Governor: Deficit $21 billion if measures fail

California's budget deficit will balloon to $21.3 billion this summer if voters reject key ballot measures in next week's special election, Gov. Arnold Schwarzenegger warned Monday in a letter to legislative leaders.

And even if voters approve the measures, the shortfall will be staggering: $15.4 billion, the governor said.

California and the rest of the nation are "facing the deepest recession since the Great Depression," and for the first time since 1938, the Golden State will see a decline in personal income, the governor wrote.

"In order to avert both a budget shortfall and a cash crisis, it is imperative that we begin work immediately to address these challenges," Schwarzenegger's letter stated.

Less than three months ago, Schwarzenegger and legislative leaders announced a compromise budget deal they said solved the enormous fiscal crisis the state was facing. The deal, reached Feb. 19 after marathon legislative sessions, would close a nearly $42 billion deficit through June 2010 with deep spending cuts and temporary tax increases.

That plan included the package of six ballot measures that on May 19 will ask voters to allow the state to borrow against future state lottery sales and dip into special funds, among other things.

Five of the six measures have been trailing in polls, and Schwarzenegger has warned in recent days that if the measures fail, the state will have to make devastating cuts that could undermine public safety, schools and local government.

On Monday, the governor's revelation made it apparent even with passage of the measures, cuts are inevitable.

"I don't know how we close a deficit that big," said Assembly Speaker Karen Bass, D-Baldwin Vista (Los Angeles County).
'Beyond triage'

Senate President Pro Tem Darrell Steinberg, D-Sacramento, who last week told reporters that the budget could be triaged if voters approved the measures, said Monday: "We're well beyond triage."

Senate Republican leader Dennis Hollingsworth, R-Murrieta (Riverside County), said he agrees with Schwarzenegger that the state's budget crisis "requires immediate action, and that means some pretty painful cuts are going to have to be done."

With California's economy continuing to deteriorate, most state finance officials began predicting another large deficit only weeks after the February budget deal was reached. The nonpartisan Legislative Analyst's Office in March forecast an $8 billion revenue shortfall for the upcoming fiscal year, which begins July 1.

"They clearly need to go back and come up with something else," said Dave Fratello, spokesman for the No on 1D and 1E campaign. "The hope, or fiction, that this was going to solve the California budget was over in a couple of weeks, and the story is just getting worse and worse."

Still, the governor is continuing to urge Californians to pass the six measures.

The propositions would limit spending, create a rainy-day fund and guarantee schools billions of dollars in future years. The measures would also allow California to borrow $5 billion against future state lottery sales and shift nearly $1 billion in taxes collected for children's and mental health services to pay for other programs.

The only measure that has been leading in polls is one that would freeze pay for lawmakers and top state officials such as the governor during tough budget years. Schwarzenegger doesn't take a state salary.

Also Monday, the governor said he will release on Thursday two versions of revised budget plans detailing how he would solve the state's deepening fiscal crisis - one that includes the passage of the ballot measures and another that takes into account the failure of the measures. The budget plans will be unveiled five days before the election and two weeks before the governor's earlier plans to release the revised budget.

The governor moved up the release date because he has the responsibility to share with Californians the severity of the state's fiscal crisis as soon as possible, said Matt David, a spokesman for Schwarzenegger.
'Scare tactics'

Opponents of the ballot measures, however, accused the governor of trying to scare voters into supporting the measures with a week before the election.

"I think the timing of this (letter) is one in a line of many scare tactics that the governor is using to put fear into voters," said Mike Roth, a spokesman for the "no" campaign.

When asked about the governor's argument that voters should know the consequences of their decision, Roth said: "I think the timing of the release speaks for itself."

Last week, Schwarzenegger informed fire officials that he plans to eliminate more than 1,700 firefighting positions and shutter scores of fire stations if the ballot measures are defeated.

The governor's other solutions include forcing cities and counties to lend $2 billion to the state from property tax collections, the early release of as many as 19,000 lower-risk offenders from state prisons and laying off more than 50,000 teachers.