Top Republican lawmakers on Tuesday called on Gov. Arnold Schwarzenegger to declare a "fiscal crisis" to deal with California's looming budget problem, but administration officials said such a move would be premature.
Sen. Bob Dutton, a Republican from Rancho Cucamonga who refused to vote for the current budget because it spent too much, said the governor should use a special authority voters assigned him during the last budget crisis to tackle a budget deficit forecast to be nearly $10 billion.
Under Proposition 58 passed in 2004, the governor could declare a fiscal emergency if he determines revenue is "substantially below" what was anticipated in the budget and summon the Legislature into special session.
"If we don't do something now ... to deal with this crisis, we could find ourselves right back where we were five years ago," Dutton said following a Senate budget committee hearing in the Capitol on Tuesday.
The administration's Department of Finance cautioned that it was too soon to make such a call.
"When we have all our data and we have our decisions in front of us, that will be when we advise the governor," Finance Chief Deputy Director Vince Brown said during Tuesday's hearing.
The state Finance Department is waiting on additional economic and revenue indicators to help draft the 2008-09 budget. Those reports are expected Dec. 10. A month later the governor will release his proposed budget for the fiscal year beginning July 1, 2008.
Brown added that the administration is considering "all options."
Lawmakers were trying to get a jump-start on the state's finances amid a $9.8 billion projected shortfall for the next fiscal year. A recent report by the Legislature's budget analyst found that state spending continues to outpace tax revenue.
High oil prices and a soft real estate market also have triggered a slowdown in the state's economy, which has brought in less money to state coffers than previously anticipated.
Dutton said when voters passed Proposition 58 that the measure gave the governor a tool to intervene early in the state's fiscal crises without having to resort to draconian cuts later.
Amid a massive shortfall, voters in 2004 passed Propositions 57 and 58, and authorized the state to sell up to $15 billion in bonds to help pay off the state deficit. They required lawmakers to enact a balanced budget and prohibited future borrowing.
The laws also set up a procedure for midyear budget corrections. Under the provision, Schwarzenegger must propose legislation to fix the problem. If the Legislature doesn't approve a solution within 45 days it is barred from acting on other business or adjourning.
"I would expect swift action as soon as those additional revenue numbers from those indicators arrive," Dutton said.
Sen. Denise Ducheny, D-San Diego, chairwoman of the Senate budget committee, said the state has other options, such as slowing down an "aggressive" debt repayment schedule.
"It's hard, as (the Department of) Finance indicated, to define fiscal emergency," Ducheny said. "Obviously we're very concerned and I think one of the questions is, 'Do we keep pre-paying debt?'"
Legislative Analyst Elizabeth Hill told legislators that she believes lower revenue and questionable assumptions will wipe out the state's $4.1 billion reserve. She estimated the state will now end the fiscal year with a $2 billion deficit.
"Without saying I told you so, Senate Republicans say we need to be very cognizant of this report and what it foretells," said Sen. Dennis Hollingsworth, R-Temecula.
Last summer the budget was weeks overdue as most Senate Republicans held out for further spending cuts and a bigger reserve to prepare for what they said were hard times ahead.
Hollingsworth delivered the same message Tuesday. He said the state should slow the growth of government.
Sen. Darrell Steinberg, D-Sacramento, whose $55 million initiative to house the homeless mentally ill became a casualty of the governor's line-item veto last summer, said lawmakers should consider the human toll of cuts.
"It may be attractive to consider an across-the-board cut," Steinberg said. "But we need to know, program by program, what the caseload impact of that means."
Hollingsworth said he doesn't want to cut people off programs, but reduce funding proportionately. "Everybody sacrifices a little," he said.
By Judy Lin - jlin@sacbee.com
Published 12:00 am PST Wednesday, November 28, 2007