Analyst Reports ’88 State Deficit, Sees Same in ’89

The Legislature’s top budget analyst on Wednesday told the Assembly Ways and Means Committee that the state not only ended the last fiscal year with a deficit but also faces more red ink this year.

Legislative Analyst Elizabeth Hill, disputing contentions by Gov. George Deukmejian that the state will show small surpluses each year, claimed that the state ended the 1987-88 fiscal year with a $200-million deficit and probably will finish the current budget year $126 million in the hole.

“We feel that you’re banking on money that just is not going to be available,” Hill warned the legislators, who are starting to review the governor’s already precariously balanced $47.8-billion budget proposal for the fiscal year beginning July 1.

With the governor already proposing to balance spending in the new fiscal year by making deep cuts in many health and welfare programs, Hill’s assessment only complicates the Legislature’s problem. If she is right, the Legislature might have to approve even deeper cuts in spending. Her assessment is in line with earlier warnings of a deficit that were issued by Controller Gray Davis.

Later in the day, recently confirmed Treasurer Thomas W. Hayes backed up Hill’s contention that the state had a deficit last year, declaring that it could be as high as $97 million.

Hayes, a Deukmejian appointee who took office Jan. 6, played down the seriousness of the problem, attributing it to a difference in accounting methods used by the Administration and other budget analysts.

Hayes, speaking at his first meeting as chairman of the Commission on State Finance, said that since the state doesn’t use a uniform method of accounting, “we are always going to have differences between reporting agencies.” But he told reporters after the meeting that he thought the state’s AAA credit rating is secure. “I don’t think the sky is falling,” he said.

The commission, in a quarterly update of state revenues and expenditures, disagreed that there would be a deficit in the current budget year. The panel said it expects the state to end the current fiscal year $79 million in the black. Deukmejian’s budget anticipates ending the year with only $3 million in reserve.

Gail Lyle, the commission’s executive secretary, said she expects state tax receipts to come in $366 million above Deukmejian Administration forecasts, largely as a result of a healthier economy. She said the state may even be in the unusual position, for such a tough budget year, of taking in $174 million more in revenues than it can legally spend under an expenditure limit approved by voters in 1974.