Thorny Budget Problems Await Lawmakers : Finances: Legislators returning Monday from recess must grapple with whether--or how--to help ailing Los Angeles and Orange counties.

SACRAMENTO —  The Legislature ends a recess and returns Monday to tackle some unfinished budget business--with Los Angeles and Orange counties hanging on the outcome and hoping for partial relief of acute financial pain.

A majority in the Assembly, near exhaustion and with frayed nerves, gave final passage to the 1995-96 budget 2 1/2 weeks ago, followed by a pleased Gov. Pete Wilson signing the $57.5-billion spending plan.

But deep differences remain over state-controlled funds, and although the amounts were not large enough to prevent adoption of a budget, they hit raw nerve endings where they count.

They count most in Los Angeles and Orange counties.

Most of the unresolved issues are technically part of the budget arithmetic. And they either add up to funds to help rescue the two counties or state program changes being dangled as bargaining chips for dollars.

“I think there is a strong desire on the part of every legislator in Sacramento to help Los Angeles and Orange County out of their fiscal crises,” said Jim Brulte of Rancho Cucamonga, who stepped down Friday as Republican Assembly leader. “I think most of us don’t want to break the bank while we’re doing it.”

Lawmakers have four weeks to work. The legislative session ends for the year Sept. 15.

Under the richest cash infusion plan under discussion, the state would allow sales tax revenues from public transit projects to be shifted to treasuries desperate to support health care in Los Angeles County and to relieve bankruptcy pressures in Orange County.

Wilson vetoed the transit fund measure, but the subject is expected to be revived along with other budget “trailer” bills pending on the Assembly floor--where the fight will pick up where it left off at 3:30 a.m. on Aug. 2.

The main clash again is expected between Los Angeles-area Democrats and the governor working in concert with his Republican allies.

Some Democrats say they will urge adoption of the same fiscal relief measures for the county that they failed to achieve earlier. Others call that option pointless and say they will try new ways to find rescue funds.

In interviews with half a dozen of the Los Angeles delegation last week, none held any strong hope of success. Wilson, they said, turned them down before and will deny them again. Some Democrats said they will push for legislation authorizing new statewide or county taxes to be placed on tobacco and on alcohol served at bars and restaurants.

A spokesman for Wilson said the governor remains flatly opposed to any new tax, local or otherwise. Additional county taxes on tobacco or alcohol would require, among other things, the governor’s signature.

Having given in to welfare benefit reductions and most of Wilson’s budget, Los Angeles Democrats have lost their leverage to deliver funds to their needy county, said Assemblywoman Diane Martinez (D-Monterey Park).

“The governor has absolutely no incentive to help us,” she said. “We can leverage the trailer bills but there’s not much left on the trailer bills that he cares about.”

Chances of reviving the vetoed proposal to shift transit funds was seen as unlikely, but work was continuing during the nearly three-week break in the legislative session to find a compromise. And efforts center on an unusual alliance of Orange County’s conservative Republicans and Los Angeles County’s liberal Democrats.

Undeterred by Wilson’s veto, Assemblywoman Martha Escutia (D-Huntington Park) and Assemblyman Curt Pringle (R-Garden Grove) were talking of breathing new life into the transit-tax diversion. “We’re looking at trying to finesse some of the arguments the governor is concerned about,” Escutia said.

She said linkage with Orange County remains pivotal if the proposal is to get anywhere, particularly when it reaches Wilson’s desk. “I need some Republican votes that I won’t get unless Orange County is in there,” Escutia said.

So far, Wilson has said that for Los Angeles County he would only consider a shift of $50 million to the county from the Metropolitan Transportation Authority, and for one year only. For Orange County, Wilson said he awaits a workable proposal, and Orange County officials are scrambling to finalize one.

Assemblyman Richard Katz (D-Sylmar), a key player in Los Angeles transit issues, said last week what he said earlier: There will probably be no deal if all Wilson will offer is the $50 million. The original proposal that Wilson vetoed called for $75 million for five years.

Noting that Wilson appeared more willing to help Orange County than Los Angeles County, Katz vowed that there would be no deal to help one and not the other. “From our perspective, any Orange County solution will contain an L.A. County solution as well. . . . That’s the feeling of the L.A. delegation, certainly.”

Wilson spokesmen have said Orange County presented a “problem created in an entirely different manner . . . an overnight exodus in hundreds of millions of dollars,” requiring a different approach than in Los Angeles County.

Meanwhile, the Democrats say, Wilson has foisted upon Los Angeles County a series of funding shifts contained in pending bills that they say masquerade as “mandate relief” but would only move the county closer to financial ruin.

Some Democrats say one example is a proposal for the state to pay a onetime subsidy, but also impose new ongoing charges, for running youth offender camps.

Another proposal would turn over eight beaches to the county, but provide operating money for only three years.

Yet another plan would offer state sales tax funds to pay for services to abused children, foster care and adoption assistance. But with the danger of bad economic times, the tax share would decline as caseloads rise.

Wilson has said in picking apart the “mandate relief” measures that the Los Angeles Assembly Democrats “wound up giving the shaft to their own county, denying almost $100 million in relief.”

Wilson’s director of finance, Russell Gould, said last week that most of the programs contained in pending bills are voluntary. Counties participating in the children’s services plan could drop out after two years.

Gould said the Administration “is aware of the concerns” over future costs to counties for confining juvenile offenders and “there may be adjustments in future years.”

Ten of the Los Angeles-area Democrats met at the Ronald Reagan State Building in Downtown Los Angeles last week to hear county officials explain problems and offer solutions. But Martinez said that “as soon as you got close to discussing something that might cause them a little discomfort, they kind of did a little sidestep like the dance the guy did in ‘The Best Little Whorehouse in Texas.’ ”

Several of those present said loose county administration over the years made it difficult to make the case for relief in Sacramento.

That point has been underscored most clearly by the introduction of a bill by Assemblywoman Debra Bowen (D-Marina del Rey) that has Los Angeles County officials infuriated. It would allow the state to take charge of Los Angeles County’s financial affairs.

Times staff writers Eric Bailey, Bill Stall and Jeffrey L. Rabin contributed to this report.