Officials alarmed by projected $21-billion shortfall

A set of ill-conceived budget solutions has left California with a projected $21-billion deficit for mid-2011, the state’s legislative analyst’s office said Wednesday, alarming legislators and area officials who braced for what could be another season of spending cuts.

The projection came less than four months after lawmakers put the finishing touches on a plan to close an expected $60-billion revenue shortfall.

But officials in Glendale and Burbank at the time criticized the plan as a facade that employed questionable maneuvers, like shifting a month’s worth of payment for state workers into the next fiscal year, or attempting to divert $800 million in state gas tax revenues from transportation projects to the general fund, a tactic that failed after it was challenged in the courts.

The state legislative analyst report criticized the failed transportation fund take away, along with expectations that the state’s prison and Medi-Cal systems would achieve billions in spending reductions.

The state’s new projected shortfall will force lawmakers to come up with more solutions, a prospect that troubled local officials.

“We all have to run scared when the state’s in this kind of a situation because, as they proved last year, there’s almost nothing they won’t turn to to try and shore things up,” Glendale City Manager Jim Starbird said.

Lawmakers failed to plug a $42-billion projected shortfall with a plan approved in February and later attempted to solve a total budget hole estimated at about $60 billion, according to the state Department of Finance.

In structuring those plans, legislators had discussed a series of solutions that could have dropped education funding below requirements from Proposition 98, the state’s minimal constitutional guarantee for schools, or initiated further borrowing from city governments.

Although those proposals were not included in the state’s prior budget plans, officials feared similar suggestions might gain traction after the release of Wednesday’s deficit projection.

“We will be worried about the suspension of Proposition 98,” said Lori Ordway-Peck, chief business and financial officer for the Burbank Unified School District. “We will be worried about whether or not deferrals will ever be repaid. We will be worried about [funding] flexibility issues.”