DEMOCRAT SHORTFALL $6.4 BILLION BUDGET DEFICIT PUT AT $3 BILLION MORE THAN ARNOLD'S PROPOSAL.

Byline: David M. Drucker Sacramento Bureau

SACRAMENTO - The Democratic budget would leave a $6.4 billion deficit for lawmakers to deal with in 2006-07 - almost $3 billion more than the shortfall created by Gov. Arnold Schwarzenegger's plan, the nonpartisan Legislative Analyst's Office says.

Legislative Democrats dropped plans to spend more money on K-12 education than Schwarzenegger proposed and acceded to his demand that next year's budget include no tax increases. But their $89.2 billion general-fund budget - voted down last week when minority Republicans refused to provide the two-thirds support needed for passage - spends more on social services and criminal justice than the governor's $88.3 billion plan and less on debt reduction.

``(Democrats) are taking almost all of the governor's savings-makers out of the budget, and they increased spending,'' said Assemblyman Rick Keene, R-Chico, the GOP point man on the budget. ``It doesn't take a math genius to know that if you eliminate savings and spend more, you will have a larger deficit.''

Democrats were not surprised with the findings of the Legislative Analyst's Office, but say the reason for the bigger shortfall is because Schwarzenegger's budget relies on savings that cannot be realized - either legally or practically.

The governor estimates annual savings of $408 million on state personnel and $469 million in teachers' pensions, both of which are unreliable at best, Democrats say.

``Their out-year number is based on unachievable savings, and that's the type of gimmick that got us into this mess in first place,'' said Assembly Budget Committee Chairman John Laird, D-Santa Cruz. ``We put together a budget with no gimmicks.''

Schwarzenegger's budget proposal for the fiscal year that begins July 1 would spend $115.7 billion in general and special funds, including $50 billion for K-12 education and community colleges.

H.D. Palmer, Schwarzenegger's chief budget spokesman, said the administration is confident its budget projections are sound.

The administration believes it is prudent and realistic to project $408 million in personnel savings. It also says the state Department of Finance obtained a legal opinion saying lawmakers can shift $469 million in teacher retirement costs to school districts without having to reimburse Proposition 98 for that amount - an issue raised in the CLA report.

Palmer criticized the Democrats' budget for spending ``too much'' one-time tax revenue on ongoing programs.

``Spending one-time money on permanent programs is what got us into this fix to begin with,'' he said. ``Democrats are trying to say there is not a lot of difference between the two of us, but the parts are very different.''

The Legislature missed its June 15 constitutional deadline for passing the budget when minority Republicans declined to support a Democratic alternative that is different than Schwarzenegger's, though not by too much when compared with the disagreements that have delayed the passage of budgets in recent years.

Schwarzenegger is supposed to sign the budget by June 30, the last day of the current fiscal year.

David M. Drucker, [phone]

david.drucker(at)dailybulletin.com

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STATE BUDGET DEBATE