SACRAMENTO — The state's financial woes are as bad as Gov. Arnold Schwarzenegger has portrayed them, but his call for deep, across-the-board spending cuts is misguided, the state's independent budget analyst said Monday.

Instead, Legislative Analyst Elizabeth Hill wrote in an analysis of the governor's budget proposal, Schwarzenegger and lawmakers need to assess which programs are worth keeping and then fund them accordingly.

Using a household analogy, Hill said the governor's approach would be like a family deciding to cut its monthly mortgage payment, dining-out tab and Netflix subscription each by 10 percent — rather than eliminating the restaurant and DVD spending in order to keep up the house payments.

"While the administration's approach... has the appeal of fairness," Hill wrote in her 23-page report, "it reflects little effort to prioritize and determine which state programs ... are most critical."

The analysis is available at http://www.lao.ca.gov.

Hill's remarks came four days after Schwarzenegger proposed 10-percent, virtually across-the-board spending cuts in response to a projected $14.5 billion shortfall through June 2009. Schools would lose about $4 billion, more than 20,000 prison inmates would be released before their sentences end and one of five state parks would be closed to the public. The proposal also cuts spending on health care for the poor and disabled, as well as welfare and countless other programs.

H.D. Palmer, spokesman for the governor's department of finance, said that across-the-board cuts seemed the most fair way to spread the pain equally.

"In our view," he said, "an across-the-board approach is designed to protect essential services, by spreading those reductions as evenly as possible so no single program gets singled out for severe reductions."

The governor's $101 billion spending proposal triggered what is expected to be a long and contentious battle with Democrats who control the Legislature. Republicans generally were pleased with the governor's plan because it did not call for new taxes (though it did propose a $11 per car increase in car registration fees and a new fee on insurance policies).

Hill took issue with the governor's heavy reliance on spending cuts, as opposed to eliminating tax credits or closing tax loopholes that currently cost the state about $40 billion a year. She did not suggest scrapping any particular credits or loopholes but said they should be part of the debate.

"Right now," Hill said, "virtually all of the solution is on the spending side."

Hill did, however, agree with the governor about the size of the problem. Hill often criticizes politicians' estimates of future tax revenues as too rosy, but this time the non-partisan analyst said Schwarzenegger got it mostly right, calling his budget forecast "generally solid."

Aside from questioning Schwarzenegger's cut-heavy approach to the deficit, Hill also criticized his proposal to reform the budget process. Hoping to head off the state's perennial boom-and-bust cycles, the governor suggested setting aside money in flush years and imposing mandatory spending cuts when tax revenues fall below expectations.

Socking away money in good times is a fine idea, Hill said, but she believes the governor's proposal impinges too much on the Legislature's authority over state spending.

Assemblyman John Laird, D-Santa Cruz, chairman of the Assembly Budget committee, said it will be difficult to find any low-priority programs as Hill suggested, after the state has experienced five years of difficult budgets.

"We've made substantial cuts as well as borrowing," Laird said. "We're to the point that we really hurt people by making the kind of cuts that have been suggested."

Responding to Hill's report, the leading Republican on the Assembly Budget committee, Roger Niello of Sacramento, reiterated his party's opposition to higher taxes.

"Raising taxes to pay for Sacramento's poor spending choices," he said in a statement, "is not the answer."

MediaNews Sacramento Bureau reporter Harrison Sheppard contributed to this report.