LOS ANGELES - Local governments in California are lobbying hard to protect their interests as state lawmakers attempt to bridge an $11 billion budget gap by slashing state and local programs.

"This is the worst year I have ever seen," said Victor Pottorff, deputy executive director of the California State Association of Counties. "There is fierce competition right now between schools, cities, counties, and the state. Each wants to protect their own turf."

Gov. Pete Wilson and the Legislature remain deadlocked over ways to balance the budget for the fiscal year, which began July 1. The governor refuses to raise taxes and instead wants to help solve the shortfall with more than $4 billion of cuts to health, education, and welfare services, many of which would affect local governments.

Moody's Investors Service this week downgraded the state's general obligation bonds because lawmakers failed to pass a budget and the state resorted to issuing promissory notes, known as registered warrants, to pay its bills.

City, county, and school officials are concerned that the state will partly balance the budget by shifting fiscal responsibility for many programs to localities, but without sufficient new revenues to pay the costs.

The most alarming proposal to local governments would give schools millions of dollars of property tax money earmarked for cities, counties, and special districts. Local governments would receive additional revenue-raising tools to help replace the lost funds.

The plan would impact allocations made under Assembly Bill 8, which was part of the Legislature's implementation of Proposition 13, the property tax- cutting measure approved by voters in 1978. The bill includes a formula that allocates property tax revenues to local governments, based on their historical share in a three-year period prior to passage of Proposition 13.

Democrats have proposed shifting $916 million in property taxes from cities over a two-year period. Gov. Wilson, a Republican, had proposed transferring $1 billion from cities, counties, and special districts - of which $280 million would come from cities - but on Monday he decided to leave municipal Property taxes alone. The governor, a former mayor of San Diego, said he was concerned about the impact on city police and fire services.

"We were a little bit encouraged, but we have a long way to go," said Debbie Thornton, spokeswoman for the League of California Cities. "The Democrats' proposal is very much alive."

Another political hot potato is the governor's proposal to cut $2 billion from schools, which could have wide-ranging impacts.

Mr. Pottorff said officials tend to lose sight of the bigger picture as various agencies compete with each other to save pet programs. He said cuts to counties can impact. other governments, such as cities.

For example, he cited a state proposal to save $8 million by shifting responsibility to counties for mentally ill criminals after their terms are completed. Mr. Pottorff said most county mental patients are city residents and said that such a plan could lead to more urban homeless.

"I think there are going to be more of them wandering around on the streets," said Mr. Pottorff. "Then the police departments will see how we are all interrelated."

Mr. Pottorff said the budget debate is still "up in the air," and he is concerned that counties could see property taxes reduced, lose flexibility in terms of health and welfare programs, and receive "illusionary revenue raising abilities which would not be practical or profitable," such as authority to increase sales taxes. Furthermore, sales tax collections have slowed during the recession, he noted.

Redevelopment agencies, considered "cash cows" by many lawmakers, are also on the budget chopping block this year. A proposal to transfer $175 million in redevelopment tax increment funds to schools was recently reduced to $25 million, but redevelopment officials say the situation changes daily.

"Because we show large reserve funds - which often include bond proceeds - we are a target," said Bill Carlson, executive director of the California Redevelopment Association.

Several Sacramento insiders predicted it could be weeks before a budget is approved. Some said several key legislators are considering abandoning negotiations to attend the Democratic Convention next week in New York, which could further delay plans for a new budget.

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