November 26th, 2010, 11:54 am · posted by BRIAN JOSEPH, Sacramento Correspondent

Lawmakers and the governor enacted the current state budget on Oct. 8, exactly 100 days late (the latest state budget in recorded history). At the time, the budget was balanced, as required under law.

Thirty-three days later, on Nov. 10, the nonpartisan and well-respected Legislative Analyst’s Office announced that the current budget now has a deficit of $6.1 billion (which combined with next year’s projected deficit equals $25.4 billion over 18 months).

What the heck happened?

Well, according to the LAO’s analysis, assumptions made by the Legislature and governor last month were way too rosy.

Right off the top, legislators and Gov. Arnold Schwarzenegger passed the budget in October assuming that the state would receive about $4 billion in additional federal funding — even though no such thing had been approved at the time. Since then, the federal government approved a waiver on health programs that will save the state about $500 million a year. But so far, that’s it. The LAO predicts the rest of the $3.5 billion in additional savings won’t materialize. That alone blasts a big hole in the current budget.

But that’s not the only one. Looking at the numbers, the LAO predicts several state expenses are likely to come in higher than budgeted, including costs for prison health care, employee compensation, Medi-Cal and In-Home Supportive Services. In all, the LAO says these collected costs are at risk of coming in as much as $3 billion over budget while revenue projections are now down by $447 million.

Meanwhile, voters on Nov. 2 approved Proposition 22, which now prevents the state from borrowing or taking funds for transportation, redevelopment or local government. There’s some uncertainty about how this will affect the state’s finances in the short term, but the LAO believes it will prevent the state from enacting a piece of the current budget that calls for borrowing $400 million from the Highway Users Tax Account and using another $400 million of transportation funds to pay for debt service.

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