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Legislators tentatively approve budget after 60-day standoff
By ALEXA H. BLUTH -- Associated Press Writer
Published 10:28 p.m. PDT Saturday, August 31, 2002
SACRAMENTO (AP) - The California Assembly ended a 60-day standoff and tentatively approved an overdue budget late Saturday that includes a total of about $9 billion in spending cuts and about $2.4 billion in revenue increases to help fill the state's gaping deficit.

The deal reached in the final hours of the legislative session abandons plans to raise taxes on smokers and drivers to help fill the $23.6 billion shortfall.

Lawmakers hooted, applauded and high-fived after the Assembly voted 54-26 in favor of the budget - just enough for the required two-thirds majority - shortly after 10 p.m. Saturday.

"Tonight I believe we've done it," said Assembly Speaker Herb Wesson, a Culver City Democrat who brokered the deal and presided over the longest legislative budget impasse in California. "Although it is not a perfect bridge, it allows us to find some ground where we can at least, for a moment, stand together."

But the Assembly vote was put on hold, as the state Senate still needed to concur with the Assembly's new $99 billion plan late Saturday before the budget could be sent to Gov. Gray Davis two months into the fiscal year.

The vote capped a two-month standoff between Republican and Democratic Assembly leaders over whether to raise taxes or carve into programs to fill in the budget deficit.

Four Republicans - who refused for months to supply the votes needed to pass a budget by the required two-thirds majority - finally said Saturday they could accept concessions made by Democrats including scrapping the car and cigarette tax plans.

"I think it is my job to help the state of California get a budget," said Assemblyman Dick Dickerson, of Redding, who said he would vote in favor of the budget.

Both Democrats and Republicans declared victory Saturday. Democrats said they achieved their goal of preserving funding for schools, prison and colleges.

"What this budget is, is a responsible plan to protect vital services that this state and its residents rely upon," said Assembly budget chairwoman Jenny Oropeza, D-Long Beach.

Assemblyman John Campbell of Irvine, the Assembly Republicans' main budget negotiator, said Republicans consider the deal a victory in the area of taxes. "The straight-up tax increases have been taken out of this."

Some Republicans who planned to vote against the budget blasted it on the Assembly floor Saturday night.

"I hope the people of California are listening up because you are being shot right dead in the wallet," said Assemblyman Jay La Suer, R-La Mesa.

An 11th-hour vote would end two months of intense negotiations by Davis and the Legislature's majority Democrats to get the necessary Republican votes.

The budget negotiations coincided with the Democratic governor's re-election campaign against his Republican challenger, Los Angeles businessman Bill Simon.

Saturday's agreement features about $1.7 billion in cuts and directs Davis to cut about $750 million from government operations, rather than programs, on top of $7 billion in cuts already proposed in May. It would cut 1,000 state jobs by the end of next fiscal year and encourage longtime state employees to retire.

The plan also would effectively reduce the minimum amount of money the state must spend on K-12 schools by about $700 million.

It also raises about $2.4 billion in new money, which supporters call "revenue enhancements" to avoid calling them tax increases and appeal to Republicans and their constituents.

The largest component of the tax increases is the two-year suspension of a key tax break for businesses - the net operating loss deduction, which enables them to offset income tax liability with operating losses. However after the two years, businesses will be allowed to write off 100 percent of their losses compared to the 65 percent they can now.

The suspension is expected to save the state $1.2 billion.

Other new sources of money include scrapping tax credits for teachers, increasing penalties for filing late taxes and requiring employers to withhold income taxes on stock options.

But the deal abandons two major tax increase plans put forth by Davis _ an increase in the state vehicle license fee back to 1998 levels and an increase on the state excise tax for cigarettes.

The compromise also includes the creation of a bipartisan commission to study possible solutions to the state's volatile revenue structure. This year's budget deficit ballooned in part because of the collapse of the high-tech sector and a sagging national economy.

Assemblyman Keith Richman, R-Northridge, acknowledged Saturday that he is one of the four Republicans who plan to vote for the budget deal.

Richman, a first-term lawmaker, said he didn't think it would hurt him politically to break with Republicans and vote for the budget.

"This is the right budget," Richman said. "This is a more fiscally prudent budget than the one submitted by the governor."

One condition of Richman's support - putting to voters a constitutional amendment steering a gradually increasing percentage of its general budget to schools, highways, parks and water projects starting in 2006 - cleared the Assembly Saturday by a 75-0 vote. It needed to be passed by the Senate before the Assembly budget vote would be taken off call, and that had not happened by 11:15 p.m.

Once approved, the 2002-03 budget will be the latest in recorded California history. Despite the delay, most state workers continued to be paid, although legislative staffers and elected officials have not received paychecks for two months.

College students were unable to secure state grants for tuition and school supplies, vendors who sell food and supplies to state prisons and hospitals were not paid and some state-funded programs for the elderly and disabled went unfunded.