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State budget picture rosier

first_imgSACRAMENTO – California lawmakers won’t have to worry about a multibillion budget deficit next year, for the first time in four years, thanks to an unexpected jump in tax income and ongoing spending cuts, according to a report released Wednesday. But Legislative Analyst Elizabeth Hill tempered the good news with a warning that the state has not solved its long-term spending problems, and she warned that big deficits will return in 2007-2008 unless additional steps are taken. “The state has to keep its foot on the gas pedal of getting its fiscal house in order,” Hill said at a news conference at her office near the Capitol. “We are not out of the woods yet, and those operating shortfalls are very important.” The report from the nonpartisan legislative analyst stands in sharp contrast to a prediction from her office in July that the 2005-2006 fiscal year will generate a shortfall of at least $6 billion. AD Quality Auto 360p 720p 1080p Top articles1/5READ MOREWalnut’s Malik Khouzam voted Southern California Boys Athlete of the Week Now, the outlook has been drastically changed by a combination of factors. First, an improving economy will produce billions more in personal and corporate tax income through the end of this fiscal year and next fiscal year. Second, spending cuts imposed in the current budget are also reducing the problem. Hill said that the state will have $5.2 billion more than expected at the end of next fiscal year, which will more than cover a projected shortfall, revised downward to $4 billion, and leave a reserve of $1.2 billion. The improved outlook also put a twist on arguments made by Gov. Arnold Schwarzenegger during this month’s special election in support of Proposition 76 – a measure that would have given the governor new authority for cutting spending without legislative approval. Schwarzenegger told voters that the state was in a crisis and taxes might have to be raised if the initiative wasn’t passed. Voters did not seem to accept his argument and overwhelmingly turned down the proposal. A spokesman for Schwarzenegger’s Department of Finance said decisions about the governor’s budget proposal for next year are still in the works – but the report from the legislative analyst was clearly good news. “When the governor took office, he said he was going to put the state on a multiyear workout program, just like a company facing bankruptcy,” said H.D. Palmer, Finance Department spokesman. “The report, we believe, indicates that the governor’s work plan is paying dividends.” Hill said that she expects the California economy to soften somewhat in the 2005-2006 fiscal year because of higher interest rates and higher energy costs. But the economy will begin growing again at a modest rate in 2006-2007, she believes. She noted that business activity last year and this year accounts for a big share of the windfall of tax money. She warned lawmakers to be careful not to assume that improved conditions will continue again next year. On the spending side, a big part of the saving came from a controversial decision by Schwarzenegger not to give schools an additional $2 billion they wanted – money that would have exceeded the voter-approved funding guarantee for education. Some critics said lawmakers should not forget those costs to schools. “California still owes a large debt to California students,” state Superintendent of Public Instruction Jack O’Connell said in a printed statement. He estimated that the bill owed to schools now stands at $3 billion. 160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set!last_img read more