California will take in about $2 billion less than previously expected in tax revenues this fiscal year and the next, so lawmakers should cut spending now, the Legislature's nonpartisan budget adviser said Wednesday.

Legislative Analyst Elizabeth Hill, whose view of the state's fiscal situation has been more pessimistic than Gov. Arnold Schwarzenegger's in recent weeks, also said the governor's spending plan for the fiscal year beginning July 1 would leave the state with a deficit of over $700 million.

"We face a very challenging budget situation," Hill said at a news conference where she released her office's annual review of the governor's spending proposals. "It requires additional solutions. We are urging that decision makers act now."

H.D. Palmer, a spokesman for Schwarzenegger's Department of Finance, said the administration believes it is still too early to make predictions about how much money the state will take in this year and next. The governor will issue a revised budget in May based on cash flow data updated after the mid-April tax filing deadline, he said.

Until then, Palmer said: "We're not backing away from anything we put into our January budget. We believe it provides a solid road map."