California Governor to Stress Budget Plan in Address

* Financially strapped state faces $25.4 billion deficit

* Brown proposes cuts to state worker pay, social services

* Voters could decide on extending expiring tax hikes

SAN FRANCISCO (Reuters) - Governor Jerry Brown is set to press California lawmakers in his state-of-the-state address Monday to balance the state budget with $12.5 billion in spending cuts and $12 billion in tax hikes.

California, the most populous U.S. state, faces a $25.4 billion deficit caused by the combined effects of recession, high unemployment and turmoil in financial and housing markets.

Analysts expect the 72-year-old Democrat to stress austerity and urge lawmakers to help him prepare a ballot measure for a special election in June asking voters to extend tax increases scheduled to expire this year.

California has the largest budget deficit of any of the 50 U.S. states in dollar terms, although not as a percentage of the budget.

Brown, sworn in as governor this month, unveiled a budget proposal on Jan. 10 that included cuts to state worker pay and social services and the plan to extend tax increases.

The governor is gambling that his budget plan will get voters to accept tax increases -- an issue other hard-hit state governments around the United States are sure to watch.

"He's going to pose a stark choice: His plan, which is harsh, and doing nothing, which is worse," said Jack Pitney, a professor of government at Claremont McKenna College in Claremont, California.

Brown will reiterate in his speech Monday his previous calls for shared sacrifice to repair the state government's finances, an aide said Friday.

Under Brown's plan, revenue from the tax extensions, proposed spending cuts and other measures would help balance the state budget in the near term and bolster the state government's finances in future years.

Without the revenue, lawmakers and the governor would have to find another $12 billion in spending to cut.

Brown is scheduled to make the state-of-the-state speech at 5 p.m. Pacific timeMonday (8 p.m. Eastern Time Monday) in the state capital Sacramento. (Reporting by Jim Christie; Editing by Will Dunham)