GOP Holdout Ends, Governor Gets Budget

SACRAMENTO — After Republicans ended their 16-day holdout, the Assembly passed and sent to Gov. George Deukmejian a $41.1-billion state budget Wednesday. But the action did not come soon enough to avoid the late payment of some state bills.

Republicans had forced the state into the new fiscal year at midnight Tuesday without the legal authority to pay its bills, having blocked passage of a budget while Democrats refused to vote for the governor’s $700-million tax rebate plan. On Wednesday, however, believing that Democrats could no longer legally thwart a rebate, Republicans joined the majority party to make the fourth and final Assembly vote on the 1987-88 budget anticlimactic.

Second Bill

The main budget bill, approved earlier by the Senate, passed the Assembly by 68 to 8. A second bill making statutory changes necessary to balance the spending plan was sent to the governor on a 70-7 vote.

The Legislature’s version of the budget would increase state spending over the last fiscal year by 6.2%. But both Republican and Democratic lawmakers predicted that Deukmejian would use his veto authority to make massive cuts in Democrat-backed programs, thus significantly reducing the overall spending increase.

Until Deukmejian signs the budget, the state will be without the authority to pay its bills.

Deukmejian aides said the governor would not finish his review of the budget and be ready to sign the spending plan until late in the week. In the past, Deukmejian has used statewide radio or television addresses to preview his major budget actions.

Controller Gray Davis, who cannot send out checks for current bills until the budget is signed, said: “I certainly hope the governor doesn’t delay action on the budget solely for the purpose of a statewide address. People are suffering because of the delay in passing the budget and the problem worsens with the passing of each day.”

Davis said his office Wednesday held up 4,000 checks. “Thursday my office is scheduled to send out $26 million worth of checks for county welfare workers,” he said. “They won’t go out until the governor signs the budget.”

Delay Criticized

The Democratic controller blasted political leaders for their tardiness. “Government should pay its bills on time. If taxpayers don’t pay their bills on time they must pay interest and penalties. There is no penalty on government if it doesn’t function on time. That’s not right,” Davis said.

Deukmejian, after speaking to a Girls State convention at California State University, Sacramento, told reporters that “obviously we are going to have to make some cuts in the budget.”

The governor would not estimate how long it would take to finish working on the spending plan.

“We are going to try to work as fast as we can on it, but it does require a lot of time and effort,” he said.

The budget sent to Deukmejian would raise spending substantially over levels recommended by the governor in his slimmer $40.8-billion spending plan.

Key changes include proposals to spend an additional $20 million to combat Alzheimer’s disease and an extra $40 million on AIDS research, prevention and treatment programs. Spending on state prisons would be cut $41 million, but funding for public schools would be increased substantially across the board, with an extra $147 million earmarked for special urban and rural education programs.

Even though the budget bears their unmistakeable imprint, majority party Democrats said they took no satisfaction in sending the budget to the governor because they fear his certain vetoes. Their worries were compounded by the fact that the governor, because of a complexity in the spending limit law, will have to cut $400 million from the proposed budget just because no rebate plan was agreed to by the start of the new fiscal year.

‘Blue Wednesday’

Anticipating the vetoes, Assemblyman John Vasconcellos (D-San Jose), chairman of the Assembly Ways and Means Committee and author of the budget bill, described the day as “blue Wednesday” and called up the spending bill for a vote without asking his colleagues to support it, as is the custom.

“Vote any way you want,” Vasconcellos told members of the Assembly.

Assembly Speaker Willie Brown (D-San Francisco) told reporters after the vote, “The cuts . . . are going to go into real muscle in terms of programming.”

Democrats predicted that most of the governor’s cuts would be in the funding increases that lawmakers made for education, toxics, health and AIDS research programs.

“Those are all in jeopardy at this point,” Vasconcellos said.

Republicans were not sympathetic.

Assemblyman Stan Statham (R-Oak Run) said during a relatively tame floor debate that he has watched the budget grow from $14 billion to $41 billion during his 10 years in the Legislature. “Crying poor lacks just a little credibility,” Statham said.

Assemblyman William P. Baker (R-Danville), vice chairman of the Ways and Means Committee, said the budget sent to Deukmejian would increase government spending over the next 12 months by 6.2% at a time when the private-sector economy is expected to grow 2.5%.

With the budget now approved, Democratic and Republican lawmakers predicted a months-long fight over how a $1.1-billion surplus should be distributed to taxpayers.

Legal Spending Limit

The surplus developed because of the state’s lack of legal authority to exceed spending limits placed on state and local governments by voters in 1979 and the failure of lawmakers to reach agreement on a rebate plan by the end of the fiscal year.

Deukmejian had recommended that $400 million of the surplus be spent and $700 million be returned to taxpayers. But Democrats and California Supt. of Public Instruction Bill Honig rejected the rebate idea, arguing that public schools need the money more than the taxpayers do.

Under the governor’s proposal, couples filing joint income tax returns would receive a maximum rebate of $190.

As the close of Tuesday’s fiscal year drew closer, Republican and Democratic lawmakers hoped a compromise could be worked out to save at least the $400 million for programs. But they could not reach agreement as Assembly Republicans refused to accept anything short of the governor’s plan. So the $400 million, by law, was added to the $700 million for potential rebate, making a total of $1.1 billion.

Honig, during a Capitol news conference, said he feared that failure to reach agreement on the surplus and pending vetoes by Deukmejian would hit school programs hard. “Schools are going to have to cut back drastically,” he warned.

Honig and Republicans will back rival initiative campaigns next year.

Will Back Initiatives

The schools chief said he will back two initiatives. One, aimed for the June primary ballot, would change the constitutional spending limit so that lawmakers in the future would not be hamstrung the way they were this year.

Honig said he would also sponsor an initiative on the November ballot that would return control of school funding to local districts. “It’s just too political in Sacramento,” he said.

Republicans want to go the other way and tighten up the law so that rebates become mandatory and there is no replay of this year’s debate over whether schools or taxpayers should get the surplus money.

Assembly Republican Leader Pat Nolan of Glendale expressed “delight” that the budget passed. “We will now proceed with our initiative to give the full $1.1 billion back to taxpayers,” he said.