State budget hole deepens as costs rise

Mandatory spending and greater safety-net outlays due to federal cutbacks erase gains.

- KATIE KING

RICH PEDRONCELLI Associated Press GOV. GAVIN Newsom will unveil his budget plan in January, which will serve as a starting point for talks.

SACRAMENTO - California's budgetary woes are worse than expected, forcing state lawmakers to grapple with a nearly $18-billion shortfall next year, according to a new report from the Legislative Analyst's Office.

This figure is $5 billion more than estimates in June.

Despite improvements in state revenue, the report said mandatory spending requirements under Proposition 98, which sets minimum annual funding for public schools, and Proposition 2, which specifies reserve deposits and debt payments, almost entirely offset any gains, according to the legislative analysis.