California Budget Not Likely to Get Much Federal Aid

“While the odds seem favorable for some federal relief sought by the administration, we believe that the likelihood of Washington agreeing to all of the governor’s requests is almost non-existent,” Taylor, from the non-partisan California Legislative Analyst Office, said in a report.

The $82.9 billion proposed budget would cut spending by $8.5 billion while counting on the federal government to provide another $7 billion that Schwarzenegger said California is owed for health care, education and illegal immigrants housed in its jails. The budget also siphons $1 billion from gasoline tax money meant for local governments.

California is among states hit hardest by the recession. Lawmakers have struggled to balance the budget as tax revenue fell, trailing projections during the first half of the fiscal year by 0.9 percent, Controller John Chiang said in a Jan. 7 report. The state, with the world’s eighth-largest economy, has the lowest credit rating among states and the nation’s third- highest rate of home foreclosures as of November, according to RealtyTrac. Unemployment was 12.3 percent that month, compared with the 10 percent national average.

(...) Taylor, who estimated California shouldn’t expect more than $3 billion if federal aid is approved, said lawmakers would need to send Schwarzenegger a budget by March for some spending cuts to take effect in time. Two of the governor’s proposals, which combined would divert almost $1 billion from early childhood development and mental health programs into the state’s general fund, would need approval by voters in a special election in June.

(...) Taylor said Schwarzenegger’s budget plan may have over- estimated how much revenue California will earn during the fiscal year from corporate and estate taxes by as much as $3 billion.