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Budget Words Can Be Hard to Define

The state's fiscal crisis is conveyed through terms like deficit, shortfall, spending and revenues. But what do they really mean? And when?

January 10, 2003|Jeffrey L. Rabin and Evan Halper | Times Staff Writers

As a candidate seeking reelection, Gov. Gray Davis downplayed the state budget crisis. But after narrowly winning a second term, he reversed course.

A week before Christmas, the governor announced that the gap between projected state spending and state revenues had rocketed to $34.8 billion.

That's almost $14 billion more than Legislative Analyst Elizabeth Hill told lawmakers in November.

What do the numbers really represent, and why did they change so quickly?

In a nutshell, the administration changed its assumptions about the past, present and future. It also altered its terminology and its time frame for assessing the depths of the problem.

But does the state really face a $34.8-billion budget problem?

It depends on how you figure and sometimes on whom you ask. In the world of California budget proposals, the meaning of terms is constantly shifting.

Here are some words and phrases to look out for, with a little help at deciphering them:

Deficit: A deficit implies that the state has already spent more than it's got. But that is possible only if there is already a budget in place. Although that's the case for the current year, which ends June 30, it is not for the coming fiscal year, which starts July 1.

Any gap between spending and revenue in next year's budget is only a projected one, and depends on assumptions, both about how much money might come in and how much the government plans to spend.

Shortfall: What California actually faces can more properly be described as a budget "shortfall" or a "gap." That is, the state's projected revenues in the coming year and a half would fall short of what was needed to meet a hypothetical level of spending -- a level initially set by the Davis administration as it contemplates its spending plan for the coming year. The governor says that gap is $34.8 billion. Republicans say it is less.

One other issue: The number being used by Davis is the spread between revenue and spending over 18 months, not a year. The 18-month figure combines this year's deficit and next year's projected shortfall.

Revenues: Simply, the money that comes into state coffers in a given year, mostly from income, sales, and bank and corporation taxes. Just be warned -- that number is only a projection until the cash is actually in the state's coffers.

The Davis administration changed its 18-month revenue projections by $17.7 billion over the course of a few months. Some analysts question whether the current projections are overly pessimistic, making the budget problem appear worse than it is.

Spending: What it costs to run the government. The administration has implied that the $34.8-billion shortfall will result from just keeping programs at current levels. That's not entirely true.

The administration factors in adjustments for the rising cost of living, inflation and other elements for next year. Republicans have suggested that, if spending were truly frozen, the shortfall would drop sharply.

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