Analyst: Budget will come up short -- Falling home sales slow economy

Sacramento Bee ^ | 11/16/6 | Clea Benson

[SmithL]

With a decline in home sales driving a slowdown in California's recent economic boom, lawmakers will find it "much tougher" to balance the state budget next year than they did this year, the Legislature's nonpartisan budget adviser said in a report Wednesday.

The economy is still doing slightly better than lawmakers expected when they approved the current $131 billion state spending plan in June, partly because oil prices have dropped since the summer, the report said.

But if trends continue, the state will still take in about $5 billion less than it spends for the fiscal year beginning July 1, 2007, Legislative Analyst Elizabeth Hill said.

"Basically, we're living on borrowed time," Hill said Wednesday at a news conference where she urged lawmakers to end the operating deficits.

To cover costs, lawmakers will have to find a way to cut about $2 billion out of the budget for the 2007-2008 fiscal year even without increasing spending on current programs or creating new ones, the report from Hill's office said. An expected $3 billion reserve at the end of the current fiscal year would bridge the rest of the gap.

The report reflected a marked difference in the economic climate from this time last year, when an unanticipated surge in personal incomes was pouring a windfall of billions of dollars into state coffers.

By the end of the last fiscal year on June 30, the state had an unexpected cushion of about $7.5 billion that the Legislature and the governor used to expand funding for schools, restore cuts to social programs and pay off debt.

Legislative leaders from both parties and administration officials said it came as no surprise that the next fiscal year would be tighter.

[SmithL]

Legislative Analyst Elizabeth Hill presents her findings.

[SmithL]

Sell bonds - get more free money.

[Always Right]

I can't believe cutting $2 Billion out of a $131 Billion budget is really that hard.

[DOGEY]

I can't believe cutting $2 Billion out of a $131 Billion budget is really that hard.

For liberal Democrats, its a Herculean task.

[RexBeach]

It's the attack of Captain Obvious!!!!!!

"Stand back!!! I must talk down the economy!!!!"

[goldstategop]

Sacramento is NOT going to cut the budget and in view of the vote earlier this month, tax hikes are also off the table. Stalemate.

"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." -Manuel II Paleologus

[Amerigomag]

in view of the vote earlier this month, tax hikes are also off the table.

According to the election results for Nov 7, voters defeated proposals for approximately $7B in new, annual taxes but they approved proposals averaging about $2.5B annually in new taxes for each of the next 30 years.

Based on those results, I'm not so sure that new taxes are off the table, unless legislative Republicans remain unified.

[goldstategop]

Its more accurate to say voters find borrowing the lesser of all evils.

"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." -Manuel II Paleologus