STATE REFORM DEAL COULD COME NEXT BUDGET OK TO CLEAR THE WAY.

Byline: Harrison Sheppard Sacramento Bureau

SACRAMENTO - The expected passage today of a compromise $117.5 billion state budget deal sets the stage for Democratic legislators and Gov. Arnold Schwarzenegger to try to hammer out a deal on his reform agenda for the Nov. 8 special election.

Schwarzenegger said Wednesday that he and legislative leaders hope to begin those talks as soon as the budget is signed. The compromise on the state's 2005-06 budget came Tuesday after a weekend of negotiating and five days into the new fiscal year.

Each side suggested the othe had tried to link compromises on the budget with measures on the November ballot but nothing came of those efforts.

``There was never an intention to make these two be together,'' Schwarzenegger said during a meeting to brief his Cabinet on the deal.

``And I think that the speaker at one point talked about a universal deal, and that meant to some people the whole thing including the budget, but it was very clear it was best to keep the two apart, and everyone agreed on that.''

The governor previously had met with Democratic leaders in the hope of developing compromises to his initiatives that would impose caps on state spending and revise the funding formula for education, take political redistricting out of the hands of politicians and extend from two years to five years the time required for teachers to get tenure.

Still, Assembly Speaker Fabian Nuez, D-Los Angeles, said talks over the governor's reform measures entered into budget dealings at least twice - though he said they were not part of the final agreement.

``It was pretty clear to me that at one point in the course of the negotiations there was an effort to link the budget to the other initiatives, and that sort of faded away, and then it came back, and then it faded away again,'' Nuez said. ``I think it was a good thing to keep the two separate.''

Nuez said he will be looking for an overall deal on the governor's measures, as well as on an initiative supported in concept by the governor but proposed by an independent group that calls it a ``paycheck protection'' measure. It would bar public-employee unions from spending dues for political purposes unless members give written permission annually.

Nuez said he would like to see proposals on the November ballot that are crafted by the state Legislature with the governor's support as alternatives to the governor's measures already placed on the ballot through the signature-gathering process.

The Assembly speaker said he hoped to have a deal in place before the Legislature takes its one-month summer recess July 15.

On Wednesday, several local legislators described the budget deal reached Tuesday as a compromise that doesn't fully satisfy either side.

``I think the budget deal is as good as it's going to get,'' said Assemblyman Keith Richman, R-Northridge. ``I am going to support it, but I'm not satisfied with it.

``I don't think we've made as much progress as I would have hoped in reducing the projected deficits in future years.''

Richman said he is glad the budget pays back cities and counties $1.2 billion that the state owes them and provides full funding for transportation, but contains no tax increases.

He said he also would have liked to see more of the governor's reforms in the final package, such as cuts in Medi-Cal, in-home support services and employee compensation.

Assemblyman Dario Frommer, D-Glendale, said the budget still doesn't provide everything that education should be entitled to under Proposition 98.

``No one's going to be happy with this budget,'' Frommer said. ``It doesn't restore the $3 billion that the governor owes our California schools, and we're going to have to deal with that issue separately.

``But it's time to get the budget done because the state does rely on us coming to some agreement, putting our fiscal plan into law, so bills can get paid and government can operate.''

At least a few conservative Republicans oppose the deal. Assemblyman Ray Haynes, R-Murrieta, said it contains too much increased spending and does too little to reduce future-year deficits.

``The Democratic majority is doing the exact same thing they did back then - pushing the governor to spend more and more money,'' Haynes said.

But Republican leader Assemblyman Kevin McCarthy, R-Bakersfield, who met with his caucus Wednesday afternoon, predicted enough of his members would support the budget for it to pass.

``You never get a whole Republican caucus voting for any budget in the long run, but I think you'll see quite a few,'' McCarthy said.

Technically, the proposed 2005-06 budget is actually smaller than the 2004-05 budget, but that is only because of an additional $10 billion in bond borrowing last year.

The 2004-05 general fund was $81.7 billion, with an additional $22.3 billion in special funds and $14.6 billion in bond funds, for a total budget of $118.6 billion.

The 2005-06 proposed general fund is $90.1 billion. With $23.4 billion in special funds and $4 billion in bonds, the budget totals $117.5 billion.

Harrison Sheppard, [phone]

harrison.sheppard(at)dailynews.com

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Source: California Department of Finance