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  Budget Fight Goes On in California
  By ROBERT REINHOLD SEPT. 1, 1992
  With only hours to go before the Legislature was due to adjourn for the year, the two-month-long budget crisis in California reached a flashpoint this afternoon when Gov. Pete Wilson threatened to veto the budget bill because he could not accept an education spending plan approved earlier in the day by the state Assembly.
  The new impasse, more of a dispute over future financing for public education rather than a clash over this year's spending, could wreck the budget package, major components of which passed the Legislature over the weekend.
  A solution to the crisis had seemed almost in hand over the weekend when the Senate passed a budget plan acceptable to the Governor. The Assembly, too, approved an overall spending plan, but the Democratic majority in that house refused to go along with the education spending plan.
  In an attempt to outmaneuver the Republican Governor, the Assembly's Democratic leadership negotiated this afternoon with conservative Assembly Republicans, who dislike the Governor, to try to get their support for the education plan passed today. The Democrats hoped to secure enough bipartisan support to send the plan to the Senate before midnight. What Happens Next?
  It was not clear what would happen, should agreement not be reached by midnight. The Governor and the Legislature each has the power to call a special session.
  The latest confrontation came as the state Capitol boiled with fury during the 63d day in which the most populous state has gone without a budget, the worst such crisis since the Great Depression. As of today, the state has paid its employees and creditors with $3.2 billion in i.o.u.'s and has stopped paying for the health care for the poor. As the Governor spoke to reporters, disabled people in wheelchairs staged a noisy demonstration outside his office, chanting "sign or resign."
  Mr. Wilson said he was prepared to sign the budget, but not with the school plan pushed by the Democratic Speaker of the Assembly, Willie L. Brown Jr., which the Governor said could "lead to a seriously unbalanced budget."
  On Saturday, the Senate passed a complete budget, both the overall financial blueprint and the dozen additional bills that are essential to put the budget into effect. The Senate package did not call for new taxation and was acceptable to the Governor. Problems in the Assembly
  Later that day, the 80-member Assembly passed the overall blueprint but waited until Sunday night to take up the additional "trailer" bills. It passed three of them, which mainly cut $1.3 billion for local governments, and came back today to deal with the remainder, including spending on education.
  There is no disagreement on the overall amount by which the budget has to be reduced. With revenues having fallen this year for the first time since before World War II, both sides have agreed to cut spending by 3 percent, from an estimated $55.1 billion last year to $53.5 billion this fiscal year. The Democrats two months ago gave up on the notion of raising taxes as politically infeasible in a recession that has hit California harder than most states.
  About the only item that does not get cut is spending for public schools, kindergarten through community colleges. The budget allows state support to local school districts to grow somewhat to accommodate increases in enrollment and to keep spending per pupil at last year's level.
  But a constitutional amendment passed by voters in 1988, called Proposition 98, requires that 40 percent of state revenues go to schools except when revenues falter. The dispute now is what to do about Proposition 98.
  The Legislature has accepted Governor Wilson's plan to keep school spending steady with a series of bookkeeping acrobatics. This is how it works: The state "recaptures" $1.1 billion it paid to schools last year on the ground that, because of the drop in state revenue, the schools were overpaid. That money is made up this year by "lending" the schools $959 million from their Proposition 98 entitlement from future years, to be "repaid" over the next two budget years.
  This brought howls from teachers unions and school administrators, who argued that it permanently reduced their financing by cutting the base on which future support is calculated.
  To guard against an almost inevitable lawsuit from school districts challenging this plan, the Governor insisted on inserting a "poison pill" into the bill. This would allow him to suspend Proposition 98, and cut school financing, in the case of a successful lawsuit. The Senate accepted this approach.
  But the Assembly, responding to the pressure from educators, who are powerful political forces in California, drew up a different kind of poison pill. In the case of a successful lawsuit, it would withhold the $959 million in "loans." Speaker Brown argued that this was a more effective tactic "because no school would run that risk" and file suit. He urged Governor Wilson to come "to the table of reality."
  Governor Wilson denounced the Brown plan as a budget buster. If a lawsuit were successful, he said, spending would rise by about $2 billion: the lost $1.1 billion "recapture" plus the lost $959 million "loan." "There will not be a balanced budget if there are gaping holes in it," he said.
  A version of this article appears in print on September 1, 1992, on Page B00006 of the National edition with the headline: Budget Fight Goes On in California. Order Reprints| Today's Paper|Subscribe