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California Has Higher Than Expected Budget Deficit - 2003-05-16

California's projected deficit has been raised to $38 billion, $3 billion higher than was earlier predicted. California Governor Gray Davis plans to meet the shortfall through a combination of tax hikes, borrowing, and cuts in services. Critics are lining up to oppose different parts of his plan.

This week, Governor Davis announced the higher-than-anticipated deficit, and offered some solutions. "I'm proposing a half-cent sales tax to finance the current year deficit, which we anticipate being about $10.7 billion," he said.

Mr. Davis, a Democrat, plans to offset the deficit for the current year and a bigger one next year through $8 billion in taxes, including a hike in the tax on cigarettes and higher registration fees for cars.

Republicans immediately criticized the proposal and promise to block the governor's plan when it comes up for approval in the state legislature.

The proposal avoids deeps cuts in education and social services, such as health care for the poor. But school officials say thousands of teachers still face possible layoffs, and community workers in the inner city say the problems of the poor will only get worse in this tight fiscal climate.

Thursday, hundreds of workers from community agencies gathered at Los Angeles city hall to voice their concerns.

California is a magnet for low-income immigrants from Mexico and elsewhere, and unemployment, now six percent nationally, is much higher in some minority neighborhoods. In Los Angeles, nearly one in five people lives below the poverty line, which the federal government has set at $18,400 a year for a family of four.

Mike Gipson, the chairman of the Los Angeles County Community Action Agency, says a poor economy and California's fiscal crisis are hurting the city's homeless.

"However, those hardest hit by the slowing economy are the working poor and those living in poverty. Critical public services are being cut across the state and nonprofit sectors as well. In these difficult economic times, we cannot forget those in need," he said.

Small private agencies rely on help from the public, and sometimes from government grants, to carry out their mission. A group called New Directions helps those who were once in the military find jobs and housing.

Willie Bailey got help from the group and is now an employee. A Vietnam veteran, he had trouble readapting to civilian life. "Yes, I did. Very hard time. Doors were closed, lack of education, lack of marketable skills. And then I fell into substance abuse, drug addiction," he said.

He found help through New Directions, and now coordinates job training for the organization, which he worries will have trouble providing services.

California State Senator Richard Alarcon says poverty affects not only the unemployed, but also those working at the lowest end of the wage scale. Federal help is available in several forms, including "food stamps," vouchers that are used to pay for food. But he says in California, the high cost of living is fueled by other factors.

"If you're in California, does housing have something to do with the reason you're poor? Does the high cost of transportation have something to do with the reason you're poor?," he said.

The state senator says federal authorities should adjust their poverty guidelines for high-cost states like California.

In the state capital of Sacramento, Mr. Alarcon and his fellow Democrats disagree with Republicans on the best way to improve the state's economy and address its fiscal crisis. Republicans say a national tax cut, promoted by President Bush, will serve as a stimulus and create jobs across the country. They say that will boost the revenue the state collects in taxes.

Both sides say California should restructure its tax system, which relies mostly on income tax, causing state income to fluctuate in response to the national economy. California collects large revenues when the economy is good, but falls short when personal incomes drop and unemployment rises.