Economists Warn State’s Top Revenue Source Declining

The cost of health insurance benefits to retired government workers and other state-funded programs could affect the governor's plans to expand health care coverage to uninsured residents, the Los Angeles Times reports. For fiscal year 2007, Gov. Arnold Schwarzenegger (R) and the Legislature will face an estimated $5 billion budget deficit.

According to state records, income tax payments from two Silicon Valley counties accounted for a third of the state's revenue. Some economists say that the state should not rely heavily on that type of revenue because it is highly variable.

Ted Gibson, a former state economist, said that the revenue flow is inconsistent and that eventually it "will either diminish or completely dry up."

Christopher Thornberg, a Los Angeles economist, said that the governor "in a year is going to wonder why he wanted to be re-elected ... Sacramento is not going to have the cash to pay for things it wants."

Elizabeth Hill, the nonpartisan budget analyst for the Legislature, on Wednesday will present her fiscal report on the state (Halper, Los Angeles Times, 11/15).