LOS ANGELES - California's legislative analyst has estimated that the state could face a cumulative budget shortfall of $7.5 billion by the end of fiscal 1994, which paints a grimmer picture than previous forecasts.

The report by Legislative Analyst Elizabeth Hill, which assumes no corrective action, highlights the challenge facing state leaders when they begin crafting a new budget in coming months for fiscal 1994, which begins July 1.

The Commission on State Finance already cautioned in its quarterly forecast last month that California likely faces a cumulative funding shortfall of $4.1 billion through June 30, 1994.

The discrepancies in the forecasts hinge on various budget assumptions and newer information, such as the decision by voters this month to exempt snack foods and certain other items from the sales and use tax.

In general, however, the forecasts highlight similar concerns on the economy.

"Slow or stagnant economic growth will have by far the greatest impact on the budget this year and in 1993-94," says the report by the nonpartisan legislative analyst, which was released Thursday. "We estimate that continued stagnation of the state's economy could result in revenue shortfalls of $2 billion in 1992-93 and $3 billion in 1993-94, relative to the May revision revenue estimates of the Department of Finance."

The legislative analyst also noted other budget adjustments for specific cost increases and revenue losses that total $759 million in the current fiscal year and $784 million in fiscal 1994, or about $1.5 billion over both years.

"These adjustments reflect actions or decisions that already have occurred, such as enactment of legislation, election results, or deficiency notifications," the legislative analyst stressed. Examples of these adjustments include additional inmate population growth in the corrections system and likely increased dental costs in the MediCal program, the state's low-income health-care plan.

The largest adjustment is the revenue loss from this month's voter approval of Proposition 163, the sales tax exemption for snack foods and other items.

Approval of that exemption will reduce state revenues by $2 10 million this year and by $330 million in fiscal 1994, the legislative analyst said.

In addition, other risks to the budget "are less certain but still pose a threat of $1.8 billion to the state's bottom line," the analyst said.

These risks - related to actions taken on the state's fiscal 1992 budget - could make the projected gap worse if any of them materialize, the analyst noted. Many of those risks entail shortfalls in anticipated funding or expected budget savings.

The legislative analyst's report also summarizes the fiscal effect of California's 1992 Budget Act.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.