today, it will be the first time since 1986 that the state has had a spending plan in place before the start of the fiscal year on July 1.

The event will stand in contrast to the debacle of a year ago, when California’s government went 63 days without a budget, paid some of its bills with IOUs, postponed payment altogether to hundreds of businesses that supply goods and services to the state and earned the public’s ill will.

The dramatic turnaround resulted, more than anything else, from renewed cooperation between Republican Wilson and the Democratic Speaker of the state Assembly, Willie Brown of San Francisco.

Just as a collision between these two political powerhouses led to last summer’s stalemate, their newfound alliance cleared the way for a bipartisan framework whose final pieces won passage in the state Senate late Tuesday night.

There were other factors.

One was the presence of a true deadline--something rarely faced here--for extending a temporary half-cent sales tax that was scheduled to expire today. The attitude of a huge class of first-term lawmakers played a role. And many veteran legislators stung by criticism over last year’s prolonged budget battle were eager to avoid a sequel.

But the actions of Wilson, who was much more eager to compromise than he was a year ago, and Brown, who was happy to accommodate the governor, overshadowed all else in bringing the matter to a timely resolution.

Wilson suffered the most political damage from last year’s stalemate. His public approval ratings sank to new lows, and the voters rejected an initiative he authored to cut welfare grants and seize budget powers from the Legislature. With the start of his reelection effort only months away, Wilson could not afford more gridlock.

“Settling the budget by July 1 was absolutely critical if we were going to begin to rebuild the public’s faith in state government,” said Dan Schnur, Wilson’s chief spokesman. “Last summer, the people of California lost basic faith in the institution. Whether there were principles at stake was immaterial. They saw a government that was totally dysfunctional.”

For Brown, this year’s budget negotiations were a return to his pattern of pushing for a consensus spending plan completed on time--a symbolic achievement he has said is every bit as important as the substance of the budget itself.

To put last year’s stalemate into perspective, it helps to recall that the issue over which Wilson and Brown were divided was school funding. Wilson wanted to reduce per-pupil spending immediately and rein in the growth in education budgets over time. The majority of Democrats under Brown’s leadership in the Assembly opposed the governor.

The crisis was triggered when the Assembly Democrats, on the eve of the new fiscal year, blocked an education finance bill supported by Wilson and passed by the state Senate. They figured that their election-year gamble would pay political dividends, because education is one of the most popular of government programs, and the California Teachers Assn. is among the most generous of political campaign givers.

“We were absolutely on the side of the angels,” Brown said Tuesday.

The deadlock lasted more than eight weeks, during which Wilson, as chief executive, was the focus of attention--and blame--far more than individual legislators. Only when state payments to doctors and hospitals that care for the poor were severed and businesses doing work for the state began to feel the pinch from past-due invoices did the governor and the legislative leadership resolve their differences.

Wilson signed the budget on Sept. 2, a compromise that allowed school funding to keep pace with enrollment but slowed its expected long-term growth.

Two months later, Wilson’s hopes of passing his ballot initiative and capturing control of the Assembly for Republicans went down amid Bill Clinton’s drubbing of President George Bush in California. Although only three incumbent legislators on the ballot were defeated--all Republicans--voluntary turnover helped open spots for 27 new members in the 80-seat Assembly.

One of them was Bernie Richter, a video store owner and former Butte County supervisor, who said he was campaigning at the Nevada County Fair at the height of last year’s budget crisis.

“People were enraged,” Richter, one of a handful of the new Republicans who voted for the budget this year, said in a recent interview. “They were very angry.”

In the end, all the Democratic freshmen voted for the budget, with Debra Bowen (D-Marina del Rey) casting the deciding vote, against what she said were her better instincts, in order to break the gridlock. In contrast, the Republican freshman were divided in voting for the budget.

Even the veterans who survived last year’s elections were left tender by the bruising they took over the deadlock.

“We heard very clearly from our constituents that they want a budget settled and quickly,” said Assemblyman Richard Katz (D-Sylmar). “Everybody understood that . . . there would be no real winners. There was just a question of how you make it work.”

The result, from the governor down to the freshest freshman, was a high level of civility and a focus on not letting political differences spill over into personal acrimony.

“Last year was a horrible experience,” said Senate leader David A. Roberti (D-Van Nuys). “We resolved not to repeat it.”

Wilson, as he had in 1992, opened the 1993 budget season in January with a plan that was quickly condemned by Democrats. But behind the scenes, the core elements of Wilson’s budget found significant support among members of the opposition party.

His treatment of school funding was crucial. By proposing to maintain education spending at its current per-pupil level, Wilson moved the most volatile issue virtually off the negotiating table.

He proposed to fund the schools by shifting $2.6 billion in property-tax revenue to education from cities, counties and special districts--a controversial idea but one first offered by Democrats in the midst of last year’s budget battle.

Then, unlike a year ago, the governor negotiated on two central issues: deficit spending and taxes.

He first agreed to stretch out repayment of the state’s $2.8-billion General Fund deficit over 18 months, instead of the usual 12. This maneuver freed $1.1 billion to be spent on services in the 1993-94 fiscal year that otherwise would have gone toward retiring the debt.

Wilson also abandoned his long-held opposition to extending a temporary half-cent sales-tax surcharge beyond today’s scheduled expiration. He proposed shifting the money raised by the surcharge to local governments to help them survive his proposed property-tax transfer.

After an alternative budget fashioned by Democrats on an Assembly-Senate conference committee was blocked by Republicans in both houses, Wilson stepped in and convened three days of intense negotiating sessions with the Democratic and Republican legislative leaders of both houses.

The breakthrough came when Brown agreed with Wilson that the property-tax shift should be the cornerstone of the budget. Although some suspect Brown believes that the tax shift will haunt Wilson politically, Brown denies such motivation. With school funding--Brown’s top priority--protected, he said he simply did not have the stomach for a summer of battling over local government services.

With agreement on the centerpiece, the rest of the plan fell together quickly, and Wilson, Brown and Assembly Republican leader Jim Brulte of Rancho Cucamonga twisted arms to push it through the Legislature’s lower house. Final action was pending in the Senate Tuesday night.

The emerging budget is a true compromise. It contains Wilson’s property-tax shift but extends the sales tax to help blunt its impact. It fully funds state prisons, one of Wilson’s priorities, but cuts health, welfare and higher-education programs far less than Wilson had proposed.

State Budget Watch

Less than two days before the end of the fiscal year, these were the key developments in Sacramento:

THE PROBLEM: The state will end the year with a $2.8-billion deficit and faces a $9-billion gap between anticipated tax revenues and the amount needed to pay off the deficit and provide all state services at the current levels for another 12 months.

THE LEGISLATURE: For a second day, the Senate remained bogged down and unable to muster a two-thirds majority to pass the last pieces of the 1993-94 budget. The main snag remained lack of agreement on suspending the renters tax credit, a necessary element for balancing the $52.1-billion budget as written.

GOV. PETE WILSON: Awaited action by the Senate, and the Assembly if necessary, before signing the budget into law.

KEY DEVELOPMENTS: Senate President Pro Tem David A. Roberti (D-Van Nuys) held out for the trade-off he wants in a renters tax credit deal: agreement to suspend the program for two years in exchange for a constitutional amendment to go before voters that would guarantee the credit in future years for renters able to take the benefit as a tax deduction.