As late as last winter, officials at the California Department of Finance were denying that the state was running a deficit in fiscal year 2000-2001.

Yet data clearly showing a deficit were available on the department's own Web site.

Come July, the governor signed a new budget for fiscal 2001-2002, running a deficit for another year.

More disconcerting is the treatment of the state's multibillion- dollar electricity purchases in the official accounting. It is assumed in the budget that someone, somehow, someday, will repay the state for those purchases and therefore they don't count in calculating the deficit.

Nonetheless, the state needs hard cash to buy electricity.

Many state politicians are still in denial. Even before the terrorist attacks of Sept. 11, state revenues were falling short of forecasts. The impact of the attacks can only be negative: less revenue due to a slumping economy and more expenditures on security.

But state officials are talking of a budget crisis that will occur "next year" and 15% budget cuts for next year. There is even talk of enacting a state "economic stimulus package.

Unfortunately, the crisis is now, not next year.

Moreover, economic stimulus packages are the province of Congress and the Federal Reserve. They can print money; the state government can't and must therefore live within its means.

Here is what needs to happen now: The current year's budget must be reopened and the deficit cut. Waiting until next year will only make matters worse.

The electricity issue must be resolved quickly. There is no longer time to philosophize about what might have been months or years ago regarding energy policy. A revenue package must be arranged that reimburses the state for its past and present electricity purchases.

And what about longer-term lessons?

First, the state must never again run a deficit at the peak of the business cycle, as it did last fiscal year. A deficit at the peak makes a crisis at the trough almost inevitable.

Second, the state must have a "Plan B" for its budget in case revenues don't meet expectations. Along with the regular anticipated budget, it must have a contingent budget plan in reserve with either reduced expenditures or more revenue.

Third, the state must maintain a substantial rainy day fund that can temporarily buffer the budget from adverse shocks. The fact is that California has had a budgetary crisis about once every decade since the early 1980s.

What we can't afford is more denial.