LOS ANGELES -- California Gov. Pete Wilson's two-year spending plan to achieve a balanced state budget by June 1995 is in danger of derailment, the state Legislative Analyst's Office reported this week.

Budget adjustments that have already occured will increase spending over the next two years by $660 million, thereby throwing the plan out of balance, the nonpartisan analyst's office said in a 69-page report.

The $660 million spending increase "results in a 1994-95 ending deficit of $560 million in the general fund, absent corrective action, rather than the $100 million reserve that was projected by the administration when the budget was adopted," the report says.

The adjustments also will increase the current yearned planned deficit to $828 million from $540 million, the report says.

H.D. Palmer, assistant director in the state Department of Finance, said the legislative analyst's report "assumes you don't adjust your budget, and that doesn't deal with reality. Of course we will adjust the budget."

Palmer and the analyst's office agreed that recent federal actions were to blame for most of the budget problems.

"Washington dropped the ball on immigration funding," Palmer said, noting that Congress did not include $240 million in the federal budget that President Bill Clinton had proposed for medical care for undocumented immigrants. The funding would have offset state costs of the federal Medicaid program in California, the report says.

However, "The feds came through for the counties by increasing disproportionate-share payments for Medi-Cal payments to hospitals," said Dan Rabovsky, a principal analyst in the Legislative Analyst's Office. The funds will help counties deal with a $2 billion shift in property taxes to schools mandated by the state budget, he said.

The legislative analyst's report also says the number of prison inmates "has been running slightly ahead of budget estimates, which will add about $25 million to corrections spending."

Further, the report identifies a $40 million shortfall triggered when the Department of Finance announced it would only reduce general fund expenditures by $10 million instead of the budgeted $50 million.

Palmer said the finance department disagrees with that analysis because the state achieved offsetting revenues from the state Employment Development Department and the controller's office.

The fiscal 1994 general fund budget of $38.5 billion is down $2.6 billion, or 6.3%, from fiscal 1993, which ended June 30. The budget reduces state spending for the second consecutive year partly at the expense of local governments.

In return, cities, counties, special districts, and redevelopment agencies will lose $2.6 billion in property tax revenues to schools, saving the state an identical amount it otherwise would be obligated to pay the schools from its treasury. Several lawsuits opposing the shift are pending in court.

The budget allows local governments to recover part of the property tax loss by receiving revenue from a six-month extension of a half-cent sales tax that was set to expire June 30. On Nov. 2. voters in a statewide special election will be asked to make the tax permanent and dedicate the money to local law enforcement. The measure would raise $1.4 billion annually.

Wilson signed the fiscal 1994 budget act into law on June 30, marking the first time since 1986 that the state has had a new spending plan in effect when the fiscal year began. The Republican governor and the Democrat-controlled Legislature agreed to spread repayment of a $2.8 billion deficit over two years.

State officials view the current-year budget in the broader context of a two-year spending plan, although the budget conforms with California's usual yearly accounting approach.

The legislative analyst office's report, the first in-depth look at the two-year spending plan, is notable because another impartial observer of Sacramento's fiscal operations is preparing to close shop because of budget cutbacks.

Wilson in June cut $532,000 from the budget for the Commission on State Finance forcing the 12-year-old organization founded by former state Treasurer Jesse Unruh to phase itself out.

The commission's chairperson, Treasurer Kathleen Brown, said Wilson acted for political reasons.

Brown suggested that Wilson wanted to silence a commission that in the past had questioned the findings of his finance department. But observers also questioned the motives for Brown's criticism because she is preparing to seek the Democratic nomination for governor.

Pointing to a broader funding cutback for numerous commissions and panels, the finance department said at the time that the state could no longer afford the finance commission.

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