GOP Blocks State Budget in Pressing for Tax Rebate

SACRAMENTO — Assembly and Senate Republicans forced the Legislature to miss its constitutional deadline for passing the state budget Monday as they bottled up the proposed $41.1-billion spending plan and vowed not to budge until Democrats agree to Gov. George Deukmejian’s $700-million tax rebate plan.

The budget failed passage in the Assembly 40 to 35, generally along party lines. The vote fell 14 short of the necessary two-thirds majority needed for passage of the budget.

In the Senate, Republicans refused to vote and the budget received only 25 of the 27 votes needed for passage. All 24 Senate Democrats and the Legislature’s only independent, Sen. Quentin L. Kopp of San Francisco, voted for the budget.

Lawmakers in both houses granted reconsideration, however, allowing the budget bill to be heard at a later date.

Although the Legislature is required by the Constitution to send the budget to the governor by June 15, there is no penalty if that does not happen. The Legislature has missed its deadline often in the past and in 1983 held up passage for a record 19 days after the start of the July 1 fiscal year.

The dispute over the tax rebate temporarily diverted attention from major fiscal differences between Democratic budget writers and the governor.

The budget, as it now stands, would spend $41.1 billion in state funds next year, substantially more than proposed by the governor, according to updated Department of Finance estimates.

As it stood Monday, the budget--put together by a two-house conference committee last week--would increase spending on general state operations by 6.2%, compared to the 4.1% increase proposed by Deukmejian.

Another key difference centers on the size of the $1-billion reserve sought by Deukmejian. Lawmakers said the budget contains a $953-million reserve, but the Finance Department said the reserve proposed by the Legislature actually would amount to only $619 million.

But those and other differences were put aside, temporarily, as the debate shifted to the proposed tax rebate.

The fight in both houses centered on Republican demands that the Legislature act on the $700-million tax rebate proposal at the same time that lawmakers vote to send the budget to Deukmejian.

Democrats, who oppose the rebate and want the $700 million spent on school programs, angrily denounced the GOP action, calling it “blackmail” and the result of a “temper tantrum” by Deukmejian.

Brown Angry

Assembly Speaker Willie Brown (D-San Francisco), his voice rising angrily during the budget debate in the Assembly, said it took “gall” and “temerity” for Republicans to block the budget until a tax rebate bill is approved.

“To suggest that somehow this (budget) ought to be held hostage for somebody’s political advantage, or somebody’s political opportunity, on something totally unrelated called ‘rebate’ is ludicrous,” Brown said. The Speaker said the rebate is “a separate and distinct” issue and should be dealt with in legislation other than the budget bill.

In the Senate, President Pro Tem David A. Roberti (D-Los Angeles) blasted Republicans for holding the budget past the constitutional deadline, declaring that it would hurt counties and school districts that rely on the state to finance their own budgets.

“We know where the orders come from,” Roberti said during the budget debate in the Senate. “We know who issues the instructions. And we know that the delay this time is from Gov. George Deukmejian, who once again isn’t getting his way, and when he doesn’t get his way he gets mad.”

Sen. Alfred E. Alquist (D-San Jose), the author of the budget bill, adding another personal note to the debate, called Deukmejian “a stubborn and recalcitrant man who can’t see the future beyond the end of his nose.”

Governor Defended

But Senate Republican Caucus Chairman John Doolittle of Citrus Heights defended Deukmejian against the personal attacks, saying, “I don’t think those are called for and I think it’s an unfortunate, harsh attack on the chief executive of this state. The Democrats want to engage in some governor-bashing.”

A spokesman for Deukmejian said the governor supported the actions of Republicans and accused Democrats of putting taxpayers “on the bottom of their list of priorities.”

Kevin Brett, Deukmejian’s press secretary, said Deukmejian believes that the proposed state budget and the tax rebate go hand in hand. “The June 15 deadline applies to passing the entire budget, not just portions of the budget that are convenient to the majority party,” the spokesman said.

Brett said that Deukmejian wants the rebate put into a second appropriations bill, known in the jargon of the Capitol as a budget “trailer bill.”

In the Senate, the trailer bill was defeated by the same 25-0 margin. In the Assembly, the Republicans kept the companion measure bottled up by refusing to waive rules to allow it to be heard.

The tax rebate was proposed by Deukmejian because the state took in more revenues than it can spend on state programs under a spending limit approved overwhelmingly by voters in 1979.

Deukmejian and Republicans insist that the rebate is legally required under the initiative.

But Democrats contend that the initiative also allows for a variety of different actions that may be taken, and say there is plenty of room under the local government spending limits for budgets to grow.

Democrats also note that the actual surplus is about $1.1 billion but that Deukmejian and Republicans already have agreed to give $400 million of that to local governments.

Assembly Republicans believe they have Democrats over the barrel because the amount put aside for a tax rebate will jump to $1.1 billion or more if no plan is agreed on by July 1, the start of the new fiscal year.

“The Constitution says we should have a budget passed today. The Constitution also says that any excess revenues that the state collects above the Gann Limit should go back to the people,” said Assembly Republican Leader Pat Nolan (R-Glendale) in the debate in the Assembly.

Nolan said the surplus was generated because of an unexpected surge in taxable income developing from changes in federal tax laws that went into effect this year.

Termed a Windfall

“Our citizens paid hundreds of millions in extra taxes this year because of changes in the federal tax law. It is a one-time windfall of extra revenues to this state. The state didn’t expect to get this money, nor should it keep it,” Nolan said.

Nolan said that part of the Republican intransigence stemmed from lingering GOP memories of the refusal last year by Democrats to approve a $300-million transfer of surplus investment funds from the Public Employees’ Retirement System to help balance the current year’s budget.

“Just as we were hoodwinked into voting for an incomplete document last year, we are not going to fall into that same trap this year,” Nolan said.

Nolan said that the earliest Republicans would vote on the budget without a rebate is July 1, the start of the new fiscal year.

Democrats differed on the legal interpretation that Republicans were giving the spending limit, arguing that the tax rebate is not required.

Sees a Distinction

“It does not require us to give it back,” said Assemblyman John Vasconcellos (D-San Jose), the chairman of the Assembly Ways and Means Committee, who is sponsoring the budget bill in the lower house. “It requires us not to spend it. There is a distinction.”

Vasconcellos, like several other Democrats, warned the Republicans about their budget strategy.

“I really react horribly to blackmail, always have and always will,” he said.

Sen. Daniel E. Boatwright (D-Concord) said to Republicans during the Senate debate that he would never vote for Deukmejian’s tax rebate plan, warning: “If it’s war you want, just let me know because I am ready and willing to fight on that (tax rebate) issue.”