EARTHQUAKE / THE LONG ROAD BACK : Dole Rebuffed on Plan to Offset U.S. Costs : Relief: Senate leader wants to cut other programs to pay for aid. Federal officials budget up to $5 billion in initial package.

Clinton Administration officials Sunday shaped a preliminary Southern California earthquake relief package of $4 billion to $5 billion, and rejected a demand by Senate Minority Leader Bob Dole (R-Kan.) that Congress offset disaster payments by cutting other federal programs.

With the figures on earthquake-related damage rising rapidly, officials cautioned that the full cost to the Treasury could rise higher. Nonetheless, Administration aides plan to begin discussions with congressional leaders Tuesday or Wednesday on an aid package.

Officials said several hundred million dollars of the proposed aid would be in the form of loans to individuals to repair homes and to businesses to fix damage from the earthquake. Federal law allows low-interest home repair loans of up to $100,000, for example.

But the bulk of the federal outlay would be direct spending. The money would go for several purposes: funds to repair schools, highways, streets, water mains and other public facilities; housing vouchers to pay for temporary housing for those left homeless; public health expenses ranging from disease control to some mental health costs, and short-term disaster relief costs such as the shelters set up to house families.

Even as they try to keep up with the escalating estimates of the cost of repairs, aides to President Clinton have been bracing for potential opposition in Congress. Dole’s remarks, made on CBS-TV’s “Face the Nation,” were the first sign that such opposition is beginning to surface.

Dole signaled that Republicans in both the House and Senate would advocate immediate reductions in federal spending to balance any emergency assistance for earthquake victims.

Some lawmakers had urged offsetting cuts during debate last year over Midwest flood relief, but Congress rejected the idea.

“We ought to provide the relief as quickly as we can, in whatever amount it takes, but we ought to pay for it,” Dole said. “We shouldn’t add it to the deficit.”

White House officials, however, said the Administration would oppose any requirement to make multibillion-dollar reductions in government outlays in order to aid quake victims.

“We did not favor offsetting cuts for the (1993) flood relief, which helped Kansas, nor do we think it appropriate to change the rules that have applied to previous disasters in the case of the Los Angeles quake,” said Christopher Edley, associate director of the Office of Management and Budget.

The clashing views came as Gov. Pete Wilson said damage estimates now exceed $30 billion, thus making it the costliest natural disaster in U.S. history.

Edley declined to estimate the total cost of the Administration’s quake relief package. But another senior official who estimated the cost of current plans at $4 billion to $5 billion also rejected Dole’s proposal.

“The deficit is coming in way below where anyone thought it would be. We’re not in crisis,” the official said, referring to estimates showing the federal budget deficit has dropped from nearly $300 billion to roughly $180 billion. Dole’s suggestion “is sort of odd,” the official said.

A $4-billion to $5-billion relief package would be roughly similar to the $4.6 billion Washington has paid to cover aid for the seven Midwestern states hit by flooding last spring and summer. It would be substantially more than the roughly $2.5 billion that the 1989 Loma Prieta earthquake in Northern California cost the Treasury, but would be considerably below the nearly $8-billion cost of the three major hurricanes that hit Florida, Louisiana, Hawaii and Guam in 1992.

In addition to the cost to the federal government, state and local governments are also expecting to pay large amounts in earthquake-related costs, and private insurers have said they expect to pay out several billion dollars.

As federal and state assessment teams continued their review of the earthquake’s impact, damage estimates have mounted rapidly. Figures for one major category of relief costs doubled on Friday alone, one official said, indicating that a final total may not be available for weeks.

The Administration probably will propose a disaster relief bill that would provide several billion dollars up front with additional funds set aside in a reserve that could be used if needed. The Midwest flood aid bill contained a similar provision.

Federal officials say the disaster cost estimates have been rising rapidly in part because of additional damage to buildings caused by aftershocks but also because engineers are finding new problems as they continue their assessments.

The costs of a downed freeway interchange, for example, can be estimated rapidly, but “it takes time for engineers to walk, use ultrasound scanners and look for hidden stresses,” Edley said. There could well be “need for more demolition and reconstruction of highways than now seems likely,” he said.

The federal government will pick up 90% of the cost of repairs to interstate highways. Clinton is also likely to grant a request from Wilson for the federal government to pick up 90%, rather than 75%, of the cost of repairing other public facilities, such as schools.

In the past, money for such uses has been classified as a budget “emergency” by both the President and Congress, thus exempting it from the pay-as-you-go provisions of the budget law. Without such a designation, every dollar of disaster payments would have to be offset by another dollar of reduced spending or tax increase.

Even as Dole declared his intentions to seek the pay-as-you-go treatment for California earthquake aid, however, he acknowledged that he might not prevail.

“We’re going to have a plan to pay for it,” he said. “If it loses, it loses. . . . We’ll see what happens.”

But, underscoring the political difficulty in finding budget cuts that will get majority backing in both the House and Senate, Dole said there is as yet no agreement among Republicans on how to make the spending reductions that would be required to offset the quake aid.

“The budget’s going to be very tight,” he said.

Democratic leaders have issued similar warnings, noting that Congress approved a hard freeze on spending for most domestic programs for five years as part of Clinton’s economic program, which was enacted in 1993.

But there have been increasing demands by lawmakers for some method of financing the cost of disaster relief without adding to the massive federal deficit.

A group of deficit-conscious Democrats and a solid bloc of Republicans raised the issue last summer, temporarily delaying congressional approval of federal relief for victims of the Midwest floods.

In that case, Clinton, following the example of his Republican predecessor, George Bush, asked Congress to waive the pay-as-you-go budget rules in approving flood relief.

However, the bill’s progress was stalled in the House when a 216-205 vote rejected the first attempt to bring up the measure without offsetting budget cuts.

“If we keep on doing what we always did, we will always get what we always got--a $4.3-trillion deficit,” said Rep. Jim Nussle (R-Iowa), who supported the pay-as-you-go move in that debate.

But House Majority Leader Richard A. Gephardt (D-Mo.) responded: “When we have unforeseen emergencies and circumstances that demand immediate action, we do not stop everything and go through a budget process.”

Congress eventually passed the flood-relief bill without any offsetting cuts in spending, but, bowing to pressure from members of his own party, House Speaker Thomas S. Foley (D-Wash.) agreed to set up a bipartisan task force to consider ways to pay for future disaster relief costs.