Gov. Arnold Schwarzenegger doesn't think you should call potential federal aid to California a bailout, handout or any other kind of out.

He prefers the term "investment."

The Republican governor emphasizes there is a distinction between the type of money he desires – public works money for California construction projects, as well as higher Medi-Cal reimbursements – and the type of direct budget aid that Assembly Speaker Karen Bass has suggested.

He sees his public works request as a $26 billion New Deal-type infusion into projects that create jobs and bolster the economy, not as a budget solution. He says his Medi-Cal request is a matter of fairness because California sends more money to Washington than it receives.

Schwarzenegger has philosophical reasons for balancing his request for federal money with his insistence that he is not asking Washington to rescue California from its budget failures. He does not believe the state should use one-time stimulus money to solve its structural budget problem.

He also has strategic reasons. He does not want legislative leaders to think they can use federal money to avoid tough decisions on spending cuts or new taxes, especially when there is no guarantee that money would ever come.

But it remains difficult to untangle the fact that states are asking for federal dollars while they face massive budget problems at home. Tuesday's meeting between governors and President-elect Barack Obama drew numerous references to the dire nature of state budgets, including California's, even though Schwarzenegger insisted his request was separate from California's $11.2 billion budget gap.

South Carolina's governor, Republican Mark Sanford, told Fox News that granting Schwarzenegger's request would be "rewarding bad behavior with regard to economics."

"It's a blurry distinction at best," said John J. Pitney, professor of government at Claremont McKenna College. "He's asking for more help from the federal government. Whether you call it a bailout or just getting California's fair share, it still amounts to asking for more federal dollars to come to California."

Barbara O'Connor, a communications professor at California State University, Sacramento, believes Schwarzenegger has a legitimate claim to differentiate between federal dollars for public works investment and Medi-Cal and direct money to solve the budget.

"If it is in fact an investment for projects in the pipeline that are being stalled because of states' inability to pay, then it meets the criteria for investment," O'Connor said. "If it's filling the gap for California's revenue shortfall, it's a bailout. But explaining that granular level of distinction is difficult for anybody."

Schwarzenegger asked for federal public works investment and higher Medi-Cal reimbursements long before the latest budget problem. But those requests are only now receiving serious consideration because a multitude of states are in a financial bind. California leaders also believe that having a Democratic president-elect bodes well for the Democratic state receiving more federal dollars.

The distinction between California's budget problems and federal stimulus isn't clear-cut. The public works package would provide indirect aid to state budgets, stimulating the economy and creating jobs that could result in future tax revenues, which Schwarzenegger acknowledged Monday. An increase in Medi-Cal reimbursements would automatically pump money into state budgets.

"Politically, it doesn't make sense at the national level to portray this as a solution to the budget problem because if you bring that argument to Congress, Republicans and senators from 49 other states will say, 'Hey, we have tough times in our states so why should we bail you out for your dysfunctional Legislature?'" Pitney said. "It's very important, to the extent he can, to portray this as California getting its fair share."

Schwarzenegger does not want Democratic legislators to use federal aid as a crutch in ongoing budget discussions over how to close the state's $11.2 billion revenue shortfall in its $103.4 billion spending plan. He has proposed a mix of tax increases and spending cuts to bridge the gap and has not included federal aid in his budget plan.

On the same day Schwarzenegger was in Philadelphia meeting with Obama, the Service Employees International Union offered its own solution in Sacramento that involved no spending cuts and $15 billion in direct federal aid over two years. Public employee unions could pressure Democrats to demand that federal aid be written into any budget agreement.

Bass, D-Los Angeles, last month told The Bee, "I want to do 50 percent revenue and 50 percent from the federal government."

But Schwarzenegger believes discussing federal aid as a budget solution would only set talks back.

"We can't count on that, we can't expect that," said Schwarzenegger spokesman Aaron McLear. "We need to solve our $11 billion deficit without expecting any support from the federal government. That's why the governor's proposal does not assume any federal resources."

Call Kevin Yamamura, Bee Capitol Bureau, (916) 326-5548.