Governor's Budget Heads In "Wrong Direction"

January 12, 2006 · Filed Under Uncategorized · Comments Off 

That's the initial assessment of Legislative Analyst Elizabeth Hill, in a report just released this morning. In many ways, the non-partisan analyst's assessment mirrors the concerns of partisan critics of Governor Arnold Schwarzenegger's 2006-2007 budget-- concerns based mainly on the high level of spending he has proposed.

[Hill's report can be found here]

Hill and her staff of budget experts pretty much say it all on the very first page of the report: "The overall plan moves the state in the wrong direction in terms of reaching its longer-term goal of getting its fiscal house in order."

On the positive side, the LAO report agrees with the governor's advisers on estimates for the level of state revenues in the near future, calling the administration's projections "justified" in light of recent economic trends.

But that's about the end of the good news. The LAO says the governor's budget not only fails to address the long-term imbalance between revenues and expenditures, but it makes the problem even worse by increasing year-after-year spending levels by about $2 billion.

And something not talked about so far this week: the LAO says the governor may end up with $1 billion less to spend than he thinks. Hill's report attributes this to what she calls "unfunded costs and risks" including $460 million the governor hopes to save by winning a court battle involving the welfare-to-work program CalWORKs; more money that may have to be paid to local governments to compensate for policy mandates handed down by the state; and the likely higher cost of state employee contracts that will soon have to be renegotiated.

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