California budget hole deepens to $16 billion: governor Sat May 12, 2012 10:32pm EDT (Reuters) - California's budget deficit will swell to nearly $7 billion greater than expected due to weak tax revenues and slow progress in cutting budgets, Governor Jerry Brown said on Saturday. Brown said the projected shortfall for the fiscal year ending on June 30 now stood at $16 billion, up from a previous estimate of $9.2 billion made in January. "We are now facing a $16 billion shortfall, not the $9 billion we thought in January," Brown announced in a video posted on YouTube. This means we will have to go much further and make cuts far greater than I asked for at the beginning of the year. Brown is due to present on Monday a new budget proposal for the next fiscal year starting in July. In it, he said, he will outline how to eliminate the deficit. California could receive a windfall from the planned initial public offering of online social media firm Facebook, which is aiming to raise as much as $12 billion when launched next week. Revenues from Facebook stock options held by people living in California could reach around $2 billion, according to municipal bond analysts who say that the final amount will depend on how the shares trade on the market. Facebook is expected to reveal its final pricing on Thursday for what would be Silicon Valley's largest market debut, then begin trading on Friday. California, the most populous U.S. State, is still recovering from the 2008-2009 financial crisis that induced the worst recession since the 1930s. In April, California's tax revenues came in $2.44 billion below the state's estimate, largely due to weaker-than-expected revenue from personal income taxes. Spending cuts have also been below what was projected, Brown said, blaming legal and federal constraints. "The federal government and the courts have blocked us from making billions of necessary budget reductions," he said. The Democratic governor did not detail how he will fill the $16 billion budget hole, but he highlighted in his video a referendum scheduled for November on tax hikes for the wealthy. We can't fill this hole with cuts alone without doing severe damage to our schools. That's why I am bypassing the gridlock and asking you the people of California to approve a plan that avoids cuts to schools and public safety. California is expected to raise $7 billion in new revenue if voters approve a ballot measure in November that would increase the state tax rate on earnings above $250,000 and the state sales tax. Original measures which were expected to balance the budget were cuts of $4.2 billion in health, welfare and education spending. If the tax increases are rejected by voters, Brown had suggested further spending cuts for another $5.4 billion mainly focusing on schools, communities colleges and state's two university systems. S&P rates California's general obligation bonds A minus with a positive outlook which was reviewed from stable in February. Reporting By Tiziana Barghini, Editing by William Schomberg and Philip Barbara