http://www.csmonitor.com/durable/2001/05/18/fp2s2-csm.shtml

FRIDAY, MAY 18, 2001

USA

California, reeling from power crisis, now faces economic woes

Associated Press

SACRAMENTO

For two years, California has enjoyed a soaring economy and boom-year budgets. But no more.

Already jolted by a costly power crisis, the state now faces a string of bleak economic news. Just this week has brought a record rate hike, warnings of a massive budget shortfall, downgrading of the state's already poor credit, and cuts of more than $3 billion from the governor's spending blueprint.

The woe comes as California braces for summer blackouts that could further disrupt the economy here — and perhaps across the nation. "The timing is pretty bad," says Tom Leiser, an economist at the University of California Los Angeles's School of Management.

On Wednesday, Legislative Analyst Elizabeth Hill warned that California faces a $4 billion budget shortfall in 2002-03, unless legislators trim Gov. Gray Davis's already-revised $103 billion budget. "It will be much more difficult to correct a $4 billion problem if they don't start today," Ms. Hill told reporters.

Mr. Davis slashed $3.2 billion from his proposed budget Monday, blaming a plunging stock market and a faltering economy reliant on income taxes and stock gains from high-tech workers. On Tuesday, state power regulators boosted rates by up to 80 percent for some customers — the largest increase in state history. In response, Moody's Investors Service downgraded California's credit rating.

Despite the gloom, California may be in better shape than it was during the recession of the early 1990s. "We've simply seen the end of a boom that was created by a soaring stock market," says Sandy Harrison of the state Department of Finance.

-- (in@energy.news), May 20, 2001