LA times.com article - Nov. 17, 2009 CA Budget Update

Less than four months after California leaders stitched together a patchwork budget, a projected deficit of nearly $21 billion already looms, according to a report to be released Wednesday by the state's chief budget analyst.  The new figure -- the nonpartisan analyst's first projection for the coming budget year -- threatens to send Sacramento back into budgetary gridlock and force more across-the-board cuts in state programs.

The grim forecast, described by people who were briefed on the report by Legislative Analyst Mac Taylor, comes courtesy of California's recession-wracked economy, unrealistic budgeting assumptions, spending cuts tied up in the courts and disappearing federal stimulus funds.

"Economic recovery will not take away the very severe budget problems for this year, next year and the year after," said Steve Levy, director of the Center For Continuing Study of the California Economy. In fact, after two years of precipitous revenue declines, the new report will project relatively stable tax collections for the state, said those who were briefed. But that won't stop the deficit from climbing to nearly $21 billion.

Gov. Arnold Schwarzenegger, who will present his next proposed budget to Californians in January as he begins his last year in office, started sounding the alarm last week.

"I think that there will be across-the-board cuts again," he said at a San Jose news conference.

The task in 2010 could be even harder than it was this year, when record deficits and cash shortfalls drove California to issue IOUs for only the second time since the Great Depression. Lawmakers have already made billions in deep cuts to education, healthcare and social services while temporarily hiking income, sales and vehicle taxes.

"I can't think of any good solutions," said Assemblywoman Noreen Evans (D-Santa Rosa), who chairs the budget committee. Although the projected deficit would be smaller than the last one, she said, "the cuts are going to be harder to make because we've already made such substantial cuts."  The current budget year accounts for $6.3 billion of the deficit, the nonpartisan analyst will project. Prisons spending will outstrip what has been budgeted by more than $1 billion, and K-12 schools were underpaid by $1 billion under the complex formula that governs education funding, the report will say.

Another $14.4 billion of the deficit is for the fiscal year that begins next summer, say those briefed on the report. The governor's next budget will have to account for both years.