LOS ANGELES -- California's cumulative budget shortfall for this fiscal year and the next could range from $4.9 billion to $8 billion, depending on the recession's lenth, the Commission on State Finance said in a forecast released yesterday.
But the bottom line is that earlier budget projections are out the window because recovery is taking longer than expected to materialize, the commission said in its "1991 Annual Long-Term General Fund Forecast."
This year's budget assumed the economy would revive in mid-1991. The commission said that did not happen and that any upturn in the state will be stalled at least until mid-1992, and possibly until 1993.
State officials already anticipate a $3 billion deficit for the current fiscal year, which ends June 30.
"The delayed recovery has thrown the five-year budget plan developed this summer out of balance, producing annual budget deficits in each fiscal year through 1995-96," the report says.
If the state recovers in mid-1992, the commission estimated a cumulative budget gap of $4.9 billion for the current fiscal year and fiscal 1993. The gap could grow to about $8 billion if the recovery is delayed until 1993.
"California faces extraordinary fiscal difficulties resulting from the most severe and prolonged economic downturn in the state's post-war history," the report says. "The recession has come at a time when demographic factors are leading to large increases in the demand for public services."
The report says that if legislators delay addressing the projected shortfall, the risks will only grow. It calls for a mix of short-term and long-term solutions, and advises the Legislature to set budget priorities before implementing spending cuts.
California's worsening economic situation prompted gov. Pete Wilson on Monday to unveil a constitutional amendment designed to reduce welfare benefits by nearly 25%. If approved by California voters, the amendment would also allow the governor to declare a "fiscal emergency" and slash the budgets of state programs without legislative approval.
The amendment, intended for the November 1992 general election ballot, is expected to spark political battles next year as Democrats and Republicans spar for legislative and other posts.
In addition to welfare cuts, the amendment would force legislators to produce a balanced budget by June 15 or face a loss in pay. The California Constitution currently requires a budget by that date, but in recent years the Legislature often missed the deadline. If a budget is not passed and signed by July 1, the measure would allow the governor to declare a fiscal emergency and slash budget items without legislative approval.
Gov. Wilson's proposal created an instant stir this week, with welfare recipients and advocacy groups predicting an increase in homelessness and poverty. Some accused the governor of trying to balance the budget on the backs of the poor.
Senate President Pro Tem, David Roberti, D-Los Angeles, criticized the new budget powers sought by the governor, saying it would make Gov. Wilson, "the dictator of California."
At least one rating official said it was much too early to predict how the proposal -- if placed before voters and approved next November -- could affect the state.
"There's a long road here," said Steven Zimmermann, senior vice president of Standard & Poor's Corp. in San Francisco. "It's a very long time before this proposal could be adopted.