LOS ANGELES -- Gov. Pete Wilson of California on Saturday abandoned his efforts to suspend guaranteed funding levels for public schools, a decision that could break a legislative logjam over addressing the state's $14.3 billion deficit.
Gov. Wilson's action is significant because a June 15 constitutional deadline is looming for state leaders to reach a budget agreement. That deadline often has been ignored in past years when there were minor budget problems, but state officials are worried they may face a credit downgrading unless the massive budget deficit is addressed promptly this spring.
Kathleen Brown, the state treasurer, told a budget conference committee in a letter last month, "I feel reasonably certain" that Standard & Poor's Corp. will take adverse action if the state delays adopting its budget for fiscal 1992, which begins July 1.
Standard & Poor's, Moody's Investors Service, and Fitch Investors Service rate California GOs triple-A.
The state Senate met in a rare Sunday session and unanimously approved two bills for school funding that total $18.8 billion for the upcoming fiscal year. That amount is about $800 million more than Gov. Wilson proposed in January and would meet the constitutional funding guarantees to public schools and community colleges provided by Proposition 98, an initiative approved by voters in 1988.
Gov. Wilson said earlier this year that state leaders should suspend Proposition 98 guarantees because of the severe budget crisis. Over the weekend, however, the governor said he was willing to compromise on education funding rather than risk delaying budget negotiations any longer.
"It is no exaggeration to say that this education solution is the critical element -- the linchpin -- of the budget agreement," Gov. Wilson said in a statement.
The state's strong education lobby -- including the California Teachers Association -- fought hard to keep Proposition 98 intact for the sake of precedent. The proposition essentially guarantees schools a fixed percentage, about 40%, of general funds spending.
Under the funding bills approved Sunday by the Senate, schools will actually have to repay the state for money to which they were not entitled during the current fiscal year because of the weak economy. Nevertheless, they will still end up with more money than initially proposed by the governor.
The legislation also frees school districts of requirements that they reimburse counties for the cost of collecting property taxes. The districts also would be relieved of an obligation to put about $300 million into non-teacher pension funds -- these contributors would instead come from surplus investment funds in the retirement system for public employees.
As of early yesterday, however, some members of the Assembly had balked at passing the school legislation, citing objections to the pension funding clause.
The Assembly Democrats "got cold feet" over that provision, Cynthia Katz, an assistant finance director for the Republican governor, said yesterday.
But she expected that something would happen late Monday to move the school funding bills forward.
Ms. Katz cautioned that "it needs to happen real soon [because the budget] all has to come together this week."
Rather than reaching one massive budget compromise, lawmakers and Gov. Wilson appear headed toward approving the package in a piecemeal fashion.
Other major pending legislation includes an ambitious proposal to shift responsibility for mental health and other social service programs, along with trial courts, to the county rather than to state level.
The Republican governor and Democrat-controlled Legislature also have to agree on a package of tax increases and spending cuts designed to balance the budget.
Ms. Brown postponed in late May a $1.4 billion bond sale scheduled for early this month because of concern that the new issuance could trigger a rating downgrade in the face of California's budget problems. A May budget revision by the Department of Finance revealed that the projected deficit stands at $14.3 billion, rather than the $12.6 billion figure calculated in March.