SACRAMENTO — Gov. Gray Davis’ budget plan relies on “overly optimistic” assumptions and could result in a multi-billion dollar deficit in the future, Legislative Analyst Elizabeth Hill said Tuesday.
Davis overestimated revenues and the federal money California will receive and his estimate of education costs is too low, according to the initial analysis by the Legislature’s top economic adviser.
Also, because the Davis plan relies on one-time solutions and deferred spending to plug budget gaps, it could leave the state with a $4 billion shortfall in the budget year after next, Hill said.
“We do not see the current situation as being a temporary imbalance, but rather an ongoing budget problem that requires ongoing solutions,” Hill said.
Last week, Davis released his 2002-03 spending plan, which would go into effect July 1.
It must be approved by the Legislature. Hill, who advises the Legislature on economic and budgetary matters, will give lawmakers her complete budget analysis on Feb. 20.
The $100 billion plan uses spending cuts, deferred spending and loans to fill an estimated $12.5 billion budget shortfall over the next 18 months. The budget proposal includes $5.2 billion in spending cuts, including deep reductions to health and welfare programs.
It also counts on an economic upswing within the next year and the sale of bonds to repay the state treasury for buying electricity during last year’s energy crisis.
Tim Gage, Davis’ budget chief, disagreed with Hill Tuesday.
“We took a very cautious and moderate view when we put the numbers together in December,” Gage said.
Davis’ budget is “basically a balancing act” between attacking a budget shortfall and “at the same time not devastating programs,” Gage said.
The budget also used slightly older economic data than Hill, Gage said. Davis will revise his budget plan in May after receiving information from the April sales and income tax receipts, Gage said.
Hill said she agrees the economy will recover this spring, but said “the budget imbalance remains in part because we’ve dug such a big hole in the current fiscal year.”
The analyst’s forecast assumes the state will receive $3 billion less in revenues this budget year than the governor’s budget assumes, Hill said. She said her figures are based on revenues in the first half of the fiscal year and cash payments to the state in December.
She believes only half of the $1.1 billion in federal funds Davis expects to receive will materialize, and that the state will be forced to pay more than predicted to fulfill its minimum schools funding requirements.
And Hill said one-time solutions, such as issuing bonds against state’s tobacco settlement payments and postponing payments of the state’s retirement contributions, could strap the state with increased costs in the future.
On the Net:
Hill’s analysis can be found at http://www.lao.ca.gov and Davis’ budget plan is at http://www.dof.ca.gov