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SYDNEY, Nov 26 AAP

November 26 2012, 07:17AM

NSW treasurer Mike Baird will explain how he made a $1 billion mistake in the state's finances at a supplementary treasury budget estimates hearing on Monday.

The hearing follows the auditor-general's report into NSW finances, which found Mr Baird's budget forecast of a $337 million deficit was wrong, with the state actually $680 million in surplus.

Shadow Treasurer, Michael Daley said cuts to schools and hospitals were unjustified given the surplus.

"The O'Farrell Government claims it has to cut $1.7 billion from public, Catholic and independent schools and TAFE colleges and $3 billion from hospitals due to budgetary pressures, but the auditor-general has proven this to be absolutely untrue," Mr Daley said.

"It has also slashed special needs funding at 272 schools, cut $500 million from community services and axed the program providing free reading glasses to the elderly.

"In addition, it has plans to sack 15,000 public servants over the next four years.

"Given the auditor-general has revealed the truth about the state's finances, these cuts need to be reversed immediately."