No tax break for business this year.

That was evident last week as state legislators and Gov. Pete Wilson hammered out the final details of the $68 billion 1997-98 state budget.

Early this year, Wilson proposed a 5 percent tax cut for corporations and banks. He also asked the Legislature to approve a $1 billion personal income tax cut, which would have meant a 10 percent cut in state income taxes for couples earning less than $80,000 annually.

But his decision to pay off a $1.36 billion judgment to the California Public Employees Retirement System as one lump sum eliminated any chance of tax cuts.

“It seems as though those probably won’t happen now,” said Fred Main, general counsel of the California Chamber of Commerce, which lobbies for business throughout the state. “That was probably the largest business issue that would affect businesses generally.”

The cuts are unlikely because of a massive pay-out from the state’s general fund to the state employees retirement fund.

CalPERS brought a lawsuit against the state after it delayed contributing to the fund during the 1992-93 and 1993-94 fiscal years something it did to help balance the budget during large shortfall years. The state Supreme Court ruled in May that the state must repay CalPERS the original amount plus interest, totaling $1.36 billion.

Wilson late last month ordered state Controller Kathleen Connell to pay the debt as one lump sum after Democrats in the Legislature rejected the governor’s proposal to cut taxes.

Jeff Gorell, spokesman for the California Manufacturers Association, said the loss of the corporate tax cut means companies won’t be spending money to expand their operations and hire new employees.

“When businesses out there know they have this 5 percent tax break which for some companies equates to millions of dollars they add employees or expand facilities,” Gorrell said. “It’s definitely an incentive for pro-growth conduct.”

The proposed personal income tax cut could have helped small businesses throughout the state, because many single-owner businesses particularly startups pay their taxes as part of their personal income taxes.

“People mistakenly look to personal income tax breaks as breaks for the rich, but a lot of those people are small business owners,” Gorell said.

Among the other potential benefits to the state’s businesses that likely won’t happen because of the CalPERS pay-out is a return to county governments of a portion of property taxes that the state began seizing from them in the early 1990s.

Because of decreased funds from property taxes, local governments for years have delayed green-lighting new developments, such as county libraries and courthouses. Those projects bring business to local contractors, supply companies and other businesses.

“We and other business groups were strongly supporting returning a portion of that to local governments,” Main said.

Ezunial Burts, president of the Los Angeles Area Chamber of Commerce, said his organization also has been pushing for a return of property taxes to the counties, because such a move would lessen the possibility of greater expenses charged by local government.

The biggest issue the L.A. chamber has been following, Burts said, is the state’s welfare-to-work initiative, which dictates how the state will react to the requirements of the federal welfare reform act.

“What the state does here is very critical because there is a role for business to play,” he said.

Burts said the chamber is following how much funding will be given to welfare-to-work programs, and how many public-sector jobs will be created to employ former welfare recipients. That will affect how many workers coming off welfare will need to be employed by California businesses.