CA: Report sees budget gaps under Schwarzenegger plan

Reuters.com ^ | 5/18/04 | Jim Christie - Reuters

[NormsRevenge]

SACRAMENTO, Calif., May 17 (Reuters) - Gov. Arnold Schwarzenegger's new budget plan would balance California's books in the coming fiscal year but some provisions would cause shortfalls to return, with annual deficits above $6.5 billion well into the future, a state fiscal analyst said on Monday.

California's budget shortfall could swell to as much as $8 billion in a few years if Schwarzenegger's revised budget plan for the coming fiscal year is passed, Legislative Analyst Elizabeth Hill told reporters.

California's longer-term budget outlook has worsened under the new plan compared with Schwarzenegger's initial budget proposal in January, warned Hill, whose office is a nonpartisan post appointed by the legislature.

If the new plan is passed, the state will not be able to tap local governments for revenues after two years and will be strapped with paying off debt used to restructure its prior loans and to fund itself, Hill said.

Additionally, deferred spending would resume in a few years and the state's economy will not grow fast enough to provide enough revenue to keep up with state spending, Hill said.

"We can't grow our way out of this problem," Hill said, urging the governor and lawmakers to consider spending cuts and raising taxes to attack the state's "structural" budget gap.

"Everything should be on the table," Hill said, noting that Schwarzenegger's revised budget for the fiscal year starting in July "misses an opportunity" to make progress toward eliminating California's long-term fiscal imbalance.

Because California has routinely spent more than it has taken in, and because of its history of missed budget deadlines, credit rating agencies have assigned the state's general obligation debt the lowest rating of any state.

H.D. Palmer, a spokesman for Schwarzenegger's Finance Department, said future cost-cutting initiatives by the governor hold "significant" potential for long-term savings.

Schwarzenegger plans an audit of the state government to make it more efficient and to address rising costs in state health-care programs, Palmer said.

State Treasurer Phil Angelides, widely seen as a potential Democratic candidate for governor, sharply criticized Schwarzenegger's revised budget plan as "chock full of one-time fixes, accounting gimmicks and borrowed money," and said the state's shortfall could swell to $10 billion in fiscal year 2006-07.

"I agree with Ms. Hill that there is no better time than now to truly address our state's structural budget imbalance with a realistic mix of spending cuts and revenue solutions," Angelides said in a statement.

Schwarzenegger last week unveiled a new $103 billion plan ruling out new taxes. The Republican governor also backed away from the deep cuts he first proposed to health and social programs after Democrats vowed a fierce defense.

He also called for lawmakers to pass a budget on time, which is likely as an economic pick-up, a successful tax amnesty and deals with local governments and educators to tap their revenue and defer their spending is providing the state with enough cash to balance next year's budget without tax hikes or deep cuts, according to analysts.

Hill acknowledged the governor's new plan would balance the next fiscal year's budget and would produce an $870 million reserve. That and $3.5 billion from a $15 billion voter-approved bond would allow the state to cover much of a $6 billion gap forecast in the following fiscal year, Hill added.

However, deferred spending in the following fiscal year's budget would really start to kick in and the state has agreed not to raid the coffers of local governments as it routinely has, complicating the state's commitments, according to Hill. (Additional reporting by Jenny O'Mara in Sacramento, Calif.)

[NormsRevenge]

The Battle of Budget Gap '04 (and '05 and '06 ..)

[jocko12]

Prove them wrong Arnie,CUT THE PORK OUT.