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Schwarzenegger plan won't work, legislative analyst says [Updated]

May 21, 2009 | 11:34 am

Declaring that California faces thorny choices to avoid insolvency, the state legislative analyst said that Gov. Arnold Schwarzenegger’s plan to borrow and sell off key assets to help overcome a $21.3-billion deficit won’t work.

Updated at 11:38 a.m.: New estimates of revenue suggest the budget deficit may be as much as $3 billion larger than the governor estimated.

In a 28-page report released this morning, Legislative Analyst Mac Taylor said the governor’s proposal for $5.5 billion in short-term borrowing would only shift trouble to the future and set a “dangerous precedent.”

Taylor’s report also expresses doubts about the proposed $1-billion sale of a state-owned workers’ compensation insurance program and a plan to save $750 million on the state’s costly Medi-Cal program by potentially cutting healthcare reimbursements or slashing the number of eligible participants.

But the report says several of the governor’s budget proposal “merit serious consideration,” including eliminating some state boards, selling property and changing retirement health benefits for future state employees.

Taylor also emphasized a need for the Legislature to “make the difficult decisions” and act quickly, which would “likely boost the confidence of the public and investors in the budget process” as well as prevent an anticipated cash crush in early July.

-- Eric Bailey in Sacramento

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