Gov. Arnold Schwarzenegger lottery profits to fix budget

The San Francisco Chronicle reports:

Gov. Arnold Schwarzenegger will unveil a spending proposal today that calls for borrowing against future profits from the state lottery to help close what is expected to be a $15.2 billion budget deficit in the new fiscal year, administration officials said late Tuesday.

Schwarzenegger plans to ask Wall Street investors to give California a lump sum of $15 billion in exchange for three years of the state lottery's revenue, said Aaron McLear, the governor's spokesman.

The plan would require voter approval because the state lottery was installed as a result of a ballot initiative that promised to help fund education. If voters reject the idea, the governor proposes a temporary 1 percent increase in the sales tax, which would expire in 2011.

The governor's plan calls for using about $5 billion of the lump sum to help reduce the projected $15.2 billion budget deficit. About $10 billion would be placed in a reserve that the governor wants to create to use during times of fiscal crisis as part of his proposed budget reform that he's been trumpeting up and down the state in recent months.

Schwarzenegger's revised plan abandons some of the controversial cuts he proposed in January, including the early release of 22,000 prisoners, the closure of dozens of state parks and deep cuts to education.

The governor instead calls for increasing funding to education by $200 million over the current fiscal year, which ends June 30. But cost-of-living increases for schools would be withheld - an amount totaling about $4 billion.

15 Billion dollar deficit but the Governor wants to increase spending.