Economy

Stimulus funds running out in California

Facing a dismal budget crisis last year, California relied on a federal lifeline of stimulus dollars. The cash infusion staved off the bleakest of cuts to Medi-Cal patients, welfare recipients and students.

But that money is beginning to run dry, leaving California grappling with whether to replace it by raising taxes or institute the severe cuts the state avoided last year.

The state already has exhausted some pots of stimulus money, such as one for higher education. Others will expire in the next year.

The federal government last year authorized an $862 billion stimulus package that included $85 billion for California. The money accounted for about $8.7 billion of direct state budget relief in last year's plan to bridge a $60 billion deficit over 17 months.

Federal leaders presumed that an economic recovery by next year would provide more tax revenue and pick up the slack. But California remains mired in an economic malaise, and the unemployment rate is 12.4 percent.

"I think the original assumptions were that we'd be much further along in our economic recovery by the time the money was spent," said Michael Cohen, deputy legislative analyst in the nonpartisan Legislative Analyst's Office. "If the economy goes along at what we're projecting, when the federal dollars go away, we're going to be left with a good-sized budget problem."

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