California Insider

Gov. Arnold Schwarzenegger will probably face a new budget shortfall of about $5 billion later this year when he begins to put together his proposed spending plan for the 2005-06 fiscal year, the governor’s finance director, Donna Arduin, said in an interview today.

Arduin said she believes the budget Schwarzenegger signed a week ago effectively erased about $11 billion of the state’s $15 billion structural budget gap. That leaves about a $4 billion gap between the general fund’s ongoing revenues and its expenditures, she said, with another $1 billion or so of “inherited debt” coming due next year.

Arduin said that as of today, she projects general fund revenues of about $83 billion in 05-06, with expenditures, based on current law, rising to $88 billion. Some combination of cuts and revenues bridging that gap will have to be part of Schwarzenegger’s budget proposal next year to bring the two sides of the ledger back into balance.

“You have to keep working at it,” she said.

The state has $3.7 billion of borrowed money remaining from the $15 billion bond voters approved in March, and some or all of that cash could be used to help close the gap for one year.

Arduin’s estimate of the remaining structural shortfall appears to be significantly smaller than others have guessed it might be. As the budget was nearing final passage, several legislators said they thought this spending plan would leave a gap as large as $7 billion or $8 billion next year, growing to $10 billion the year after that if nothing was done in the meantime.

But even if Arduin is correct, the task ahead is difficult. Schwarzenegger has already placed off the table for next year K-12 education, higher education, and the judiciary, and has promised not to raid local government coffers again. That leaves him with few options other than deep cuts in health and welfare and prison programs.

The non-partisan legislative analyst will probably weigh in with a preliminary estimate of the remaining gap sometime in the next week or so.

Controller Steve Westly reports that July revenues were 13 percent ahead of the Department of Finance forecast, netting $400 million more for the treasury than projections made last May. Remember, though, that the controller and the department always seem to be on different pages when it comes to projecting and counting state revenues. For June, Westly reported revenues were up $700 million, while the Finance Department said receipts exceeded projections by about half that.

UPDATE: Westly's office now says it's discovered that sales tax projections it was comparing to actuals were artificially low because of an accounting issue, so the revenue numbers are not as rosy as first believed. The controller, though, adds this detail: all three major tax sources were significantly higher than the same month a year ago. Sales and use taxes were 9.5 percent higher; personal income taxes were 7.6 percent higher; and corporation taxes were 30.9 percent higher.

Today's Field Poll has Kerry maintaining his double-digit lead over Bush in California, 51% to 40%. That's about the same margin by which Gore beat Bush here four years ago.

The race continues to be all about Bush, with 58% of Kerry supporters saying they will vote for the Democrat not because they like him but because they can't stand the president. Seventy-nine percent of Bush voters, meanwhile, say they will vote for the incumbent because they like him, with just 17 percent saying they will vote for Bush because they don't like Kerry.

Among voters who support their candidate strongly, Kerry leads by just 34 percent to 33 percent. The leaners -- those who say they support their candidate "somewhat" -- break 17 to 7 for Kerry.

The whole poll report is here.

By traditional measures, Republicans have no business even playing in the Bay Area's 21st Assembly District. Democrats hold a commanding 45-31 registration edge. But the GOP candidate, Steve Poizner, a former tech executive who sold his start-up for $1 billion, is funding his own campaign while refusing contributions from unions, corporations PACs and political parties. The Democrat, Redwood City councilman Ira Ruskin, is running a traditional campaign with a lot of help from the unions. Keep your eye on this one. Here is the latest from the Mercury-News.