California's projected budget deficit has grown as large as $21.3 billion through next June due to a sharp economic decline, Gov. Arnold Schwarzenegger disclosed Monday in a letter to the Legislature.

The latest projection means lawmakers will consider deep spending cuts in education, corrections and welfare, as well as borrowing and new fees, to bridge the gap.

The announcement comes less than three months after the Legislature and Gov. Arnold Schwarzenegger closed $34 billion of a then-$40 billion state budget deficit with tax hikes and spending cuts and asked voters to eliminate the rest in next week's special election.

"Since that time, the severe economic downturn that California, like the rest of the nation, has been facing has worsened substantially," Schwarzenegger wrote. "These changes in the state's economic and revenue pictures have caused a significant new budget problem to emerge."

The Republican governor's Department of Finance has projected a budget gap of $15.4 billion if the May 19 special election ballot measures pass and $21.3 billion if they fail. The state would gain nearly $6 billion in solutions if Propositions 1C, 1D and 1E pass, including $5 billion in 1C's borrowing against the California Lottery.

"The numbers are clearly within the ballpark that we were considering," said Legislative Analyst Mac Taylor, who will provide his own review in the coming weeks. "What they've added in are some expenditure increases and a worsening economic and revenue picture since March when we had our last estimate. It's not surprising to us."

Schwarzenegger announced Monday he will present two versions of his revised May budget Thursday, one that brings the $15.4 billion deficit into balance and another that solves the $21.3 billion problem.

The governor did not disclose his proposed solutions Monday. But he warned groups last week that he will consider borrowing $2 billion from cities and counties, releasing low-level offenders in state prisons and reducing school funding by $3.6 billion. The state also could eliminate its planned $2 billion reserve.

California faces limitations in how much it can cut without jeopardizing federal stimulus funding. For instance, the state cannot cut too much in higher education, K-14 schools or Medi-Cal eligibility without running afoul of federal stimulus guidelines.

The governor originally planned to release only one plan at the end of May before deciding instead to release a dual option five days before the election. He emphasized that if the three ballot measures fail, state leaders will have to approve deeper spending cuts across the board.

"The $6 billion worth of the solutions will now go before the voters, a critical piece to the state's budget puzzle," Schwarzenegger said at the Culver City Senior Center. "Whether they pass or fail, I think we have the responsibility to plan for either of the scenarios."

Polls show that Proposition 1C, which would expand California Lottery payouts and allow the state to borrow at least $5 billion against the game's future revenues, is trailing by more than 20 percentage points.

Campaign opponents immediately attacked Schwarzenegger for trying to threaten voters with a list of harsh cuts so they vote for the ballot measures next week. Only Propositions 1C, 1D and 1E would help bridge the current budget gap, but Schwarzenegger and other proponents have grouped all six ballot measures together as one budget solution.

"I think the timing of this release is another in a line of tactics to scare voters into voting for these failing measures," said Mike Roth, spokesman for the labor-backed No on 1A campaign.