Even in a Good Year, Budget Won’t Come Easy--or Early : Finance: Fiscal gap is relatively small, but fractures within the Legislature complicate tussles over education and welfare funds and cuts in taxes.

By almost any measure, this year’s state budget negotiations should have ended quickly, and on time.

More Californians are working and paying taxes, and more cash is flowing to state coffers. If there had been a few compromises, a little more money here, a little less there, a $56-billion budget would have been in place when the 1995-96 fiscal year began on Saturday.

A mere $1 billion to $1.8 billion separates Gov. Pete Wilson from signing his fifth state budget into law. That’s nothing compared to the gaping $14-billion hole that met Wilson when he took office, or even the $5-billion hole he and lawmakers filled last year.

“There’s no reason it can’t be done in the next two weeks,” said Russell Gould, Wilson’s finance director. “What it takes is the Legislature making the tough decisions to close it out.”

But while the money problems are relatively modest, politics in Sacramento this year is not. Thirty-two members of the Assembly have never been involved in the budget process before, and Assembly Republicans, a majority in the lower house for the first time since 1969, are at war with one another.

As a group, Assembly Democrats are more liberal than in past years and Republicans are more conservative. For the first time in years, anti-abortion hard-liners are insisting on cutting much of the $40 million spent each year on Medi-Cal abortions.

In the Senate, Democrats have drawn lines, saying they won’t agree to Wilson’s proposed 10% increases in state university tuition. Democrats in both houses oppose Wilson’s 15% income and corporate tax cut.

All this is made more complicated by the law requiring two-thirds of the Legislature--27 senators and 54 Assembly members--to approve the budget.

“If there weren’t all the philosophical disputes and turmoil in the Assembly, this would be one of the easier budgets to solve,” said Senate President Pro Tem Bill Lockyer (D-Hayward).

Lockyer summed up the Democrats’ view by saying they want more money for education by taking it from the state prison budget and costly bureaucracies, and by keeping in place higher income tax brackets that are due to expire this year for the wealthiest Californians.

However, those bureaucracies are Wilson’s domain, and the governor seems intent on protecting the prison budget. And as he runs for President, Wilson dearly wants to reduce taxes by 15%, starting with a 5% installment in the coming year.

“It’s going to be extremely difficult because of the obvious fact that this is the sixth or seventh year of economic problems,” said Senate Republican Leader Ken Maddy of Fresno. “We have made all of the cuts in expenditures that were easy or possible.”

Maddy also points out that the cost of state government keeps going up. The reason: More people qualify for welfare, more elderly people need health care, more children enter schools, more felons enter prison. The increase will consume another $1.5 billion in the coming year, Maddy said.

“You can’t just stop expenditures,” he said.

Newcomers to the budget game wring their hands when a budget deadline comes and goes: It is cast in the California Constitution. But missing budget deadlines has become a Capitol tradition dating back to 1969, when Ronald Reagan was governor and Democrats held out for three days against his tax cut and for more school spending. So it was almost an aside when Wilson nonchalantly acknowledged on Thursday that Friday’s midnight deadline would pass without a budget.

Controller Kathleen Connell said the effects will not be felt for at least two weeks. That’s when checks otherwise due won’t arrive for services performed after July 1.

The people most directly affected will be vendors who deliver food and other goods to state hospitals and prisons, nursing home operators who house Medi-Cal patients, and pharmacists who dispense prescriptions to elderly people on Medi-Cal.

If the budget impasse goes beyond Aug. 1, as many as 33,000 officials, including Wilson’s political appointees, and professional state employees such as lawyers and doctors, also will have their checks delayed. But all the money will be paid as soon as a budget is in place.

Few Capitol insiders expect the deadlock to go on that long. Most believe a budget will be in place by mid-July. It is, after all, in Wilson’s interest to solve the problem so he can hit the campaign trail full time.

“If there is any delay in the enactment of the budget, any chaos in the state of California, Pete Wilson’s detractors will point out that he is without the ability to shepherd his own state,” said Assembly Democratic leader Willie Brown of San Francisco.

It is also in Brown’s interest to round up 39 Assembly Democrats so he can spend the summer running for mayor of San Francisco. Assembly Republicans may see a need to repair their tarnished image and endorse a budget, too. And, importantly, the Legislature traditionally goes on vacation in July.

When Brown, Lockyer, Maddy, Assembly Speaker Doris Allen and Assembly Republican Leader Jim Brulte resume meetings with Wilson on Wednesday, after his campaign trip to the East and Midwest, they will grapple with these issues:

Prisons and Universities

Wilson’s budget includes more funding for public universities, but also assumes that tuition will increase 10%. The fees, though low when compared to those in other states, have more than doubled during the 1990s. All 21 Senate Democrats vowed early in the budget battle to oppose any tuition hike, and most hold to that position.

“I’m not going to vote for a budget with fee increases,” Lockyer said Friday.

Instead of raising tuition, Lockyer wants to pare the Department of Corrections’ $3.5-billion budget by as much as $400 million.

“If we look at the four years of Pete Wilson, we see 8,000 new jobs in prison and 8,000 jobs cut out of higher education. I think that is an alarming trend,” Lockyer said.

“To me, frankly, it doesn’t make a lot of sense,” Maddy said of the Democrats’ stand on tuition. “It’s almost like they’re in denial. The economy in California is dramatically different than it was 10 or 15 years ago.”

Tax Cuts and Schools

Wilson’s budget gives schools their first increase in five years, slightly more than 2%. “It’s a pittance against the rightful claims of schools,” Lockyer said.

Democrats contend that Wilson’s proposed tax cut would most directly affect public schools. By cutting income, corporate and banking taxes by 15%, the tax proposal would remove $225 million in revenue this year, and more than $7 billion over the next three years.

One effect of the tax cut would be that public schools would receive $3 billion less than they would get if taxes were not cut.

Lockyer said Wilson wants his tax cut separated from the budget debate. The reason is that while the budget needs a two-thirds vote, the Legislature can approve the tax cut by a simple majority. Still, chances for Wilson winning his tax cut remain questionable.

“I don’t see it having much of a chance,” Maddy said, noting that Senate Democrats can kill the tax cut.

Maddy, who supports the plan to cut taxes for banks and corporations, is lukewarm on the need for an income tax cut. “I for one don’t think we need a middle-class tax break. The middle-class taxpayers are hurt by other taxes, but not income taxes.” He added, however, that if the Republican-dominated Assembly approves the tax cut, the idea may gain momentum.

As an inducement to Wilson to give schools more money, the California Teachers Assn. is offering to settle a lawsuit the teachers won against the Wilson Administration over a prior budget deal. If the teachers succeed on appeal, the suit would cost the state more than $1 billion.

Wilson has a hammer of his own. To blunt the cut in the first years, Wilson has proposed to extend for up to five years the upper-income tax brackets for the highest wage earners. If lawmakers take no action, the upper brackets will expire at the end of the year, leaving the highest wage earners paying a combined $325 million less in taxes next year than they will pay this year.

Welfare

Wilson wants to cut welfare to families by about $500 million. For example, a mother with two children who receives $594 a month now would get $465 a month next year. Assembly Democrat John Vasconcellos of Santa Clara is leading the opposition to such cuts.

“Kids’ food, to me, is hardly negotiable,” Vasconcellos said.

Under Wilson’s budget, grants for couples who are elderly, blind or disabled also would be cut from $1,102 to $992 a month. Vasconcellos is opposing such cuts, but some Republicans also are uneasy about them.

“They’ve got great power,” Maddy said. “Everyone is concerned politically about the impact of senior citizens.”

Lawmakers probably will agree to some welfare cuts, especially given that few welfare recipients are politically active. Vasconcellos is proposing that the amount of welfare checks differ, depending on a region’s cost of living.

Local Government

Republicans and Democrats oppose much of Wilson’s proposal to shift the responsibility for welfare to counties, given that it would cost counties at least $75 million. Legislative staffers are working with the governor’s office to make sure there is no cost to counties.

Steve Juarez, Los Angeles County’s lobbyist in Sacramento, said Wilson’s proposal as it stands would cost the county $25 million--one-third of the total cost to counties statewide.

Largely absent from budget discussions is talk of helping financially struggling counties such as Orange and Los Angeles. But as part of a budget accord, Los Angeles County lawmakers may seek to give the county the authority to impose a “tipplers’ tax” of 10% on alcoholic drinks served in the county.

“I’m praying there is a Republican legislator who maybe concludes that a tipplers’ tax is not the worst thing in the world,” Supervisor Zev Yaroslavsky said. “At least let us begin the process of stabilizing county government.”

Assemblyman Curt Pringle (R-Garden Grove), Orange County’s representative on the budget conference committee, said the state may lift some responsibilities on counties as a way of helping them. But, Pringle added, the “majority of the counties’ problems are going to be solved locally--and should be.”