California likely will not receive enough federal stimulus money to avoid higher taxes and deeper spending cuts from the new budget deal, the Legislature's nonpartisan fiscal analyst said Tuesday.
Legislative Analyst Mac Taylor estimated that the state will fall $2 billion short of the stimulus money needed to activate a controversial "trigger" in the budget signed last month.
Taylor's analysis, part of a 48-page report on the stimulus package, agreed with a prediction last week by Gov. Arnold Schwarzenegger's Department of Finance that California will fall short of the threshold.
"This is really something that is out of our hands," Taylor told the Assembly Budget Committee.
But Taylor said the issue is complicated by discretion in classifying funds. The California Budget Project, which advocates for the working poor, released a study Monday that said it had calculated California would receive enough money to avoid higher taxes and deeper cuts.
"The language leaves some room for interpretation," Taylor said.
Treasurer Bill Lockyer and state Finance Director Mike Genest are required to determine by April 1 whether sufficient federal funds will be received.
Higher taxes and deeper program cuts will occur automatically unless Lockyer and Genest conclude that California will receive $10 billion in federal funds for defraying its general fund costs by July 1, 2010.
The state expects more than $31 billion in stimulus funds over three years, but not all of it can be used to offset general fund costs.
Taxpayers have $1.8 billion riding on the decision by Lockyer and Genest – the amount expected to be raised by the scheduled increase of 0.125 percent on every income tax bracket in 2009.
Failure to activate the trigger also would impose $948 million in further spending cuts, mostly to health and social services.
Medi-Cal patients would see elimination of various health benefits, such as podiatry and adult dental services, beginning July 1. Higher education would be cut $100 million. Monthly grants for welfare families would be sliced 4 percent, and grants to low-income disabled and elderly residents would be reduced by 2.3 percent.
Schwarzenegger declined to predict Tuesday whether the threshold will be reached. "We don't know," he said. "There's mass confusion, still, at this stage."
Lockyer has hired a consultant and "we'll be crunching our own numbers and coming to our own conclusion" about the $10 billion, spokesman Tom Dresslar said. The Legislature charged Lockyer with resolving an issue pivotal to millions of Californians but "gave us virtually no guidance on how to carry it out," Dresslar said.
Call Jim Sanders, Bee Capitol Bureau, (916) 326-5538.
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