The Governor's annual May budget revision was rolled out yesterday. The document still shows a net operating deficit of $1.4 billion, but represents this as "major progress as compared to the $4.4 billion that was anticipated for 2007-08 at the time the Governor signed the 2006 Budget Act." The revised budget includes plans for early debt payments as well as to avoid tax hikes, and shows Arnold's intent to restrain spending growth and maintain adequate reserves, among other things.

Democrats are concerned, though, that it's doing so at the expense cuts social services and public transit -- which could have a direct affect on BART and other orgs.

For all those who say Arnie isn't really a Republican, we'd say that this budget shows that, in fact, he is, at least when it comes to spending.

There are tough choices to make -- and the concerned Dems have the advantage of controlling the legislature. We do hear a lot of gloom and doom about markets doing this or that, particularly regarding real estate, which makes the guv.'s job all the more difficult. If new housing starts slide, for instance, that's less money we can count on in the state's coffers.

The Sac Bee reports Michael Genest, the governor's finance director, as saying that the housing market is "pulling our numbers down slightly," and that the downturn "is just getting a little deeper and lasting a little longer than we thought."

UC and Cal State students are concerned that the budget still shows a fee hike of 7%-10%.

In any case, what all of this ultimately means on a macro level is for the pundits and wonks to figure out. All we know is that the legislature is supposed to approve a budget by June 15, and Mr. Schwarzenegger is supposed to sign a budget into law by June 30. You can check out a little Web cast video here.