One-Two Punch in Budget

California’s already-strained state budget is getting a double dose of bad news: a new projection Tuesday showing that tax collections are $600 million to $1.3 billion behind earlier forecasts, and word from Washington that President Bush proposes cutting the state’s transportation aid by $620 million.

Together, the developments could erase some of the fiscal benefit of $2 billion in program cuts that lawmakers passed last week and Gov. Gray Davis signed into law Saturday.

Davis administration officials and financial analysts at the Capitol were still trying to determine Tuesday what the new figures mean, and their bottom lines don’t yet agree.

The administration said the preliminary January tax collections were $640 million below earlier estimates. The legislative analyst’s office, reporting partial tax receipts, put the figure at $800 million. And state Controller Kathleen Connell pegged it at $1.3 billion. She reiterated her contention that California could end the fiscal year with virtually no money and be forced to borrow as much as $8 billion next year.

“We were surprised,” Connell said. “We had hoped to see stronger January numbers.”

The 2003 budget proposed by President Bush earlier this week would compound the state’s problems by slashing federal funding for California roads and prisons.

The state spending plan Davis unveiled last month for the 2002-03 fiscal year relies on an increase of about $1 billion in federal money to cover Medi-Cal, security and prison costs, among other expenses. So far, federal officials have earmarked about $100 million in bioterrorist preparedness funds for California.

Both Connell and Elizabeth Hill, the state’s independent legislative analyst, believe the Davis administration is being overly optimistic by anticipating $1 billion.

Davis spent Monday trying to maintain existing federal funding. He sent Bush a letter asking him to reconsider the $620-million cut in highway money for California, saying that it would harm the state’s economy and lead to 20,000 layoffs. The proposed cut is due to a dip in federal gas tax revenue.

Finance Director Tim Gage said in an interview that the cut would ultimately result in transportation projects being dropped.

“Exactly what time frame, we don’t know,” Gage said.

“This will certainly cause hurried recalculations on the part of transportation planners in California and other states,” added Tim Ransdell, executive director of the California Institute for Federal Policy Research, a think tank that advises the state’s congressional delegation. “The cut is going to hit every state equally. We share the gains when there are gains and the losses when there are losses.”

Bush proposals that could bolster California include increased defense spending and restoring food stamp eligibility for many legal immigrants.