California Budget Deadlock Continues As Assembly Defeats School Spending Bill

THE state Assembly early yesterday rejected deep cuts in education demanded by Gov. Pete Wilson (R), prolonging the two-month-old deadlock that forced California to issue IOUs for the first time since the Great Depression.

The Assembly adjourned for the night, and was to reconvene at 9 a.m. yesterday.

"The Assembly Democrats have virtually assured that the state of California will not have a budget on Sept. 1, and they should be prepared to explain that to the people of California," said Dan Schnur, Mr. Wilson's spokesman.

The Democratic-controlled Legislature had passed a $57 billion budget over the weekend, then got to work on bills to cut spending on welfare, aid to local governments, and schools. Wilson, a Republican, had said he wouldn't sign the spending plan without those cuts.

The Senate approved the 12 bills Sunday and sent them to the Assembly. There, lawmakers voted against considering the school funding proposal, 45 to 1, with Republicans boycotting. The Assembly also approved a measure on aid to local governments, but changed it from the Senate version.

Many legislators denounced the budget but said they voted for it out of a need to end the stalemate.

California has been without a budget since the fiscal year began July 1 because Wilson and the Legislature have been unable to come to terms over how to close an $11 billion deficit caused mostly by the recession.

The impasse has thrown state government into turmoil and forced California to issue IOUs to employees, vendors, and taxpayers for the first time since 1936.

During the deadlock, Wilson and Republican leaders urged deep cuts throughout government, including welfare and education. The Democrats, led by Assembly Speaker Willie Brown (D) of San Francisco, sought more moderate cuts in welfare, protection for school funding, and deeper cuts in prison operations.

Democrats have majorities in both houses but lack the two-thirds margins needed to pass budget bills on their own.

With little spending authority or cash, the state has issued $3 billion worth of IOUs to pay bills, tax refunds, and thousands of employees' wages. During July, banks accepted the IOUs as regular checks, but earlier this month they stopped, putting pressure on lawmakers and the governor to act.

Some people - vendors who provide services or products to the state under contract, for example - received nothing at all. Others received money only under court order, including about 155,000 minimum-wage workers who provide in-home care to the aged, disabled and others.

MONG other things, the budget plan would cut welfare payments by 5.8 percent - or $1.7 billion - and reduce aid to cities and counties by $1.3 billion.

The blueprint also would provide schools with roughly the same amount of money this year as they had last year. It would not provide extra money for an estimated enrollment increase of 200,000 students. It would also allow school budgets to be cut in future years, even though voters in 1988 approved a ballot initiative to protect school funding.

State schools chief Bill Honig said the education provision amounts to an immediate $1 billion cut because of burgeoning enrollment.