SACRAMENTO – Senate President Pro Tempore John Burton, D-San Francisco, said yesterday that Republican budget amendments will be rejected today, a setback to hopes that a 2-week-old deadlock might end soon.

Burton said the Republican proposals cut health and welfare programs for the poor and aid for students, while restoring proposed cuts for prisons and health-care providers and eliminating higher fees proposed for polluters.

"It's a budget that hits hardest at those who need the help of the state, and doesn't even dip its beak into the water of those that are able to help with taking care of the state's fiscal problems," Burton said.

Burton said the GOP amendments reveal the deep philosophical differences between Democrats, who advocate some cuts and tax increases, and Republicans who are opposed to any tax increases.

The struggle to close a record $38 billion budget gap has left the state without a budget since the new fiscal year began July 1. Contractors and vendors are not being paid.

As the toll mounts, payments to child-care centers and some highway contractors will end this week. The state will be unable to make payments to schools and community colleges at the end of the month.

If there is no budget by the end of next month, the state may have to slash the pay of state workers to the minimum wage, $6.75 an hour, and begin paying some of its bills with IOUs.

State officials have warned that the state's credit rating, the lowest in the nation, could be lowered to junk-bond status, triggering a $33 million penalty on a recent loan and raising future borrowing costs.

There had been some hope that the spending cuts proposed by Senate Republicans and a complicated sales-tax "swap" with no net increase might begin to set the stage for a budget solution.

Gov. Gray Davis predicted last week that a budget would get out of one legislative house, presumably the Senate, in a week or two. Davis also said the plan probably would not have a tax increase.

Burton called a news conference yesterday to announce that his caucus will reject Republican amendments to a Senate Democratic proposal rejected by Republicans in late June.

Burton said Republicans proposed $3.6 billion in spending cuts – but the total savings would be $2.7 billion mainly because of the rejection of prison and medical provider cuts and the elimination of various fee increases.

Two-thirds of the Republican cuts would be in health and welfare programs, Burton said, and the Republican plan also would cut $100 million in aid to students in the University of California and California State University systems.

"The easiest way out is to pick on people that really aren't able to fight back," Burton said. "I don't know that the senior citizens or the blind and disabled have a political action committee."

The lead Senate Republican budget writer, Dick Ackerman of Fullerton, said Senate Democrats rejected about $2 billion in spending cuts in the revised budget proposal issued by Davis in June.

Ackerman said the Republicans were prepared to defend each of their proposed cuts. He said he was surprised to hear Burton say that all of the GOP proposals would be voted on together in one bill.

The cuts in funding for the aged, blind and disabled would reduce payments to their 1997 levels, Ackerman said, rolling back increases made when the state went on a "spending spree" that it cannot afford.

At the center of the budget plans proposed by Davis and Democrats and Republicans in the Assembly is an unprecedented $10.7 billion bond, paid off over five years, that would be used to close part of the budget gap.

Davis and Senate Democrats are proposing that the bond be paid off with a half-cent increase in the sales tax, yielding $2.4 billion a year. The sales tax in San Diego County is now 73/4 cents on each $1 of a purchase.

"We are about a half-cent apart," Burton said of the key dispute preventing Democrats and Republicans from reaching a budget solution.

Davis contends that lenders insist that the bond be paid off with a tax increase. In the "tax swap" plan, the local government share of the current sales tax would be lowered and the state share increased by a similar amount.

There would be no increase in the total tax paid by consumers, and the deficit bond could be paid off with the revenue from the increase in the state share of the sales tax.

To cover its loss, local government would receive property-tax revenue currently going to schools. The state general fund would repay schools for the property-tax revenue shifted to local government.

Burton said the swap would create a drain of more than $2 billion on the general fund. He said Republicans oppose a quarter-cent swap, which would reduce the general fund loss but take longer to pay off the bond.

Senate Minority Leader Jim Brulte, R-Rancho Cucamonga, said last week that he asked Davis to have the administration draft a proposal for a half-cent tax swap.

Ackerman said the tax swap has only been debated for "about 30 seconds" in the Republican caucus. He said he personally is opposed to it, calling it a "short-term gimmick" to finance the deficit bond.

To get the two-thirds approval of the Legislature needed for a new budget, minority Republicans must provide at least two votes in the 40-member Senate and six votes in the 80-member Assembly.

Ackerman said he thinks Democrats finally have realized that Republicans will not vote for a tax increase. Burton said that "sooner or later the rubber is going to meet the road" and there will have to be a decision.

The Democratic leader said he will continue to meet with Brulte in an attempt to negotiate a solution after the Senate votes on the Republican amendments.

"I believe clearly it will be voted down," Burton said. "And then we will see where it goes from there."