The state's bleak financial outlook continues to worsen, and California now faces a $16 billion deficit - up $1.5 billion from the governor's forecast just over a month ago, an independent budget analyst said Wednesday, the Los Angeles Daily News reports.

The assessment by the nonpartisan Legislative Analyst's Office will likely compound the choices confronting Gov. Arnold Schwarzenegger and state lawmakers as they craft a budget for the fiscal year that starts July 1.

"We certainly recognize that very tough decisions are ahead," Legislative Analyst Elizabeth Hill said. "A sacrifice will have to be made by all Californians in order for the state to get its fiscal house in order."

With easier options seemingly exhausted, the governor and legislators now have to find a way to close the largest deficit since the collapse of the dot-com bubble early this decade. In his January budget proposal, Schwarzenegger suggested slashing virtually all state programs by 10 percent, which would mean closing dozens of state parks, cutting billions in education spending and releasing thousands of nonviolent prison inmates before their sentences end.

Hill calls that across-the-board approach a mistake. Instead, she argues, lawmakers should decide which programs are worth spending money on and boost revenues by closing tax loopholes.

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