CA: State budget picture brightens but deficits still loom, analyst says

SACRAMENTO (AP) - An improved economy could leave the state with a budget surplus of nearly $3 billion in mid-2006, but California would still face deficits of at least $3 billion to $4 billion in the following years, the legislative analyst said Tuesday.

Analyst Elizabeth Hill warned that the annual deficits would climb to nearly $10 billion if the Democrat-controlled Legislature and Republican Gov. Arnold Schwarzenegger don't agree on ongoing ways to eliminate at least $5 billion in red ink.

That could happen through spending cuts, tax increases or a combination of the two, said Brad Williams, director of budget overview and fiscal forecasting for the analyst's office.

Hill also said that several of Schwarzenegger's budget proposals would put more state spending on "autopilot" and make it tougher to balance future budgets.

"Our bottom line assessment is that the Legislature has a key budget opportunity" to improve the state's finances, she said. "But we are very concerned that it have tools available to be able to make adjustments in situations of revenue volatility...."

Hill, in a 289-page report on budget issues, projected that state revenue would be $2.2 billion higher and expenditures about $250 million lower than the governor predicted in January when he released his budget plan for the fiscal year that starts July 1.

That means, Hill said, that if lawmakers adopted Schwarzenegger's plan in total the state would end the 2005-06 fiscal year with a $2.9 billion reserve fund instead of the $500 million edge that Schwarznegger projected.

That surplus could be used to erase most of the $4 billion deficit in the following 2006-07 fiscal year, but the state would still face shortfalls of $4.5 billion in the 2007-08 fiscal year and $3.3 billion in 2008-09, Hill added.

She also said there were "many risks" in Schwarzenegger's budget proposals, including reliance on a $765 million pension bond that was being challenged in court and $408 million in savings that would have to be negotiated with state workers.

Some of Schwarzenegger's proposals would make it tougher to balance future budgets, Hill said. She cited his plan to prevent suspension of the Proposition 98 funding guarantees for schools and to bar use of a less-expensive school allocation formula in times of tight state budgets.

Those restrictions would make it more likely that another Schwarzenegger proposal - automatic across-the-board budget cuts when expenditures exceed revenue - would kick in, Hill said.

"That across-the-board feature would not only cut education, it would cut transportation ... and it would make no priority choice between high-priority state programs and low-priority programs."

A spokesman for Schwarzenegger, Vince Sollitto, said the threat of across-the-board cuts was needed to avoid prolonged deadlocks over a new state budget. If those cuts were triggered, he said, they would reflect priorities adopted by lawmakers in the previous budget.

State Treasurer Phil Angelides, a Democrat who is a likely candidate for governor next year, used Hill's report to criticize Schwarzenegger's budget proposals, saying they relied too much on borrowing.

"It may be that the governor's going to have to show some real courage and close some corporate tax loopholes or turn to his wealthy friends and ask them to pay" higher taxes, Angelides said in a conference call with reporters.

"The governor remains committed to undoing years of overspending without penalizing taxpayers any further," he said.

you mean we actually have some positive news in the future?...get with it Arnold and do what you have to do (except raise taxed of course)....spank the Dems and send them packing any way you can.....

It ain; that positive, imo,,

cuts cuts cuts.. Now .. seeing as how last year was a loss in that regard, and a massive borrowing year to keep the ship off the reef and allowed the Rats to have more time to scuttle the ships stores.

"That across-the-board feature would not only cut education, it would cut transportation ... and it would make no priority choice between high-priority state programs and low-priority programs."

Blah Blah Blah. The Democrats have given California cancer. They've made annual spending hikes in education and other areas mandatory - and it's no small figure.

This is a bit more positive.

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On the KTVU 10 PM news, caught a snip of results of a new Field Poll that shows the Legislature is on shaky ground, as usual, with the public. I haven't located poll results online yet, should be out tomorrow for public viewing, I suspect.

The Legislature is seen as more confrontational and unwilling to work for needed reforms by a pretty significant margin.

Of course, 'experts' and media talking heads and analysts weighing in say the Gub may be risking too much in trying to use his popularity to push for broad reforms (no pun intended) in such an aggressive manner, and they won't be approved without democrat support.

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