California will have to make multi-billion dollar cuts in its budget — starting now, the governor said after meeting with the state legislative leaders on a conference call Thursday.

Gov. Gray Davis now places the state legislature’s independent budget analyst’s forecast for a $21 billion shortfall for the next (2003-04) fiscal year, on the “low side.” He said he told the lawmakers they could be assured the number would be bigger than that. As a result, Davis said he is calling a special legislative session to begin Dec. 9, at which time the governor plans to propose a package of $5 billion in budget cuts.

The implications for the energy industry and the state’s attempt to get the electric utilities back on their financial feet were unclear. A special session could spark legislation that would impact regulatory and energy policymaking, and the proposed cuts in existing budgets could spark an accelerated look at consolidation of California’s 13-odd agencies and departments dealing with energy. The governor did not tip his hand on any specifics yet.

“We don’t have a precise number yet, and may not have it until mid-December,” Davis told a conference call with news media late Thursday, noting he told the legislators to assume the $21 billion would go up when they come up with a consensus forecast from various economists and economic think tanks in the state.

In the meantime, Davis said he would use as much executive authority as he has to freeze as much spending as he could immediately. In response to specific questions, Davis said the immediate proposal for budget cuts doesn’t include any tax increases or assessment of new fees, but for this formal 2003-04 budget proposal that he will make in early January, he doesn’t “preclude anything from being included.

“This problem is so big that it behooves all of us to set aside our ideological preconceptions and find a way to come together in a bipartisan fashion and address this shortfall,” the governor said in a statement obviously aimed at the minority Republican party legislative leaders.

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