If Props Fail, $21.3 Billion Deficit

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Late word this evening that will get everyone's attention: Governor Arnold Schwarzenegger has informed legislative leaders that if three of the six budget-related ballot measures fail next Tuesday, the state faces a $21.3 billion deficit between now and next July.

In a letter to the four legislators this afternoon, Schwarzenegger actually offered two new assessments from his budget team of what lies in store for California: a $15.4 billion shortfall if Propositions 1C, 1D, and 1E pass, and the aforementioned $21.3 billion if they fail.

This comes after Schwarzenegger told reporters in Culver City today that he intends to release a full revised state budget on Thursday -- about two weeks earlier than was expected, but about the normal time that revised budgets are submitted to the Legislature.

Actually, he said he'd offer up two revised budgets... one if Props 1C-1E pass, and one if they fail.

The biggest mystery about those documents was going to be the latest deficit projections, which this late news pretty much answers. As for actions he will propose should the ballot measures (as expected) take a nosedive, those have trickled out in various news outlets over the last few days.

Taking a closer look at the $15.4 billion deficit projection, aides to Schwarzenegger say that a full $7.4 billion of that is in the fiscal year that ends just 50 days from now; the remaining $8 billion is in the 2009-2010 fiscal year.

That $8 billion in the '09-'10 year matches up with March's projection by Legislative Analyst Mac Taylor. And given that Controller John Chiang announced last Friday a $2.1 billion shortfall in anticipated revenues for the current year... that leaves about $5 billion in what budget watchers might call "new" deficit in this announcement.

Remember that the February budget deal... painful, complicated, and full of protracted negotiations... produced about $14.8 billion in spending cuts and $12.5 billion in tax increases. Put another way: if you take the word of those who say there won't be any more tax increases, no matter what, then even the best case scenario -- a $15.4 billion gap -- would have to be closed with even more cuts than were agreed to this winter.

There's little doubt that those opposed to the May 19 ballot measures will see this news as just another tactic of Schwarzenegger to try and drag some of those propositions across the goal line with voters.

Regardless, they paint a bleak picture for the weeks and months to come... and will no doubt spark a spirited debate about both what to do, and whether these circumstances are truly worse than any in modern times.

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About John Myers

John Myers is Sacramento Bureau Chief for KQED Public Radio and "The California Report," heard daily on 23 public radio stations across the Golden State.

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