SACRAMENTO — Six months into the leanest fiscal year in memory, Gov. Arnold Schwarzenegger and California legislators soon will begin wrestling with a new state spending plan — and a new budget deficit.

And while revenues are in relatively short supply, there is an abundance of aphorisms applicable to the looming budget battle.

Things are never so bad that they can't get worse.

Lawmakers and the governor spent much of 2009 cobbling together a way to close a $60 billion budget deficit, with the full realization that whatever they did, it wouldn't be enough to fend off a new deluge of red ink in 2010.

Sure enough, the nonpartisan Legislative Analyst's Office estimated last month that the state now faces a $20.7 billion gap between what it can expect to collect in revenues and spend over the next 18 months.

That figure includes a $6.3 billion hole for the current fiscal year, which ends June 30, and a $14.4 billion deficit in the 2010-2011 year, which begins July 1.

"And as hard as $60 billion was, closing the (new) deficit is going to be even more challenging," said H.D. Palmer, spokesman for the governor's Department of Finance, "for three reasons."

First, Palmer said, the state can't rely on another $8 billion in federal stimulus money, as it did this year, although state officials hope at least some aid from Washington will show up.

"Second," he said, "some of the solutions this year were one-time in nature, and we made that very clear."

Those "one-time" solutions included budgeting maneuvers such as accelerating the collection of payroll taxes, and postponing the last payday of state workers in the fiscal year until the first day of the next fiscal year.

Third, Palmer said, the state is scraping bottom in cutting some major spending programs because of something called "maintenance of effort."

That basically means the federal government sets minimum standards for programs such as education and social services that states must meet to be eligible for federal funds.

For example, the state must have enough money available to pay 90 percent of doctors, pharmacies and other providers of Medi-Cal services within 90 days of being billed. If it doesn't, it risks the loss of billions of federal dollars.

Read the full story at sacbee.com