CALIFORNIA SPENDING PLAN IS DEFEATED

The five-week-old budget stalemate that has forced California to pay its bills with IOUs dragged on yesterday as the Legislature rejected a spending plan that Gov. Pete Wilson had said he would veto anyway.

Legislative leaders said it may take more than a week to come up with another plan for closing a $10.7 billion deficit.

The Senate and Assembly early yesterday rejected a $56 billion budget that backers called the best deal schools and cities could hope for given the tough economic times.

The Senate voted 24 to 13 in favor of the proposal by Republican Sen. Frank Hill, three votes short of the required two-thirds majority. The Assembly voted 46 to 24 for the measure, eight votes short.

The Republican governor and the Democrat-controlled Legislature have been unable to come to terms on a budget for the fiscal year that began July 1, forcing California to issue IOUs to employees and suppliers for the first time since the Great Depression.

Mr. Hill had said schools would be better off under his plan than under the even deeper cuts being worked out between the governor and leaders of the Legislature.

"It's not going to get any better than this," added Senate leader David Roberti.

Hill's proposal would have cut money for schools by $851 million - more than the Democrats have proposed but less than what Mr. Wilson seeks.