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CA: State's fiscal watchdog warns of budget shortfall, calls for cuts
AP on Bakersfield Californian ^ | 2/21/07 | Aaron C. Davis - ap

Posted on 02/21/2007 6:22:33 PM PST by NormsRevenge

California's fiscal watchdog on Wednesday warned that the state's budget outlook has deteriorated significantly since Gov. Arnold Schwarzenegger released his proposed spending plan in January and urged lawmakers to enact midyear cuts.

Lawmakers should immediately trim $600 million from schools and Schwarzenegger should cancel more than $1 billion in other spending to keep the state from sinking further into debt, Legislative Analyst Elizabeth Hill said.

In her annual review of the governor's proposed budget, Hill expanded on her recent criticism that Schwarzenegger's plan relies on rosy revenue projections. Her 1,107-page analysis detailed what Hill said are billions of dollars in overstated revenue and billions more in understated expenses and liabilities by the administration.

The state's latest tax figures, she said, clearly tell the story: Revenue collected from personal income tax returns is nearly $1 billion below forecasts just since December.

Hill called on lawmakers to reduce education funding and suggested Schwarzenegger sign an executive order canceling early repayment of bond money from propositions 57 and 58 - the money voters approved in 2004 to help close the state's deep budget gap.

Education advocates were immediately wary of the recommendations from the nonpartisan legislative analyst. But she said that without such corrective action, the state may end the 2007-08 budget year with a $726 million shortfall - not the $2.1 billion surplus Schwarzenegger had estimated.

Hill said the classroom money amounts to less than 1 percent of state education spending. She said her office has calculated that for various reasons the money would not be spent this year.

"Real world, in the classroom, not a change," she said. "In our view, it's money that will not be spent."

H.D. Palmer, spokesman for Schwarzenegger's finance department, largely dismissed the criticism and the calls for cuts.

He said Hill's team put too much emphasis on the most recent tax-return figures and said the administration has no plans to pull back on efforts to repay the bonds ahead of schedule. Paying them off early might help Schwarzenegger persuade voters to approve more infrastructure bonds on next year's ballot.

"We're not backing away from anything we put out in our January budget," Palmer said.

He added that the finance department believes tax revenues will end up closer in line with estimates by April.

When he released his budget in January, Schwarzenegger proclaimed his $143.4 billion spending plan would accomplish the seminal task voters charged him with when he was elected during the 2003 recall.

Schwarzenegger said that in the budget year beginning July 1, he will bring an end to the state's chronic budget deficit. The gap between what the state takes in and what it spends was projected to peak at $16.5 billion the year he took office and leave the state teetering on the edge of bankruptcy.

Since the governor made the claim in January, Hill, lawmakers and Wall Street analysts have questioned whether he can really achieve his goal. On Wednesday, Hill said that in addition to next year's budget woes, the state will face deficits through the end of the decade.

As the Legislature continues hearings on Schwarzenegger's budget, lawmakers said Hill's analysis would guide the debate.

Assembly Speaker Fabian Nunez, D-Los Angeles, called the analyst's numbers "a timely reminder of the careful choices we have to make and of the importance of having realistic assessments and assumptions."

TOPICS: Business/Economy; US: California
KEYWORDS: budgetshortfall; california; fiscal; watchdog

1 posted on 02/21/2007 6:22:34 PM PST by NormsRevenge
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LAO Analysis of the 2007-08 Budget Bill

2 posted on 02/21/2007 6:24:27 PM PST by NormsRevenge (Semper Fi ......)
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To: NormsRevenge

Arnie you could save another 2 billon by vetoing all the pork bill you will be getting.

3 posted on 02/21/2007 6:51:41 PM PST by jocko12
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To: NormsRevenge

"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 Palelologus

4 posted on 02/21/2007 6:54:23 PM PST by goldstategop (In Memory Of A Dearly Beloved Friend Who Lives In My Heart Forever)
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To: goldstategop

In the ordinary course of events absolutes are usually motivated by unreasoned passion, always suspect and frequently inaccurate. But in this case, history is on your side.

5 posted on 02/21/2007 7:47:18 PM PST by Amerigomag
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