May 14, 2008 12:27 pm US/Pacific
Gov. To Propose Lottery Borrowing to Close Deficit
SACRAMENTO (AP) ―
Gov. Arnold Schwarzenegger on Wednesday released a $144.3 billion state budget that eliminates a massive deficit by selling lottery bonds and cutting billions in state programs.
The spending plan for the fiscal year that begins in July is austere, a byproduct of a slowing state economy.
Tax revenue has been falling far short of what California needs to keep pace with spending, leading to a $15.2 billion shortfall.
"As everyone knows, we are facing an extremely tough budget year," Schwarzenegger said during a news conference at the Capitol. "Our crisis is real, and it is very serious."
The centerpiece of Schwarzenegger's budget relies on a plan to make the state lottery more lucrative and thus more attractive to potential investors.
The governor hopes to raise $15 billion over the next three years by selling bonds based on anticipated lottery revenue. He will use about $5.1 billion of that in the 2008-09 fiscal year to help erase the state's deficit.
The other $10 billion would remain in a reserve fund the governor wants to create to help the state get through rough financial times in the future.
Schwarzenegger said creating a reserve fund is crucial if California is to avoid severe financial problems in the future.
The revenue proposal -- which administration officials refer to as "securitizing" the lottery -- would require voter approval on the November ballot because the lottery was established through the initiative process.
If it fails, the governor will ask the Legislature to approve a temporary 1 cent increase in the state sales tax to pay for the reserve fund. It would last no more than three years.
Republicans said they disagree with the plan because it links the lottery and sales tax proposals. They have taken a pledge to oppose any tax increase.
"The idea that we use the lottery to pay down debt is a good one," said Assembly Minority Leader Mike Villines, R-Clovis. "Tying it to borrowing is, I think, a mistake, and tying it to a tax is a mistake."
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