California's Fiscal Woes Continue

WILL the state Legislature mutiny over the budget mess?

Or will there be, as California's political leadership insists, a coming to terms before the legislative rank-and-file tire enough of the budget soap opera to take matters into their own hands?

More than a month after missing its constitutional deadline for approving a spending plan, the nation's most populous state has issued more than $1.6 billion in IOUs, or registered warrants, in 750,000 separate payments.

As the state's longest budget stalemate continues into its second month, several major banks, including giants Bank of America and Wells Fargo, stopped honoring IOUs yesterday. More than a dozen smaller banks say they will follow suit this week or next.

The banks' action is forcing renewed negotiating vigor on the part of Gov. Pete Wilson (R), Assembly Speaker Willie Brown (D) of San Francisco, and Assembly minority leader Bill Jones (R) of Fresno.

The leaders of the state Senate, David Roberti (D) of Los Angeles and Ken Maddy (R) of Fresno, brought their chamber to a compromise agreement before the budget deadline lapsed.

But the Assembly, which meets today, still has not agreed on a satisfactory solution to the state's record-breaking $11 billion budget gap.

At the end of the Assembly's last session on Monday, all 33 Republican members passed a resolution declaring the speaker "deleterious" in his duties. Although the censure carries little practical weight, open rebellion by either party signals growing discontent, political insiders say.

Most agree that Mr. Brown's job is secure at the moment. However, for the first time in several years, there is open discussion about trying to unseat the powerful speaker if the GOP elects some more members to the 80-seat Assembly in November.

Some conservative Republicans and moderate Democrats already have mounted a limited but spirited effort to bypass the Assembly leadership and form a "committee of the whole" that would come up with its own budget proposal.

"We're [51] days past the constitutional limit to get a budget to the governor. It's time the members shouldered their responsibility and began direct negotiations on the impasse," said Assemblyman Tom McClintock (R) of Thousand Oaks, who is leading the bypass effort. "Government in California is in a serious crisis if this isn't resolved soon."

So far, Speaker Brown has managed to squash the attempts to form a "committee of the whole."

"Forming a `committee of the whole' is a bad idea because not every member is well enough briefed to take up the budget on a detailed basis," said Jim Lewis, a spokesman for Brown.

But Mr. McClintock is determined to keep trying. And even though most Democrats are not ready to follow his lead yet, they are not far behind.

"Unless the boys manage to settle this week, we must try an alternative," said Assemblyman Phil Eisenberg (D) of Sacramento. "What's holding them up is a mystery to me."

Both the Assembly Speaker's and the minority leader's camps say they understand rank-and-file frustrations, but that progress has been made.

"There was a period where there was nothing being done on the outside, but shuttle diplomacy was going on all over the place," said Phil Perry, a spokesman for minority leader Jones.

`EACH area they are working through is just excruciating," commented Bob Naylor, a political consultant and former state Senate leader.

Mr. Naylor said 1991's budget debate was much less painful for Democrats because Governor Wilson had agreed to tax increases. This time around, the governor refuses to raise taxes or roll over the debt into next year.

As a result, legislative leaders have been forced to examine the state's numerous special funds to glean savings where possible. It is estimated that this exercise will produce savings of between $200 and $900 million.

On Monday, lawmakers found another $100 million to $160 million in savings through early retirement of state university professors. A bill authorizing the state's tax-collecting agency to negotiate rather than always resort to court action in collecting back taxes will bring in another $350 million to $500 million.

Naylor accused legislators of resorting to a number of "gimmicks" in trying to resolve thorny budget problems. For example, lawmakers have decided that taxes by attorneys, architects, and other independent contractors should be withheld up front rather than quarterly.

But although there has been some movement on major budget issues, the areas where the lion's share of the savings must be made remain unresolved.

Mr. Perry of the minority leader's office said Democrats have increased from $605 million to $750 million the funds the state will return to the treasury because of 1991 overpayments to schools. But Wilson wants at least $1.5 billion returned from the education budget.

Other unanswered questions include whether cities should join counties in losing state subsidies. And should the state no longer make counties provide a health safety net for the poor?

Even if negotiators were to answer all these questions today, their agreement must go before the 40-member Senate and 80-member Assembly to "see which proposals are the most palatable of the unpalatable," said Mr. Roberti, the Senate leader.