State Budget Deadlocked Despite Talks : Finances: Round-the-clock sessions with governor and lawmakers fail to iron out differences over spending plan. Financial syndicate headed by Bank of America could offer to extend line of credit.

The state began the new fiscal year today without a budget after Gov. Pete Wilson and legislative leaders failed to resolve their differences Thursday in an all-day negotiating session that focused on taxes, welfare and prisons.

Wilson and Democratic and Republican leaders of the Assembly and Senate met into the night in hopes of producing a spending plan and related legislation that could be put to a vote today.

The five leaders conferred early Thursday with a representative of Bank of America, which is heading a syndicate of financial institutions that is prepared to back the state’s credit as it seeks billions in loans to finance government operations over the next two years.

Anthony Taddey, managing director of BankAmerica Securities Inc., warned the leaders that delay in passing the budget “seriously endangers” the bank’s ability to help the state finance its debt on the best available terms.

In a letter to legislative leaders, Taddey said the state should do all it can to avoid the use of IOUs, which state Controller Gray Davis said would be necessary as soon as Tuesday if no budget is in place.

The use of IOUs, officially known as registered warrants, would “further jeopardize the state’s ongoing access to credit markets at a reasonable cost,” Taddey wrote.

Taddey has been advising lawmakers and the state’s fiscal officers about a measure that would trigger spending reductions or higher taxes in the event the state’s fiscal condition deteriorates after a budget is enacted.

The extraordinary legislation is necessary because Wilson’s budget plan depends on a record $7 billion in borrowing. Wall Street investors who would finance the debt by buying state bonds want assurances that California will be able to redeem the notes even if a huge federal bailout Wilson is hoping for does not materialize.

One lawmaker said he found it troubling that an international syndicate of banks could be represented at the bargaining table, dictating terms to the state’s top elected officials behind closed doors.

“We have crossed the line,” said state Sen. Tom Hayden, the Santa Monica Democrat. “This is the way the International Monetary Fund treats Brazil.”

But Democratic Assembly Speaker Willie Brown (D-San Francisco) said the roles of the banks were no more intrusive than would be expected in any relationship between a debtor and its creditors.

“A borrower is always at the mercy of the lender,” Brown said.

Brown said he was hopeful that the legislative leaders could agree on the budget in time for a vote today. The Senate passed a $57.3-billion spending plan Wednesday, but it was blocked by Republicans in the Assembly.

Republican lawmakers, acting in concert with Wilson, demanded deeper cuts in welfare than the 2.3% reduction Democrats already have accepted. The Republicans also want a bigger boost for state prisons than the 7.5% increase Democrats have agreed to.

Wilson also has demanded restoration of several executive branch positions and programs that Democrats deleted from the budget. Among them: the governor’s Office of Planning and Research, which Democrats charge is used to produce material to aid Wilson’s reelection campaign.

Finally, Wilson and his Republican allies are trying to protect a tax cut for the state’s wealthiest residents that is due to take effect in 1996. Individuals earning more than $100,000 and couples earning twice that amount have been paying a surcharge on their income taxes since 1991, and Democrats want it extended beyond a scheduled expiration at the end of 1995.

Wilson, who until Thursday played no direct role in negotiations with the lawmakers, was closeted in his office all day and was not available to reporters.

The leaders emerged periodically to attend to legislative business but declined to discuss the specifics of the negotiations.

“We’re just going through it,” Senate President Pro Tem Bill Lockyer (D-Hayward) said during one break. “It’s very tedious and very detailed.”