Even if the Legislature approved Gov. Gray Davis' budget tomorrow, the state would still face a four-year deficit of an estimated $27.7 billion.

However, that amount is less than the long-term shortfall predicted after the governor released his spending plan last year.

The reason, the nonpartisan agency advising lawmakers on fiscal matters said, is Davis' 2003-04 proposal includes more permanent deficit-reduction solutions than his 2002-03 plan did.

Still, if lawmakers want to eliminate the structural debt completely, more significant action is necessary immediately after the upcoming budget is signed be it late or on time.

"Clearly (Davis' 2003-04 plan) does more to address the structural imbalance than last year's proposal did,' said Brad Williams, senior economist for the Legislative Analyst's Office. "It doesn't address the full magnitude of the problem, but it does do more than last year's.'

If the governor's revised May budget plan was signed as is and no further action was taken next year or beyond to address the deficit, the Legislative Analyst's Office projects the state would face shortfalls of $6.7 billion in 2004-05, $6.9 billion in 2005-06, $7 billion in 2006-07 and $7.1 billion in 2007-08, for a total of $27.7 billion.

Last year, the shortfall projected for the same period was pegged at anywhere from $35 billion to $42 billion.

Davis said upon releasing his May revised budget that he and the Legislature would have to tackle structural reform once the 2003-04 budget is signed if the state hopes to avoid deficits similar to the estimated $34 billion gap projected for next year.

"The wheels are in motion but it's going to take a long hard effort because a lot of oxen will be gored in that fight,' Davis' press secretary, Steve Maviglio, said late last week.

Potential obstacles blocking the elimination of the long-term structural debt remain.

Among them are the possibility that any tax increase included in the final 2003-04 budget will fail to meet revenue projections, and the likelihood the state will spend more money on certain programs than the spending plan will allow for.

California could overspend by $3 billion before the current fiscal year ends June 30.

The Davis administration has a $1.5 billion deficiency request, or a request for more money for particular agencies than was budgeted in the 2002-03 budget, pending before the Legislature. State Senate Budget Committee Vice Chairman Dick Ackerman, R-Tustin, said he wants to see this practice curbed in 2003-04.

"Deficiency requests are usual and most of them are approved,' Ackernman said. "But this year they have been much, much greater.'

Medi-Cal accounts for about $1 billion of this year's deficiency requests. It probably will be denied, Ackerman said, as no efficiently run department could have that much of a cost overrun.

Democrats constitute a majority in the Legislature, but the two- thirds requirement for budgetary items means Republican votes are necessary for the approval of deficiency requests.

Tax increases could fuel the long-term structural deficit also, as they failed to meet revenue projections in the early 1990s when implemented to address a $14.3 billion shortfall.

Three state taxes were raised in 1991-92, but all fell short of revenue expectations by 20 percent that fiscal year and the two fiscal years that followed, according to a Legislative Analyst's Office analysis prepared in 2002 for then-Assemblyman Bill Leonard, R-San Bernardino, now a member of the state Board of Equalization.

Taking a page from his Republican predecessor, former Gov. Pete Wilson, Davis, a Democrat, has proposed a temporary half-cent hike in the sales tax and raising the income tax to 10 percent and 11 percent for individuals earning in excess of $136,000 and $272,000 annually in taxable income, respectively. The current top rate is 9.3 percent.

State Sen. Bob Margett, R-Diamond Bar, a member of the state Senate Budget Committee, said tax increases will not eliminate the structural debt.

To do that, California needs to fix its broken workers' compensation system and tackle other measures that have made the state an undesirable place to do business, he said.

"No business wants to come here and walk into the sorry mess we have,' said Margett, who represents Chino and Chino Hills.

Only an economic recovery that includes private-sector business growth and job creation will increase tax revenues to levels necessary to zap the protracted deficit, he said.