Wyatt Buchanan, Chronicle Sacramento Bureau
San Francisco Chronicle
Saturday, November 13, 2010

(11-13) 04:00 PST Sacramento – —

Gov. Arnold Schwarzenegger said Friday that the $6 billion hole in the budget he signed just over a month ago was unforeseen, and he blamed the deficit on the Legislature and voters, who passed a ballot measure last week that zaps revenue the state expected to collect.

But while Schwarzenegger may not have seen trouble coming, others at the Capitol did.

The largest portion of that $6 billion hole can be attributed to the Schwarzenegger administration, said State Senate President Pro Tem Darrell Steinberg, D-Sacramento, who was a key player in the budget negotiations. Steinberg said that as Democrats fought to save public services from being trimmed, the administration estimated billions in revenue from the federal government that had never been promised.

“They ran out of solutions,” Steinberg said Friday afternoon. “We were not going to eliminate the best assistance to work program in the country. We were not going to eliminate child care. We were not going to disinvest in education more than we already did. It was a plug-in” number.
Governor defensive

At a news conference at a Sacramento auto show Friday, the governor refuted assertions by reporters that the gap was evident when he signed the spending plan on Oct. 8. The governor said the Nov. 2 voter approval of Proposition 22, which bans the state from tapping into local funds, and Republicans winning control of the House of Representatives changed the outlook on the budget.

“I think we should deal with all of those changes rather than thinking we knew all of those things,” said Schwarzenegger, who said such notions were “absolutely incorrect.”

The outgoing governor said this week he would call a special session of the Legislature on Dec. 6, when new lawmakers are sworn in, to deal with the shortfall, which is part of a $25.4 billion deficit projected through June 2012.

Schwarzenegger said repeatedly that the federal aid, which the Legislative Analyst’s Office said was unrealistic to the tune of $3.5 billion, are dollars the state is “owed.” However, officials at the Department of Finance said they could only calculate about $1.8 billion in specific dollars they believe the federal government owes California for welfare and prison allocations.

The other money the administration believes is owed would be for health and human services and special education, but there are no specific amounts attached to those, said H.D. Palmer, spokesman for the Department of Finance.

“The final number was a decision that was reached in the final budget negotiation,” Palmer said.

Officials at the Legislative Analyst’s Office said the election of Republicans in Congress was not the reason they doubted the billions of dollars of aid from Washington.

“I’m not sure that it would have changed the final way we decided to put the federal funds assumption together,” said Michael Cohen, deputy legislative analyst. “I think well before the election the hopes of another state-based stimulus package were pretty dim.”

Additionally, Cohen said, large portions of the rest of the $6 billion shortfall had been flagged as unrealistic by the Legislative Analyst’s Office during hearings and other budget meetings. For example, the budget included an $820 million cut to prisons for health care for inmates.

The analyst believes the state will actually be able to cut only $40 million, which was repeatedly told to officials, Cohen said.

And while the governor points to Prop. 22, the measure that bars the state from taking local transportation and redevelopment funds to balance the budget, as a game-changer for budget projections, its passage accounts for only a portion of the problem. The legislative analyst has pegged its cost to the budget at $800 million.
How to close gap

The prospects for real action in the special session could hinge on just what Schwarzenegger proposes to do to fill the gap. On Friday, the governor said that he originally proposed more than $12 billion in spending cuts, but the final budget plan approved last month had just over $8 billion.

“The Legislature is going to get another shot at that,” he said.

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