U.S. News: In California, Another Deficit Looms
California's fiscal woes aren't over yet. Only months after state lawmakers in February had to raise taxes and slash spending to close a $42 billion budget deficit, legislators in May will begin work on filling a new multibillion-dollar shortfall.</br></br>A state agency projects an additional $8 billion budget gap for the fiscal year that ends in July 2010, a result of declining tax revenue amid the recession. The figure could grow if revenue plummets further.</br></br>And it could get worse yet if voters defeat a series of ballot measures on May 19 aimed at closing the earlier deficit. That is a possibility, as a March 25 poll by the nonpartisan Public Policy Institute of California shows 50% of Californians against Proposition 1C, which would allow the state to borrow $5 billion against future lottery revenue, versus 37% who support it.</br></br>The proposition's backers, who include Republican Gov. Arnold Schwarzenegger and legislative leaders, said they expect increased support for the measures as they begin campaigning. "As they step back and we get information to them, they'll say, 'You know what, this makes sense,'" said Republican Mike Villines, the Assembly's minority leader.</br></br>About $2 billion of the new deficit can be wiped out by using cash reserves that were built into the plan approved in February. Legislators are waiting until May 28, when the governor is scheduled to release his revised budget, to get into specifics on how they will close the rest of the gap.