State Ended Fiscal Year With Record Deficit : Finances: Controller says California needed $4.1 billion in loans to pay bills during 1990-91, which ended with a $1.9-billion shortfall.

SACRAMENTO — California Controller Gray Davis confirmed Wednesday that the state ended last year with a $1.9-billion deficit, the largest in state history.

Davis said the state, which has had deficits in five of the last 11 years, was able to pay its bills through the fiscal year ending last June 30 only by taking out $4.1 billion in short-term loans. The largest previous deficit, $608 million, was in 1983, reflecting another severe recession.

Davis, a Democrat who said he is running for one of the two U.S. Senate seats up for grabs in next year’s general election, predicted that a new round of short-term borrowing will be needed to keep the state financially afloat during the 1991-92 fiscal year because of another large deficit.

Davis said he expects tax revenues during the 12-month fiscal year will be $5 billion to $6 billion below Republican Gov. Pete Wilson’s budget estimates.

A report released by the legislative analyst’s office Wednesday said actual revenues through November were down by $597 million, or 4.7% below Wilson’s budget projections.

Davis said the Legislature, on recess through the Christmas holidays, should return to Sacramento immediately to get to work on the problem, rather than wait until Jan. 6 when the recess ends. “Our job is to right the ship, not simply run for the lifeboats,” Davis told reporters at a Capitol news conference.

As one way to give a jump start to the economy, Davis said he will propose in January that businesses be given a $1,500 tax credit, to be spread over five years, for each new employee they hire.