Hill Recommends Increased Revenue Be Used To Reduce Borrowing, Rather Than Restore Proposed Funding Reductions
State revenue likely will increase by about $2.4 billion in fiscal year 2005-2006 because of increased business growth and higher returns from the stock market, Legislative Analyst Elizabeth Hill said, adding that legislators should allocate the projected revenue increase to eliminate some of Gov. Arnold Schwarzenegger's (R) proposed borrowing, rather than restoring proposed cuts to state programs, the Los Angeles Times reports. Hill's recommendation "brought little solace" to some Democratic legislators who are opposing proposed cuts to health care and some other programs included in Schwarzenegger's state budget proposal, according to the Times (Halper, Los Angeles Times, 2/23).
According to a report by Hill released Tuesday, state revenue for FY 2005-2006 will exceed Schwarzenegger's projection by about $2.2 billion and expenditures will be about $250 million less than Schwarzenegger projected last month (Lawrence, AP/San Jose Mercury News, 2/23).
Hill said the Legislature should reduce the state budget by $4 billion to $5 billion to reduce the current budget deficit of $8.6 billion and help the state avoid future budget deficits. Without such cuts and with increased reliance on borrowing and other one-time budget measures, Hill predicts the state will face a shortfall of as much as $10 million in mid-2006 that will continue through 2009 (Los Angeles Times, 2/23).
According to Hill, if lawmakers adopt Schwarzenegger's proposed budget fully, the state would have a $2.9 billion reserve fund at the end of FY 2005-2006, compared with the $500 million surplus Schwarzenegger projected. The surplus could be used to reduce the projected $4 billion budget deficit in FY 2006-2007, but the state would still have to address a projected $4.5 billion budget deficit in FY 2007-2008 and $3.3 billion in 2008-2009, she said (AP/San Jose Mercury News, 2/23).
Hill said that the increased revenue "is an opportunity for the Legislature to use healthy revenues and make the ongoing solutions of the magnitude outlined in the budget in order to well position the state in terms of getting its fiscal house in order" (Gledhill, San Francisco Chronicle, 2/23).