California revenues $1.1 billion below budget estimate

SAN FRANCISCO (Reuters) - California's general fund revenues for the first three months of its fiscal year were $1.1 billion below estimates in its budget, a sign the state's economic woes are far from over, Controller John Chiang said on Friday.

The most populous U.S. state has suffered a steep drop in revenues this year in the face of the housing slump, credit crisis, financial market turmoil, surging unemployment and the recession.

Chiang on Friday urged Governor Arnold Schwarzenegger and lawmakers to brace for hard choices to keep the state's books balanced should revenues weaken further.

"While there are encouraging signs that California's economy is preparing for a comeback, the recession continues to drag state revenues down," Chiang said in a statement. "I urge lawmakers and the governor to prepare for more difficult decisions ahead."

California officials this summer had resorted to IOUs for low priority bills while Governor Arnold Schwarzenegger and lawmakers haggled over how best to close a massive budget shortfall of more than $24 billion.

They eventually agreed in the summer to a budget-balancing plan relying on deep spending cuts.

(Reporting by Jim Christie; Editing by Leslie Adler)