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Cuts Spurred by Calif. DeficitMay Rescue Proposition 98

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The California initiative that guarantees schools about 40 percent of the state budget may be saved, an0 alysts suggested last week, by the same fiscal problems that have led this year to calls for its suspension.$ A spokesman for Gov. Pete Wilson said last week that the state deficit, now estimated at $14.3 billion, is so huge that it has triggered automatic reductions in school funding under Proposition 98--thus, ironically, perhaps making suspending the measure unnecessary.0

Proposition 98 remains a point of contention between Mr. Wilson, who has pushed for suspension, and Democratic leaders of the legislaL0 ture, who together with most educa0 tion groups have been strongly op0 posed to the idea. But the importance of the issue to the bud0 get debate has diminished, explained the spokesman, Franz R. L0 Wisner, as the state's deficit has L0 grown beyond the earlier estimates of $12.6 billion.0

The Governor, meanwhile, last L0 week signed a measure that backers said would help alleviate the need to suspend Proposition 98.$ !

The proposal recaptures about $840 million in excess funds that the state had provided to districts this year and then carries the funds over to next year to help avoid suspen0 sion. Technically, the recaptured money would be lent back to school districts this year, and then the L0 same amount would be appropriated next year to repay the loan.$#+

Due to the recession and the resulting drop in state revenues, which has triggered automatic re0 ductions in Proposition 98 funding, school districts this year actually re0 ceived $1.2 billion more in state aid than mandated under the constitu0 tional amendment.

Republican legislators had proposed recapturing the full $1.2-bil0 lion overpayment by withholding L0 state payments to schools, but Democratic lawmakers resisted.

The compromise measure, sponsored by Assemblyman Thomas M. Hannigan and supported by Mr. 3Wilson, provides for the recapture of about two-thirds of the funds.3

The legislation passed the Assem0 bly by a 42-to-11 vote last week. It had cleared the Senate on a nearly unanimous vote on May 24, after Republican members decided to abstain from voting.$

Still at issue is about $400 million overpaid to districts this year and an additional $420 million in school-L aid cuts sought by the Governor.0

The state can pass legislation to re capture the overpaid amount at any time before the end of June, but mak ing the additional school-aid cuts re quested by the Governor still may re quire a suspension of Proposition 98.

The Governor and legislative lead ers were in negotiations late last L week in an attempt to pass a budget by June 1. They hoped to do so by that point in order to give businesses around the state time to adjust to a sales-tax increase and begin bringing in additional revenue before the July 1 start of the fiscal year.$

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