Gov. Arnold Schwarzenegger's Department of Finance estimated Wednesday that California will not receive enough federal stimulus money to avoid higher personal income taxes and deeper cuts in social services.

Officials said California will fall $2 billion short of the $10 billion threshold the state must receive to eliminate $1.8 billion in additional income tax increases and $948 million in further spending cuts negotiated as part of the budget deal Schwarzenegger signed Feb. 20.

Under a quirk of the budget deal, lawmakers and the governor made $2.7 billion in tax increases and spending cuts contingent on how much money comes in from Washington. The budget agreement holds state Treasurer Bill Lockyer, a Democrat, and state Finance Director Mike Genest, a Republican, responsible for determining by April 1 whether the state will receive $10 billion through the next fiscal year. It's not clear what happens if the two men can't agree.

The Finance Department's calculation already faces scrutiny from advocates for low- income residents, who say the additional social service cuts will dramatically hurt millions of struggling Californians.

"Some of the cuts that would occur are deeply troubling," said Jean Ross, executive director of the California Budget Project, which advocates for the working poor. "It would reduce the state share of pay for in-home supportive service workers. And I think there's a long record of evidence regarding the need for optional (Medi-Cal) benefits. Particularly adult dental care, because dental health is integrally linked to physical health."

Of the $8 billion figure, Finance Department spokesman H.D. Palmer said, "That's our current estimate. In the coming days, we're going to be working with the Treasurer's Office to refine that estimate." He said the department conducted an internal review with assistance from Schwarzenegger administration officials in Washington and state agencies.

If Lockyer and Genest decide that California will not reach the federal trigger, taxpayers will pay an additional 0.125 percent on every income tax bracket in 2009, equal to $1.8 billion in higher taxes.

Failure to hit the $10 billion mark also would eliminate various health benefits for Medi-Cal patients starting July 1, such as adult dental services and podiatry. It would cut $100 million for higher education. And it would reduce monthly SSI/SSP grants for low-income disabled and elderly residents by 2.3 percent and monthly grants for welfare families by 4 percent.

Lockyer has not yet made a judgment on the Finance Department analysis, said his spokesman, Tom Dresslar. On Wednesday, he launched a Web site to coordinate information related to the federal stimulus plan and make a determination of his own.

"I'm sure that those numbers will be updated as we go along toward our March 17 (public) hearing and toward April 1," Dresslar said. "That's not the final analysis."

If the state receives less than $10 billion in federal money, the bulk of funds would go toward expenditures already in the state budget, avoiding the need for a $5.9 billion short-term loan. Any remaining amount would go into the state's reserve or pay for unanticipated budget costs.

At the very least, the Department of Finance believes the state will receive enough to avoid the $5.9 billion loan, Palmer said.

Taxpayers already face increases in the state sales tax, income tax and vehicle license fee as part of the February budget agreement. The 2009 income tax hike would go from 0.125 percent to 0.25 percent if Lockyer and Genest determine the state will not receive enough federal money.

"These things never seem to break in the direction of taxpayers," said Jon Coupal, president of the Howard Jarvis Taxpayers Association. "We'll monitor it. We don't want anybody to fudge the numbers one way or the other. They've got to go by the law, and this should not be driven by politics."

Advocates fighting the additional cuts said they plan to conduct their own analyses of federal aid and make their case at the March 17 hearing. The budget language was vague, they contend.

"I think our initial assessment is that they're potentially not being creative enough looking at ways to use federal dollars," Ross said. "Particularly, some of the money that can be spent on higher education, for example, that can be used to help meet the trigger."

While California will receive $29.7 billion in federal stimulus aid, only $8 billion of it can be used to pay for general fund expenditures, according to the Department of Finance. For instance, $2.1 billion for unemployment compensation would go to the state's Unemployment Insurance program, which is administered apart from the state's general fund budget.

Nonpartisan Legislative Analyst Mac Taylor is planning to release his own review next week, though he said it is unlikely to contain a finding on how much the state stands to receive from Washington.

He said the budget language regarding the trigger "leaves some room for interpretation. I know some people are really concerned if (the federal stimulus) would trigger or not, but we haven't come to any conclusions."

Call Kevin Yamamura, Bee Capitol Bureau, (916) 326-5548.