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SCENARIOS-California options for new budget fix
January 6, 2010 / 4:10 PM / in 8 years

SCENARIOS-California options for new budget fix

SAN FRANCISCO, Jan 6 (Reuters) - California Governor Arnold Schwarzenegger presents his final state-of-the-state speech on Wednesday and is certain to lay out a stark state budget to fix a shortfall seen near $21 billion.

Schwarzenegger will follow the speech by unveiling on Friday his plan for balancing the budget, which requires plugging a $6.3 billion shortfall in the current fiscal year and a $14.4 billion deficit in the fiscal year beginning in July, according to the Legislative Analyst’s Office, California’s budget watchdog agency.

California’s battered economy played a major role in the state’s fiscal woes.

The following outlines possible budget-balancing scenarios for Schwarzenegger, a Republican, and California’s Democrat-led legislature. The possibilities are not mutually exclusive.

* Focus on raising revenue. Though an income tax rise is considered off the table, California’s leaders could scrap or modify tax credits and extend temporary tax increases set to expire at the end of the next fiscal year. Sales taxes, oil taxes and soon-to-start corporate tax breaks are prime candidates.

Higher fees for state services -- University of California tuition already is rising by about a third -- selling state properties, increasing gasoline taxes and tapping local government coffers are also options.

* Get more from Washington. State leaders are already asking for financial help from the federal government and say the most populous U.S. state doesn’t get back all it sends in federal taxes. Schwarzenegger wants more federal aid for state health care and relaxed rules that would let the state cut benefits without running afoul of conditions on federal funds.

* Move around money. State officials may also consider seeking voter approval to redirect revenues to the state’s general fund from programs shielded by voter-approved laws. Accounting measures, such as moving payments due on the last day of the fiscal year into the first day of the next, are expected.

* Cut expenditures. California could cut or slash payments for welfare programs, state parks, higher education and prisons. Furloughs of state workers could be extended -- the administration plans to appeal a ruling that would stop furloughs -- and jobs could be cut. Capital projects also could be put on hold.

Cuts to programs may be limited, though, by conditions on federal aid intended to stop the state from shifting the welfare burden onto the national government. (Editing by Kenneth Barry)

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