(136 pages, 8 MB) For the second year in a row, the Legislature faces a budget that does not contain sufficient funds to maintain the existing levels of service. In terms of real purchasing power, the Governor's Budget for 1982-83 is 3.5 percent lower than the budget for the current year. The General Fund portion of the Governor's Budget will be in balance only if several critical assumptions underlying the budget are borne out. These assumptions include: the state's economy will improve by rnid-1982; the Legislature will approve total revenue package of nearly $1 billion; at the June 1982 primary election, the voters will approve the bond measure for state prison construction, .and disapprove initiatives relating to income tax indexing and inheritance and gift taxes. If these and other assumptions are not borne out, the General Fund will end the year with a deficit, even if there is no carry-over deficit remaining. Here, we provide a perspective on the state's current fiscal situation, including options for addressing the deficit in the General Fund Budget for 1982-83, provide a perspective on the budget issues that the Legislature faces in 1983-84, and discuss major issues that have been identified in our review of the state's current fiscal condition and the Governor's Budget for 1983-84.