Rescue California

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Controller reveals another budget headache
More state spending could increase deficit

May 03, 2003

Controller Steve Westly announced Friday that the state had received about what was predicted in income tax revenue last month, but increased spending could add more to the budget deficit.

California collected $8.2 billion in taxes in April, only 0.9 percent off what Gov. Gray Davis had projected in his budget plan.

But the state's expenses are $2.6 billion more than projected, according to Westly, and year-to-date revenues are down by a total of $361 million.

The extra expenses are due to a growing number of Californians applying for Medi-Cal health insurance during the poor economy, and because the Legislature did not enact all of the budget cuts for the current year that the governor had proposed.

Later this month, Davis plans to release his revised budget proposal, and his top finance adviser said this week that the deficit will be several billion dollars worse than the originally estimated shortfall of $34.6 billion.

Westly said he plans to borrow $11 billion this spring to enable the state to pay its bills.

Adding to the state's cash-flow problems is a delay in the sale of tobacco settlement bonds that would have gone to California's general fund.

On Monday, Davis plans to sign a $3.6 billion package of budget savings that includes cuts to health and education and a plan to issue bonds to cover the annual payment to pension fund accounts for retired state workers.