Legislature Poised to Approve Final Sections of State Budget : Finances: A bill pending in the Assembly meets most of Wilson's demands on education spending. Treasurer is tapping pension fund to cash state workers' IOU paychecks.

By DANIEL M. WEINTRAUB

Sept. 2, 1992 12 AM PT

TIMES STAFF WRITER

SACRAMENTO — The Legislature appeared to be poised early today to pass the final pieces of a $57.6-billion fiscal package, paving the way for Gov. Pete Wilson to sign a spending plan and end the state’s 64-day budget stalemate.

A bill pending in the Assembly would meet most of Wilson’s demands on education spending--the most contentious issue of many that delayed the budget’s approval for more than two months into the fiscal year.

The Democrats’ last hope for significantly denting Wilson’s demands faded early Tuesday when the governor promptly vetoed a Democrat-backed education bill that reached his desk just after midnight. Although that measure contained almost all of a Senate-passed bill Wilson supported, he said he could not sign it because it lacked a provision to suspend the state’s constitutional guarantee for school funding in the event the education budget is struck down by the courts.

As lawmakers gathered for late-afternoon floor sessions, state Treasurer Kathleen Brown was redeeming IOUs with money borrowed from the state employees pension fund. State workers lined up at Brown’s office to cash paycheck IOUs issued Monday.

Controller Gray Davis, meanwhile, prepared to churn out thousands of checks to vendors who have been providing goods and services to the state without reimbursement since July 1. Davis said he will begin paying the $3 billion in overdue bills as soon as Wilson signs a budget. The first payments will be made with IOUs until the treasurer can borrow money to ease the state’s cash crunch.

Wilson on Tuesday met in his office with Republican members of the Senate and Assembly to plot strategy for the evening. He also reviewed the spending plan on his desk, looking for items he might trim with his line-item veto. Wilson has vowed not to sign the budget until the Legislature sends him the entire package of bills needed to make it balance.

The Legislature completed action on most of the measures over the weekend but did not pass the major bills on health and welfare, local government and education before its scheduled adjournment for the year Monday night. Without those bills, the budget would be more than $5 billion out of balance.

But on Tuesday, it appeared that final action on the remaining pieces was imminent.

The health and welfare measure, which would save $1.7 billion, was awaiting final passage in the Senate, as was a bill to complete a shift of $1.3 billion in property tax revenue from local government. And negotiations were proceeding on what has always been the toughest piece: education.

Members were optimistic that the intense focus on the schools issue, now that almost all other legislative action is complete, would allow for quick resolution of the budget package.

“If you get rid of the 500 things we did yesterday and all the other budget issues and it’s just down to this, maybe we can shrink the tumor,” said Assemblyman Tom Hayden (D-Santa Monica).

For elementary and secondary education, the dispute has come down to a handful of narrow side issues.

“What happens to schools has been decided,” said a dejected Bill Honig, state schools superintendent. “That was decided in the budget. We’re going to be held flat three years in a row and we’re going to be $1,100 per student below the rest of the country next year.”

Honig conceded that no deal would go forward without Wilson’s so-called poison pill, which is meant to discourage a legal challenge to the education measure. The challenge is expected to arise over the state’s effort to deduct from this year’s Proposition 98 guarantee $1 billion the schools got last year in excess of the legal minimum. The poison pill would trigger a suspension of Proposition 98 and allow the state to set school funding at any level.

Although the Legislature has the power to do the same thing simply by voting directly to suspend Proposition 98, Wilson has conceded that there are not enough votes among lawmakers to suspend the measure, an action that would be portrayed by critics as an attack on the voters’ desire to protect school funding.

In exchange for the Democrats’ acceptance of the provisional suspension of Proposition 98, Wilson agreed to guarantee that schools would not fall below their current level of $4,185 per student next year, no matter what happens to the economy.

The bill also included a provision to clarify that schools could continue to take attendance once a day rather than in every class period, as an attorney general’s opinion said they should. And it provided protection for extra funding the Legislature has given to suburban school districts to compensate for historically higher spending on urban school systems.

For community colleges, the bill would raise fees to $10 a unit, rather than the $20 Wilson had been seeking and the $12 contained in a Senate bill that was pending in the Assembly.

But the final deal was proving hard to close Tuesday night.

One complication was the involvement of a handful of conservative Assembly Republicans--led by former Republican Leader Pat Nolan of Glendale--who broke with Wilson and tried to reach a deal with Democrats to soften the budget’s blow on higher education.

Nolan and Democratic Assemblyman John Vasconcellos of Santa Clara proposed setting aside nearly $100 million of the $340 million in cuts called for in a Senate bill backed by the governor. The bill, which the Assembly passed on a 55-9 vote, would save the same amount by cutting the state bureaucracy and slicing into the state Commerce Department and the aeronautics program.

But at the GOP lawmakers’ meeting with Wilson, Nolan was singled out for criticism by Senate Republican Leader Ken Maddy of Fresno, who complained that Nolan was dividing the party and aiding the cause of the education lobby, particularly the California Teachers Assn.

“With Nolan working the halls of the Legislature, the CTA doesn’t need a lobbyist,” Maddy told reporters later.

The dispute spilled over into the Assembly floor debate, with Nolan and a conservative ally, Republican Ross Johnson of La Habra, criticizing the governor for protecting the state bureaucracy at the expense of higher education. Wilson is expected to veto the bill if it reaches his desk.

“Pete Wilson isn’t getting tough, he’s getting mean,” Johnson said.

Wilson’s office late Tuesday was signaling an expected end to the standoff, now in its 64th day, but was keeping details closely guarded.

“This is like watching a no-hitter in the bottom of the eighth inning,” said Dan Schnur, Wilson’s chief spokesman. “You don’t want to say anything to jinx it.”

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