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Senate Budget Plan Differs From Wilson's

Finances: Democratic-controlled chamber approves $68.7-billion proposal. Changes include more money for welfare and education and less for prisons.


SACRAMENTO — One day after the state was ordered to pay $1.36 billion in back pensions, the state Senate on Thursday approved its $68.7-billion state budget proposal--one that is as much as $1.1 billion in the red without the new pension costs.

The Democratic-controlled Senate's version of the budget differs sharply from Gov. Pete Wilson's spending plan on several issues, including how to cut welfare and increase education spending, and what type of tax cut to offer.

Unlike Wilson, the Senate also offers $400 million in pay raises to state employees.

Senate Budget Committee Chairman Mike Thompson (D-St. Helena) called the upper house's document "a work in progress." It is certain to change when senators and Assembly members begin meeting in a budget conference committee next week, and when Wilson and legislative leaders negotiate the final budget deal this summer.

The Senate's preliminary spending plan was approved on a 27-11 vote, the two-thirds necessary for passage, and included support from four Republicans.

But Republicans also assailed the proposal for cutting $100 million from prisons, boosting welfare spending $500 million, and not giving a general tax cut to Californians or small business owners.

"If this were the final version of the budget, there wouldn't be a single Republican vote," Sen. Jim Brulte (R-Rancho Cucamonga) said. "We will expect this budget in its final form to have some kind of tax cut."

The vote followed Wednesday's decision by the state Supreme Court to reject Wilson's appeal of lower court decisions requiring that the state pay $910 million in pension contributions to state employees, plus interest of another $450 million.

The 6-0 court ruling stemmed from decisions by Wilson and the Legislature during the height of the recession in 1992 and 1993 to delay making $910 million in state contributions to the Public Employees Retirement System.

Wilson and lawmakers made the decision in an effort to balance state budgets in the early 1990s, over objections of state workers and their unions. But given the court ruling, that miscalculation stands to take a major bite out of the state budget for the fiscal year starting July 1.

"We assume there will be a settlement," Senate President Pro Tem Bill Lockyer said.

Several lawmakers were hoping that they could pay the debt off over the next few years. However, public employees and their unions sued over that very issue. They contended that the state could not delay its pension contributions without illegally shortchanging retirees.

"The victory makes clear they have to pay now," said Dennis Moss, a Glendale attorney who represents three unions in the lawsuit. He said, however, that the unions "genuinely feel taxpayers and other programs the state has to fund should not have to suffer."

Moss and others involved in the court fight noted that the state could pay part of the debt by offering retirees benefits such as improved health care, or better retirement packages for new employees.

"They picked the pockets of the employees and didn't give a comparable benefit," Moss said. "If they want to talk about comparable benefits now, we'll listen."

Still, the Supreme Court ruling means that the state will have less money available for other programs and plans next year.

The most direct impact of the court ruling could be on negotiations over state employees' pay raises. State workers have not received a pay hike since January 1995 and have been working without a contract for more than two years.

The Senate has proposed a 5% pay raise, a sum that would take $250 million from the general fund and $150 million from various special funds. Wilson has made no proposal for a pay increase.

"Obviously, we hope the governor doesn't use what amounted to a theft of state funds as an excuse to not grant pay raises," said Drew Mendelson, of the California State Employees Assn.

While spending on many state programs could drop as a result of the court ruling, the $1.36-billion cost of repaying the pension fund will not have a direct impact on school funding.

Under the law governing school finance, education is entitled to at least 40% of the state's revenue, largely without regard to how much money the state spends on other programs.

The Senate's budget vote Thursday was an initial step toward reconciling the 1997-1998 budget. The Assembly is scheduled to take up its version of the budget today. Once the Assembly acts, the Senate and Assembly will form a conference committee to resolve differences.

State law requires the Legislature to send a budget to the governor by June 15. The governor has until July 1, the beginning of the 1997-98 fiscal year, to sign it. Both deadlines are frequently missed.

While the Assembly is expected to approve its version today, the plan probably will not receive Republican support. Republicans complain that Assembly Democrats have frozen them out of discussions over how to cut welfare.

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