[BATN] Analysts question Schwarzenegger budget plan Date: 10 Jan 2006 03:10:55 -0800 Published Monday, January 9, 2006, in the San Jose Mercury News Analysts question state budget plan By Aaron C. Davis Even as Gov. Arnold Schwarzenegger promised to unveil a state budget Tuesday with no new taxes, he committed last week to spending billions of dollars more on education than analysts believe the state can afford. The discrepancy has prompted analysts to begin speculating if California's tax revenues may be growing even faster this year than Schwarzenegger has let on. And it has also raised fears that cuts to social services may be needed to keep the state's checkbook in balance. "We're certainly worried about many of the human services programs, from MediCal to children's health care," said Jean Ross, executive director of the California Budget Project, which advocates for low-to-middle-income families. "Unless the governor's revenue forecast is very aggressive, I assume there will be spending reductions." The governor, however, has sprinkled nothing but a trail of good news to the door of Tuesday's budget release, giving the impression that anything's possible. First came Schwarzenegger's plan to boost education funding by $4.3 billion. Then his State of the State address made clear he would propose a year of robust transportation spending. He also gave a nod to fiscal conservatives, vowing to pay down the state's debt ahead of schedule. Yet, all of those promises have come just two months after the state's non-partisan legislative analyst calculated that with no new spending and the rosiest state budget picture in years, California would have just $1.2 billion in the bank at the end of fiscal year 2006-07 -- not nearly enough to cover the governor's proposed spending increases. "Frankly, until we see the whole thing, I'm not sure how they're funding some of the things they've said in press releases," said Legislative Analyst Elizabeth G. Hill. "The governor said he will restore additional education monies -- just that alone wipes out the reserve we were showing in November." And there could be more costs, Hill said, noting that the governor may feel pressure to set aside nearly $1.5 billion for a voter-approved rainy-day reserve fund and to remedy a court decision on funding state employees' pensions. The state also still faces a structural deficit of $4 billion dollars in 2006-07, with revenues forecast to climb to $91.1 billion and expenditures at $95.1 billion. Hill has estimated, though, that the state should have enough money to cover the gap because of an increase in personal income tax, as well as increases in corporate tax and sales and use taxes. Rob Stutzman, the governor's communications director, cautioned skeptics on Friday to wait and see what's in the budget. He reiterated the governor's pledge to also cut college tuition costs. "The budget he will present Tuesday will be a balanced budget with no taxes that's able to refund UC and CSU fee increases to California students and their families and pay back existing debt early." Some Democrats and advocates for poor and disabled, however, say there's little chance Schwarzenegger would be able to make up for under-funding a variety of social services since taking office -- despite his apparent newfound support for a host of Democratic-backed funding initiatives in his third State of the State address. The $117.3 billion 2005-06 budget Schwarzenegger signed in July froze cost-of-living increases for the disabled and welfare recipients in order to add money to education and highway projects, as well as pay back $1.2 billion owed to local governments. Administration sources say the governor's 2006-07 budget will likely include a modest expansion to children's health care -- raising from 250 percent to 300 percent of the poverty level the threshold for families to qualify for state-provided health care. "There will probably be talk of more money for disabled and children's health care," said Jaime Regalado of the Pat Brown Institute for Public Affairs, "but there will not be much money left to work with, given the governor's other priorities." Still, with state revenues up $1.9 billion in the first five months of the fiscal year due to a sharp increase in business and personal income tax, this budget season could be much more of a discussion about what funding to restore, rather than what programs to cut. "It will be hard for the Democrats to argue with him on these even though they won't want to give him any victories on the social side of things going into November," Regalado said. "It's not going to be an easy ride, but it certainly shouldn't be like last year's budget." It may be hard, however, to untangle this year's budget from broader debates over the governor's long-term plan for more than $200 billion in infrastructure projects that he hopes to launch with the help of $25.2 billion in bonds on the ballot in June. But the bonds wouldn't affect next year's general fund. If approved, the first bills for those projects wouldn't come due until 2008. Contact Aaron C. Davis at acdavis@mercurynews.com or (916) 325-4315. Email article texts/URLs for posting to . Manage your subscription by sending a blank email message to: BATN-subscribe@yahoogroups.com to subscribe, BATN-unsubscribe@yahoogroups.com to unsubscribe, BATN-digest@yahoogroups.com to switch email to digest mode, BATN-normal@yahoogroups.com to switch email to normal mode, BATN-nomail@yahoogroups.com to switch email delivery off. See http://groups.yahoo.com/group/BATN for web access & archives.