You have to remember that the Capitol operates like Wonderland, Lewis Carroll's fictional and nonsensical society where nothing is what it appears to be.

That's why good news – that the state's revenues finally appear to be moving up rather than down – may be bad news to Gov. Jerry Brown and the Legislature's dominant Democrats.

For months, they've been pursuing the goal of raising taxes, based on an assertion that California has no other choice because revenues are so low that popular and vital services, especially education, would have to be slashed unless revenues are increased.

Specifically, Democrats want a five-year extension of some temporary sales, income and car taxes that otherwise are expiring, although they're in disarray over how those extensions should be enacted.

However, revenues are running several billion dollars ahead of expectations, and if the trend continues, they could offset as much as a third of the $26 billion deficit that Brown originally projected for the remaining months of the 2010-11 fiscal year and all of FY 2011-12.

Coupled with the health, welfare and college spending cuts already enacted, the higher revenues could finance all of the constitutionally guaranteed funding for K-12 schools and leave only a few billion dollars remaining to be covered – not nearly enough to justify a $10 billion per year tax hike.

Brown will deliver his take on the situation next week in a "May revise" of the budget he originally proposed in January, but administration officials are already downplaying the impact of the revenue surge.

"While tax receipts are currently running higher than projections, this should in no way be taken to mean that we can ease up on our efforts to close the remaining budget gap," Brown's budget director, Ana Matosantos said, adding that "the Department of Finance is updating the entire budget, not only on the revenue side but on the cost side as well."

Why isn't the governor jumping for joy, or even claiming credit for the surge, as governors are wont to do?

Because it undercuts his plea for the added taxes that would, if enacted, take him off the budget hook at least for the rest of his first term.

Republicans are already crowing that the state can balance its budget without new taxes and pledging to give schools – the single most popular segment of the budget – all the money to which they are legally entitled.

It's an easy commitment since school appropriations are more or less automatic, as long as there's enough revenue to cover them.

The positive revenue news also counters the sky-is- falling message that teachers were delivering in mass demonstrations at the Capitol Monday, even though a full constitutional allocation falls billions of dollars short of what they would like to get from Sacramento, were the money available.

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Call The Bee's Dan Walters, (916) 321-1195. Back columns, www.sacbee.com/walters

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