Wilson Sees Budget Answer by End of Week

Apparently buoyed by progress in closed-door negotiations, Gov. Pete Wilson said Saturday that he and legislative leaders intend to have the state’s $14.3-billion budget shortfall erased by the end of this week.

Speaking to reporters after meeting privately for more than four hours with the Democratic and Republican leaders of the Senate and Assembly, Wilson offered no details to explain why he and the lawmakers believe that the end of the state’s worst fiscal crisis is in sight.

Agendas for the meetings prepared by the governor’s office and obtained by The Times show that one scenario being discussed would include laying off more than 10,000 state workers while preserving Proposition 98, the state’s constitutional guarantee for school funding.

The governor said the negotiators expect to start moving budget bills through the Legislature as soon as Wednesday and hope to have the final budget passed by Friday. That is the deadline that would allow the governor’s proposed sales tax increase to take effect July 1, the start of the next fiscal year.

“We are not only optimistic, we are going to make a real effort,” Wilson said. “We are compelled to act.”

The governor and legislative leaders apparently have decided to say little or nothing in public. Their strategy is to strike a deal privately, then push it through the Legislature before special-interest lobbyists--or voters--have time to react.

As a result, it was unclear Saturday whether any real breakthroughs had been made or the leaders were simply setting a new deadline to act.

Assembly Speaker Willie Brown (D-San Francisco) would only say through a spokesman that the governor’s time line is realistic.

“The Speaker’s feeling would be that certainly progress has been made,” said Michael Reese, Brown’s press secretary. “It’s just possible that we could be out of this thing by the end of the week.”

The Republican leaders in the Senate and Assembly left the Capitol and could not be reached for comment. Their views are significant because Assembly Republicans have the votes to block passage of the budget.

Wilson’s earlier plan, announced before the projected shortfall grew from $12.6 billion to $14.3 billion, called for a 1 1/4-cent increase in the sales tax, the elimination of sales tax exemptions for newspapers, candy and snack foods, bottled water and other products, and increases in alcohol taxes and vehicle license fees. The governor also proposed a new, 6% tax on telephone calls.

The governor has not offered a plan to erase the latest jump in the projected shortfall, which is $1.7 billion greater than was described in his most recent public proposal.

Privately, Wilson has rejected a Senate-Assembly conference committee plan to deal with the shortfall. According to copies of the agendas, Wilson has said he would not approve a sales tax on admissions to sporting and entertainment events, higher inheritance taxes, and eliminating the mortgage interest deduction on second homes, as the committee proposed.

On the spending side, Wilson also refused to go along with additional cuts in programs he has tried to protect, including prisons and the University of California, and has insisted on a $1.4 billion reserve, rather than the $1 billion approved by the committee.

At the same time, these agendas show, the governor has been offering proposals to overcome major fiscal and political obstacles.

He has privately proposed capturing $777 million for general government use by eliminating two funds designed to ensure that the pensions of retired state employees keep pace with inflation. Wilson would provide the same protection by building these special cost-of-living bonuses into the pension system’s 40-year plan--essentially a way to borrow from future taxpayers.

On the political side, Wilson has offered legislators a way to avoid suspending Proposition 98, the constitutional guarantee for public school funding, while cutting from education as he has proposed.

The method, part of which has been accepted by the Legislature, involves cutting the schools budgets on paper this year by $1.2 billion while “loaning” them the same amount of money, so that educators would not have to reduce their budgets immediately. The schools then would have to “repay” the loan by taking less next year than Proposition 98 would have guaranteed.

Wilson has also discussed with legislative leaders his plan to cut $670 million from all programs other than the universities. According to the private committee agendas, more than 10,500 state workers would lose their jobs if the cuts occur by July 1. More workers would be laid off if the cuts are not implemented until later.