Oh, but everything's going so well! Everything on the up-and-up, right?

Governor orders more cuts to reduce deficit

Matthew Yi, Chronicle Sacramento Bureau

Wednesday, February 20, 2008

(02-20) 04:00 PST Sacramento --

Gov. Arnold Schwarzenegger signed an executive order Tuesday requiring state agencies to make additional spending cuts that total $100 million as part of an effort to help solve the state's fiscal crisis.

The move comes after the governor signed a series of bills Saturday to help put a dent in the looming $14.5 billion budget deficit that California stood to face July 1. The legislation was the result of a special session of the Legislature after the governor declared a fiscal emergency in January.

"There should be not one single day's rest," Schwarzenegger said Tuesday in urging lawmakers to immediately find additional spending cuts.

Schwarzenegger's latest savings, estimated to be worth about 1.5 percent for each state agency, are in addition to the earlier order by the governor to slash 10 percent across the board for all state departments.

The new savings are designed for "non-essential and non-mission-critical activities and shall not negatively impact public safety or public health activities," the executive order said.

But the cuts are to include hiring freezes; limiting discretionary travel for seminars, conferences or training; holding off on certain purchases; and canceling some government contracts.

Immediate cuts are necessary because, in many cases, they could take months to implement, Schwarzenegger said. In fact, the governor said, the Legislature shouldn't wait until May, when he is required by state law to offer a revised budget proposal, to come up with budget solutions.

"We don't have to wait," he said. "We know that every month, our revenues are coming in short by around $500 million to $600 million. Nothing has changed; that has been consistent."

But Assemblyman John Laird, D-Santa Cruz, who chairs the Assembly budget committee, said it doesn't make sense trying to write a spending plan for the next fiscal year before knowing what the tax receipts will be in April, which is typically a huge tax collection month.

"It's hard to imagine doing the budget and finding out what the revenue picture is later," he said. "You should know what the revenues are before you do the budget."

Legislators in each party agree that California's fiscal picture will probably get worse before getting better as the state wades through the current housing market meltdown and slowing economy.

Many lawmakers expect nonpartisan Legislative Analyst Elizabeth Hill to offer a larger estimated deficit today, when she releases a detailed report on the state's fiscal outlook and an assessment of the governor's budget proposal.

In January, Schwarzenegger unveiled a spending proposal with deep cuts that includes the early release of prisoners, closing some state parks and suspending constitutionally guaranteed funds for education.

In announcing his budget proposal, the governor also declared a fiscal emergency and called a special legislative session to start making immediate fixes.

The Legislature passed six bills Friday as part of a package of ideas to cut the $14.5 billion deficit in half. But the gap is being narrowed largely with additional borrowing, delaying previously planned early debt payment, withholding unspent education funds and delaying cost-of-living adjustments for some welfare recipients.

While the package did not include the controversial cuts proposed by the governor, those ideas will be hotly debated in the weeks and months to come as Schwarzenegger and the Legislature work out a $140 billion-plus spending plan for the next fiscal year, which begins July 1.