SACRAMENTO — Prolonged budget negotiations between Gov. George Deukmejian and legislative leaders came to an end Friday with an agreement that calls for roughly $2.3 billion in spending cuts, nearly $850 million in tax and fee increases and enactment of legislation giving governors broad new authority to make budget cuts in future years.
But passage of the agreement, which came on the 27th day the state had operated without a budget, is not assured.
Both the Senate and the Assembly met Friday evening to consider the spending and tax package, contained in at least 20 separate bills. The Senate adjourned without action and is to reconvene today. The Assembly met into the night, with Republicans saying they found the tax increases hard to swallow.
According to the agreement reached between Deukmejian and the Legislature's four top leaders, most of the cuts will be contained in legislation now before the Legislature; Deukmejian is expected to trim an estimated $400 million with his line-item veto.
Among the political difficulties is the governor's insistence on freeing state funds to construct two Los Angeles County prisons.
Deukmejian, even as he joined legislative negotiators in announcing the agreement, vowed that he would not sign the $55-billion state budget unless the Los Angeles County prison construction legislation was approved.
But Assembly Speaker Willie Brown (D-San Francisco) said he would support Los Angeles Democrats in opposing the measure. One potential problem was eliminated when negotiators decided to put the prison question in a separate bill requiring only a 41-vote majority in the Assembly, making it easier to win approval for construction. If it had been in the main budget bill, it would have required 54 votes, or a two-thirds majority, in order to pass.
Assemblywoman Lucille Roybal-Allard (D-Los Angeles) accused Deukmejian of "blackmailing the Legislature" into voting for the prison by linking the issue to the budget.
Deukmejian, in forging the agreement, yielded to Democrats on tax and fee increases and failed in efforts to cut public school spending. Initially, Deukmejian had insisted that the entire $3.6-billion gap between what the state expects to take in this year and projected budget expenditures could be bridged through spending reductions. One of his proposals was an $800-million cut in public schools funds, almost exactly the amount of the tax and fee package.
But the Republican governor received support for an automatic spending reduction formula that can be used in coming years to avoid prolonged stalemates. It would give future governors the authority to make up to 4% in cuts in most state programs, including those now protected by law, whenever projected expenditures exceed revenues by at least one-half of 1%.
Announcing the agreement at a Capitol news conference, Deukmejian said the so-called "trigger" mechanism, had it been in place this year, would have given him far more flexibility in dealing with a gap of roughly $3.6 billion between revenues and projected state operating expenses.
"Hopefully, (future governors and legislatures) won't be faced with it, but in the event that they are they will have more flexibility than we have had," Deukmejian said.
In a late development, negotiators dropped a proposal initially supported by Deukmejian that would have imposed the first-ever sales tax on newspapers and periodicals. Only 15 states currently tax newspapers, and newspaper executives from throughout the state had contacted their local legislators to stop the levy in California.
Publishers argued that there was no comparable tax on broadcasters, that the tax would raise little of the money needed to close the looming budget deficit, and that the effect of the tax would hurt the flow of information.
They also noted that more than $5.5 billion in sales tax exemptions are currently on the books and that removal of the newspaper and magazine exemption was the only one still being considered in the final stages of the budget negotiations.
Among those arguing against the tax was Los Angeles Times Publisher and Chief Executive Officer David Laventhol, who called Senate President Pro Tem David A. Roberti (D-Los Angeles) on Thursday. "I called Roberti just to reiterate . . . (that) we thought the tax was not a good thing, that it hurts newspapers, particularly small newspapers and that the legislation shouldn't pass."
Laventhol said Roberti made no commitment except to say: "I hear you."
Senate Republican Leader Ken Maddy of Fresno had supported the tax, pointing to the inconsistency of current law, which taxes books but not magazines. "It's ludicrous that you can buy Playboy without paying a tax, but if you buy a Bible there is no way to avoid it."
But Maddy said he backed down when the governor insisted that there be no increase in sales taxes or income taxes.
Deukmejian downplayed the tax and fee package, noting that it does not raise sales, income or other general taxes.