SACRAMENTO — A compromise proposal from Assembly Democrats that would have achieved about $6 billion in state budget savings -- without instituting any new taxes -- was firmly rejected by Republicans on Wednesday.
The news stunned Democrats, who had crafted the plan in an effort to bring tax-wary Republicans to the table.
The GOP rejection represents a significant step backward in the Legislature's efforts to close a budget gap estimated to be as large as $35 billion over the next 15 months.
The proposal was rooted in a trade-off: Democrats would agree to make long-resisted cuts in health care, education and aid to local government in exchange for Republican support for borrowing $2.2 billion in pension funds to pay off debt.
Assembly Speaker Herb Wesson (D-Culver City) won grudging support for the proposal from a reluctant Democratic caucus earlier Wednesday after warning that without the program cuts no Republican would go along with floating the pension bonds.
If bonds are not approved by May 5, the state treasurer has said, California will lose $656 million in potential savings.
But late in the day, Assemblyman John Campbell of Irvine, chief Republican spokesman on budget issues, splashed cold water on the Wesson plan, asserting that the cuts Democrats proposed were not bold enough to get their votes for raiding the pension system.
Campbell also criticized the plan because the cuts would come in the next fiscal year instead of the current one, which ends June 30.
"You cannot make reductions in a budget that doesn't exist yet," he said, adding that Democrats could reverse the cuts Wesson proposed on a whim as the budget debate drags on.
Democrats disputed that, saying the cuts would be passed as "urgency measures" that would be binding.
But Gov. Gray Davis implored legislative leaders to return to the negotiating table quickly.
Republicans said they were willing to keep talking. "We are not slamming the door in any sense," Campbell said.
The pension bonds were originally proposed by Davis in January. Instead of using general fund money to make its yearly contribution to the state employees' pension fund, the state would sell bonds to make the payment. That would free up the existing money to help fix the budget gap.
A report from the nonpartisan legislative analyst's office advised lawmakers against taking out the bonds and noted that no state has ever used pension bonds to pay off general government debt.
Republicans voted down an earlier proposal to approve the bonds, but said they would leave the door open to providing the votes if Democrats came to the table with more program cuts.
Assemblyman Joe Canciamilla (D-Pittsburg), a moderate who has been working with Republicans on budget solutions, said that while he has "mixed feelings" about the Wesson plan, its rejection by Republicans with the pension bond deadline looming worries him.
"The goal of this middle step was to try to reach some consensus that would permit the pension obligation bonds to be sold," he said. "This represents our caucus coming a long way in trying to responsibly address the need for cuts."
Several Democrats had vowed to fight to maintain funding levels for health care and education programs, and even attended rallies where they promised to protect the status quo for various services.
The caucus support for the Wesson compromise seemed a major shift for Democrats, who only days ago said they would wait until late May to make more cuts, and they would only do so then as part of a "balanced" approach that also includes billions of dollars in new taxes.
Assemblyman Mark Ridley-Thomas (D-Los Angeles), who has fought many program cuts, said debate by Democrats over Wesson's proposal was "substantive, passionate, but informed by reality."
The Wesson proposal "is measured and it seeks to get us closer to a solution," he said.
Among the $2.5 billion in cuts and deferrals in the Democratic plan are $493 million in reductions to health and human services programs.
Cost-of-living adjustments in aid to the disabled and seniors would be suspended and administrative measures would be taken to reduce the Medi-Cal caseload.
Also being considered were another $179 million in cuts to the University of California and California State University systems. About $85 million in cuts to the state prison system were in the Democratic proposal, but Wesson said they would not result in any inmates being released early.
Times staff writer Carl Ingram contributed to this report.