No Budget by Deadline, Wilson Says : Finances: Governor holds first talks with legislative leaders, but no progress is reported. New spending plan is required to be in place by tonight.

Gov. Pete Wilson, entering budget negotiations with legislative leaders for the first time this year, acknowledged Thursday that no new budget will be in place when the constitutional deadline passes at midnight tonight.

Wilson, who intends to leave the state to campaign for the presidency this weekend, convened Thursday’s meeting after Democrats charged that he was spending more time running for President than working to solve the state budget impasse.

The governor spent much of the morning meeting with lawmakers, and said he continues to insist on a 15% income and corporate tax cut, an idea opposed by Democrats who want to use the money to increase school funding.

After spending July 4 in Iowa, the governor intends to return to Sacramento, where he will hold another meeting with legislative leaders on his $56-billion spending plan for the 1995-1996 fiscal year.

In the days leading up to that meeting Wednesday, the Senate-Assembly budget conference committee will meet in an effort to resolve several points of contention.

“We intend to take whatever product they have and continue our own deliberations until we have a budget,” Wilson said, adding that he will postpone additional campaign trips until a budget is adopted. “We will be here until we’ve got a budget.”

Wilson is proposing a 5% tax cut for the fiscal year starting Saturday, followed by 5% cuts in each of the next two years. In all, taxes would be cut by more than $7 billion--an amount equal to the 1991 tax increase signed into law by Wilson in his first year in office.

Democrats, school officials and education lobbyists, who oppose the tax cut, argue that the proposal would deprive public schools of $4 billion over the next four years, and point out that 40 states spend more per pupil than California.

“We oppose any tax cut that would reduce services to schools,” State Supt. of Public Instruction Delaine Eastin said at a news conference Thursday.

Eastin released estimates showing that in Los Angeles County, the tax cut would translate into $869 million less in school spending between now and 1999 than if there were no tax reduction. In Orange County, the tax cut would mean schools would receive $240 million less during that period.

The Legislature must pass the budget by a two-thirds vote. But it can cut taxes with a simple majority. If the governor’s tax cut passes, income and corporate taxes would fall by $225 million in the next fiscal year, translating to a tax cut of $63 for a family of four earning $60,000 annually.

“The governor clearly feels it’s important to have his tax cut,” Assembly Republican Leader Jim Brulte said after the leadership meeting. “He wants his tax cut.”

Wilson invited Brulte to Thursday’s meeting knowing that he, not Speaker Doris Allen, can deliver votes of Assembly Republicans. Allen was at the meeting, as were Assembly Democratic Leader Willie Brown, Senate President Pro Tem Bill Lockyer and Senate GOP Leader Ken Maddy.

Exactly how long the budget will be delayed is not known--although the money gap separating Democrats and Republicans is relatively small, less than $2 billion.

But contentious politics in the Assembly are complicating the process--as evidenced later in the day when the budget conference committee convened. As they have throughout most of the process, the two Assembly Republicans on the committee, Charles Poochigian of Fresno and Curt Pringle of Garden Grove, defended nearly all aspects of Wilson’s proposed $56-billion budget.

As the meeting began, the conference committee had failed to resolve 205 budget items--ranging from divisive issues such as university tuition increases and welfare cuts to special district projects sought by various lawmakers--such as $600,000 for a swimming pool in Chino Hills.

“The good news is we’ve saved $10,000 on the one item we’ve closed,” state Sen. Mike Thompson (D-St. Helena) said, a sarcastic reference to the one compromise achieved after two hours, on an issue involving minor salary reductions.

Failure to approve the budget will have little immediate impact. However, paychecks for as many as 35,000 top state officials, middle managers and professionals such as lawyers could be delayed. Without a budget, the state cannot legally pay for some Medi-Cal services, such as prescriptions for the elderly.

Assembly and Senate leaders announced that lawmakers would not receive their paychecks starting with their next payday in August, or their $109 daily per-diem checks starting Saturday. Lawmakers receive the tax-free per-diem checks for each day they are in session. However, any pain felt by lawmakers will be temporary. The salary and per-diem money will accrue in accounts, to be paid out when the budget is approved.