Politics & Government

Economy's decline pushes California back into deficit

SACRAMENTO — The California legislature's budget analyst, Mac Taylor, declared Friday that the immense package of spending cuts, new taxes and loans aimed at closing the state's $40 billion budget deficit will fall short by $8 billion because the state's economy is continuing to falter.

"Unfortunately, the state's economic and revenue outlook continues to deteriorate," the Legislative Analyst's Office (LAO) said in a review of the package, which covered the remainder of this fiscal year and all of the next.

"Even in the few weeks since the budget was signed, there have been a series of negative developments. Our updated revenue forecast projects that revenues will fall short of the assumptions in the budget package by $8 billion. Consequently, the legislature and governor will need to adopt billions of dollars in additional solutions in the coming months to bring the 2009-10 budget back into balance."

Taylor had some more bad news for the state's political leaders. Because so many of the "solutions" adopted last month are temporary, "without corrective actions, the state's huge operating deficits will reappear in future years — growing from $12.6 billion in 2010-11 to $26 billion in 2013-14."

Taylor said that to close the newly discovered $8 billion gap, the state should maximize its use of federal "stimulus" funds and "continue developing programmatic solutions," especially those his office has been recommending in recent months but the legislature and the governor shunned in adopting their package last month.

The LAO report will renew the Capitol's partisan and ideological squabbling over spending cuts and new taxes and fuel calls on the left for even more tax increases and those on the right for deeper spending cuts.

Read the full LAO report.