Assembly Achieves Budget Breakthrough

Ending a record two-month budget impasse, the state Assembly approved a $98-billion spending plan late Saturday that includes $2.4 billion in additional taxes.

Republicans blasted the budget proposal as unbalanced and irresponsible, but it passed the Assembly with the minimum 54 votes on the final night of the two-year legislative session. The Senate, which approved its version of the budget two months ago, was expected to agree to at least most of the Assembly version by early today.

The deal, negotiated by Speaker Herb Wesson (D-Culver City) and Assembly Republican leader Dave Cox of Fair Oaks, contained an additional $1.7 billion in spending cuts, including an agreement to shift authority to Gov. Gray Davis to trim $700 million from government operations. In order to win four Republican votes, Assembly leaders labeled the $2.4 billion in targeted tax increases as merely “revenue enhancements.”

They included speeding up collection of taxes owed when people sell stock options and commercial real estate, and a suspension of Davis’ much touted income tax credit for public school teachers.

In one of the most notable changes from the spending plan offered by Davis and approved in June by the Senate, the Assembly version includes no tobacco tax hike and no increase in the car tax.

Davis and the Senate supported raising the car tax by about $1 billion and raising the state tobacco tax to $1.50 per pack, but those efforts failed. Tobacco lobbyists held more sway in the Assembly, which at one point proposed hiking the tax to $3 per pack but abandoned any such increase.

“It’s dead--there wasn’t support for it,” said Assemblyman Jerome Horton (D-Inglewood). “There is no cigarette tax [hike] in this budget.”

The accord came 61 days after the July 1 start of the 2002-03 fiscal year and the constitutional deadline for having a spending plan in place.

Assembly Republicans condemned the budget as unbalanced even before it becomes law. It relies on billions in loans that will take 23 years or more to fully repay. The shortfall, previously estimated at a record $23.6 billion, may have grown to as much as $27 billion, according to the state’s most recent revenue forecast.

Assemblyman John Campbell (R-Irvine), the GOP’s point man on the budget in the lower house, criticized Davis, saying he was “missing in action” from budget talks, charging that he failed to engage “in the single biggest thing that we do in this house in this state.”

“Have we solved the fiscal crisis? No,” Campbell said, adding that “this state is drunk on spending.”

But Assembly Budget Committee Chairwoman Jenny Oropeza (D-Long Beach) lauded the budget as including “concessions and compromises,” and protecting public schools and health care programs for poor people.

Joining 50 Democrats in the Assembly were Republican Assemblymen David Kelley of Idyllwild, Dick Dickerson of Redding, Mike Briggs of Fresno and Keith Richman of Northridge.

Richman, a physician who is provisionally running for mayor of the new city if the San Fernando Valley secedes from Los Angeles, called the deal “significantly better than the budget introduced by the governor and approved by the Senate.” Richman said he was pleased that the car tax would not increase, as Davis had proposed, and that there would be no tobacco tax hike. He also said he pushed for spending cuts.

Several Republicans were skeptical about the deal, given that few details were in print by the waning hours of the legislative session. And it was not clear that Senate Democrats would agree to all Assembly proposals. An angry and tired Senate President Pro Tem John Burton (D-San Francisco) said simply, “I don’t care,” when asked about the lower house’s proposal.

“It’s not that it’s bad. But who has checked it out?” said Assemblyman Bill Leonard (R-San Bernardino).

Leonard, who planned to vote against the budget, predicted that any Republicans who supported the budget would face challenges from the political right in future primary elections: “It’s a guaranteed issue in any campaign they ever run in the future,” he said.

Among its provisions, the budget would have the state delay making $681 million in payments to public schools and offer early retirement to as many as 1,000 veteran state employees at a savings of as much as $285 million. Also as part of the deal, the Legislature and governor would agree that at least 4% of the state general fund be spent on public works projects.

The deal came together after Senate Democrats brushed aside Republican objections and approved legislation that could have allowed Davis to triple the car taxes that motorists must pay each year. The move could have led to a tax hike of as much as $3.9 billion.

The car tax vote was among the year’s most divisive actions. But it also helped jolt Republicans into negotiations, according to Democrats involved in the effort.

The maneuver so angered some Republicans that they hardened their resolve to block the budget’s approval. Sen. Maurice Johannessen (R-Redding), the one Senate Republican who voted for the budget in June, charged that the car tax bill violated the deal he thought he had with Senate Democrats--and Assemblyman Dickerson vowed to withhold his support over the car tax issue. “The fight is not over yet,” Dickerson said.

California’s Constitution requires a two-thirds vote of both houses for a tax hike. But Senate Democrats led by Steve Peace (D-El Cajon) concluded that the bill could be approved by simple majority because it was mere a “clarification” of 1998 legislation pushed by then-Gov. Pete Wilson that opened the way for the car tax cut.

“Like hell it is,” Wilson said in an interview. “This is nothing more or less than a subterfuge to get around the two-thirds requirement to increase taxes.” Many Republicans believe the car tax has particular resonance with the electorate. And given their minority status in Sacramento, they are especially protective of the constitutional requirement that both houses approve tax hikes by a two-thirds vote.

In order to assuage GOP members, Assembly Democrats agreed to drop the car tax proposal.

“As we stand here, we’re not going to take it up for a vote,” said Assemblyman Fred Keeley (D-Boulder Creek).

The budget machinations came as the two-year legislative session came to a close. It was, many lobbyists and veteran lawmakers said, among the most chaotic finishes in memory.

As the budget vote was pending, legislators voted on scores of bills that required action by the midnight deadline:

* The Senate killed a Hollywood tax break, aimed at halting so-called runaway movie production. Studios and entertainment industry unions backed the tax break. But though the break would not have kicked in until 2004, the timing was bad, given the state’s budget deficit of nearly $24 billion.

“The sponsors keep coming up like they are entitled to something instead of asking for something,” Burton said. “You’re going to take what we give you.”

* A bill to prevent banks and other financial institutions from sharing or selling consumers’ personal data died in the state Assembly for the second year in a row when moderate Democrats rallied to kill it. The measure, SB 773 by Sen. Jackie Speier (D-Hillsborough), was backed by consumer groups, who noted that polls showed the issue to be deeply important to the public. But financial firms spent more than $5 million in campaign donations and lobbying to kill it.

* The Senate approved and sent to the governor a controversial measure that would benefit Mercury Insurance Group, a Los Angeles company that has contributed generously to two-thirds of the Legislature. The bill, SB 689, would allow insurance companies to offer discounts to customers who have continuously purchased automobile coverage. It reverses a decision by Insurance Commissioner Harry Low that outlaws such a discount.

* The Senate gave final approval to legislation, SB 804 by Sen. Richard Polanco (D-Los Angeles), that would allow illegal immigrants to obtain drivers’ licenses, so long as they undergo criminal background checks and are in the process of applying for citizenship.

* In a third attempt to win Davis’ support of legislation sought by the United Farm Workers, the Senate approved AB 2596, a bill to allow government mediators to intervene in contract disputes between growers and the UFW.

Times staff writers Jon Ortiz, Miguel Bustillo, Julie Tamaki and Virginia Ellis contributed to this report.