Governor Schwarzenegger and his budget advisers today projected a $41.8 billion deficit between now and the end of June 2010. That's easily one of the state's biggest fiscal holes ever, and only seems to have raised the sense of gloom and doom inside the state Capitol.
All that aside, the new $41.8 billion estimate merits some examining... using data provided by the governor's budget team.
First off, the shortfall is actually projected at $39.8 billion; on top of that has been lumped a desired $2 billion reserve that gubernatorial budget director Mike Genest said today must be counted, given the need to have some kind of padding in light of the seemingly comatose economy. Probably so, but for now let's stick with the shortfall itself.
The budget signed into law in late September projected $103.4 billion in general fund expenditures and about $102 billion in general fund revenues; the difference was to be made up with money carried over from the 2007-08 fiscal year.
But as of this month, current year revenues are expected to total only $87.5 billion; that's a whopping $14.5 billion that's evaporated into thin air. For the budget year that begins next July 1, revenues are now expected to be $16.3 billion below earlier forecasts.
On the expenditure side, current year general fund spending was budgeted at $103.4 billion, but is now projected to be almost $104.6 billion. Reasons for that, say the governor's advisers, include firefighting costs and growth in client caseloads for social service programs.
But that's nothing compared to next year, where projected expenses are now estimated (absent any fixes) to be $111.2 billion. That's almost 7% more spending than this year... while revenues, if the estimates are accurate, will be almost 16% below this year's level.
And next year is the bigger problem, representing about $25 billion of the $39.8 billion problem.
There's more info about those missing revenues. Personal income taxes this year are expected to come in 16% under budget; corporation tax revenues, 22% under budget. All other sources of revenue are also off.
Schwarzenegger advisers say these are the numbers usually kept quiet until the governor's budget is released in early January. But this is a far from usual year, and it's clear that these kinds of numbers, a (for now) worst case scenario, are being publicized to try and spark some action by legislators.
The administration's bad news also comes with what they think is a lifeline: projections that the governor's special session budget plan, if enacted, would cut the $41.8 billion gap by more than half... to $19.3 billion.
But as of now, such action is a long shot... and there are an awful lot of folks around the Capitol holding their collective breath about what bad news might come next. Holiday cheer is in short supply.
That's the bleak news you can expect to hear more about today.
An administration official, speaking on background, says that Governor Schwarzenegger will tell legislative leaders today that the new deficit estimate through June 2010 is a whopping $40 billion.
That's up significantly from the last official estimate for the 18-month gap, which was $28 billion from Legislative Analyst Mac Taylor.
As we found out yesterday, almost $15 billion of the $40 billion shortfall is in these final six months of the current fiscal year. And for the first time, the estimates now include both missing revenues and higher-than-expected expenses.
While it still isn't as deep as the 2003 deficit, which at the time was pegged at about $38 billion (estimates varied, and still do), that gap was closed with a lot of one-time gimmicks that are no longer viable, either for policy or political reasons.
The bad news comes on the heels of Schwarzenegger's jabs at legislators in a news conference yesterday. One wonders how the juxtaposition of those two factors will affect the mood inside today's planned Big Five meeting.