Gov. Gray Davis on Wednesday offered a revised plan for coping with a state budget deficit that now tops $38 billion, saying he sought to accommodate all sides to get a spending plan on time and avoid an even greater fiscal calamity.
But lawmakers from both parties showed little sign of budging from entrenched positions. Republicans said they continue to oppose new taxes. Davis' revised $100.4 billion budget proposes tax increases to pay off $10.7 billion of the deficit over five years and to fund a shift of some responsibilities to local governments.

"We are willing to negotiate on everything except the issue of taxes," said Senate Republican leader Jim Brulte of Rancho Cucamonga.

Democrats, sounding their own familiar refrain, accused Republicans of failing to negotiate and said no budget solution is possible without new taxes.

"I'm extremely disappointed that after everything we've done, and after everything the governor has done, the Republicans have not moved an inch," said Assembly Speaker Herb Wesson, D-Culver City.

In one small indication of remaining tensions between the parties, Republicans took issue with Davis' contention that he had met with legislative leaders 19 times. Their records indicated 11 such meetings.

Still, the Democratic governor adopted a strikingly accommodating tone in presenting his changes.

He said that he still preferred the proposal he made in January, which called for erasing the deficit in the coming fiscal year. But "unfortunately, both parties of the Legislature decided they did not like the one-year plan I proposed," he said.

The plan Davis outlined Wednesday bears little resemblance to his January proposal. Gone is a $8.3 billion shift of responsibilities to local governments, to be funded by an array of tax increases.

It's replaced by a more modest $1.8 billion "realignment" proposal. The new version would be paid for by a new 10.3 percent income tax bracket on annual incomes above $150,000 for individuals and $300,000 for married couples, and a 63-cents-a-pack increase on cigarettes, phased in over two years.

The $10.7 billion deficit in the current fiscal year would be wiped out by selling bonds, which would be paid off with a new half-cent sales tax over about five years.

On top of that, Davis' new budget proposal assumes that the vehicle license fee that Californians pay each year will be tripled under an existing law that calls for recent reductions to be reversed in tough budget times. That would raise $4.2 billion.

All told, the revised budget proposal banks on about $8 billion from increased taxes, about the same amount Davis planned in his January spending outline.

In another change, Davis backed off from a proposal to raise $2 billion by selling bonds on the strength of the state's year-to-year share of a legal settlement with tobacco companies. With many other states doing the same thing and tobacco companies struggling financially, the deal no longer makes sense, he said.

He also scaled back -- from $1.5 billion to $680 million -- the amount he expects to get from renegotiating gambling compacts with Indian tribes. The process is complex and can't be finished in the coming fiscal year, he said.

In January, Davis had proposed overhauling the system of funding school programs with separate pots of money by replacing $854 million of so-called categorical funding with block grants. After lawmakers rejected the idea, Davis gutted the proposal pending further discussion.

The governor admits that his revised plan would lead to an $8 billion deficit in the 2004-05 fiscal year. After the Legislature passes a budget this summer, he said, it should spend the rest of the year on "structural reform" to avoid recurring shortfalls.

"This is something we must do if we want to right the state's financial ship," he said.

Davis' revised proposal also responds to some concerns from lawmakers of his own party by backing off -- in part -- on some cuts he proposed in January to health care and social services, such as the monthly grants paid to the aged, blind and disabled.

It gives $700 million more to K-12 schools, allowing the state to continue funding a class-size reduction program, and $304 million to community colleges. In January, Davis proposed increasing fees at community colleges from $11 per unit to $24. He is now paring that to $18.

Davis and his finance director, Steve Peace, took pains to make the case that the new plan won't work without taxes.

Assembly Republicans released a plan last month that called for the deficit to be paid off with existing state revenue, avoiding tax increases.

"Their plan doesn't pencil out," Davis said.

Under the GOP plan, he said, "we're basically borrowing from one pocket to pay another pocket," leaving too little money for all the state's obligations.

Peace said that using current revenue from the general fund, the state's main bank account, would pose a host of complications. For one, the Legislature each year would have to reappropriate the money, on a two-thirds vote, to pay off the bonds -- a requirement unlikely to assure Wall Street lenders.

"Put yourself in the financial community's perspective and you'll understand why nobody in their right mind would lend money to this state if it wasn't a new tax" separate from the general fund, he said.

But Republicans say experts they've consulted believe differently.

"Let Wall Street say what they want," Senate Republican leader Brulte said. "Their job is to maximize profits for their people," not look out for the interests of Californians.

Peace said the May budget revision tries to placate all parties so the budget can be passed on time. A late budget, he said, could cause financial markets to slash California's credit-rating or decide not to lend money the state needs in the next several months to avoid running out of cash.

"If we don't deal with these things prudently, we're going to have both higher taxes and bigger cuts," he said. "The faster we act, the better we do."

In January, Davis proposed cutting the state's share of grants to the aged, blind and disabled to the federal minimum. That would have forced grant recipients, most of whom are disabled, to get by on $49 less each month, said Lupe Diaz, legislative advocate for the Western Center on Law and Poverty.

Davis got rid of that plan. But the governor still proposes to suspend cost-of-living adjustments, which would have added $34 to the monthly grants in the next year. CalWORKS recipients would also not get cost-of-living adjustments, while avoiding an earlier proposal to cut grants.

"It's better, but certainly not what we would have envisioned," Diaz said.

Davis reversed some cuts he had proposed in health care, such as denying Medi-Cal coverage to working parents who made more than 61 percent of the federal poverty level.

But "most other health cuts remain, and would indirectly deny coverage to literally millions of Californians," said Anthony Wright, executive director of Health Access, a statewide health-care consumer coalition of 200 organizations.

Overall, the revised budget calls for $18.8 billion in cuts and other savings, compared to $20.7 billion in his January proposal.

The state's deficit through the next fiscal year is projected to be $38.2 billion, up from the $34.6 billion in January. The state's general fund this year is about $78 billion.

The Legislature, in two rounds of budget cuts, has already trimmed $6.9 billion.

Lawmakers face a June 15 constitutional deadline for approving a budget for the fiscal year that begins July 1. The budget must win two-thirds majorities in each house. That means that six Republicans in the Assembly and two in the Senate would have to join majority Democrats to approve the spending plan.