Legislative Analyst Mac Taylor may have a fallback solution to the political paralysis that has thwarted a state budget solution – let the people decide.

In the nonpartisan office's first take on Gov. Arnold Schwarzenegger's proposal to close a $40 billion budget gap over the next 18 months, Taylor suggested the Legislature call an election for April, perhaps asking voters to decide the confounding issue of whether taxes should be raised.

Taylor said a quick election is necessary because lawmakers and the governor must know soon whether to rely on solutions like selling future California Lottery revenues for $5 billion or taking $500 million from dedicated tax streams. If voters reject those proposals, lawmakers would have to find multibillion-dollar alternatives on top of other taxes and spending cuts.

"The benefits in doing it early are that should the voters not accept those proposals, the Legislature would know and have time to react in order to get a budget in place on July 1," he said.

Voters and state leaders have long been complicit in California's budget problems. The electorate has created special levies, mandated formulas for school financing and made it difficult to raise taxes, all of which have restricted the Legislature's maneuverability. Yet voters remain the only ones with the power to approve certain financing tools.

"On a purely philosophical level, the irony is pretty thick," said Dan Schnur, a former Republican strategist who now directs the Jesse M. Unruh Institute of Politics at the University of Southern California. "But once you get past that level, there's some logic to it. If the voters have put their elected officials in this type of straitjacket, there's something to be said for seeing if they'll let them out."

County registrars say an April special election remains possible if lawmakers act quickly. Madera County Clerk/Registrar Rebecca Martinez, president of the state election officials' association, said counties realistically need no less than 70 to 75 days' advance notice.

The state's most populous county, Los Angeles, has elections scheduled for April 21 and May 19, making it preferable to hold a statewide election on one of those days, she said. The May date works best because the city of Los Angeles, with 1.5 million registered voters, will hold a mayoral election that day.

Legislative leaders and Schwarzenegger didn't commit Thursday to calling a special election that soon. They have agreed on only two measures for a ballot this year.

"Well, we do think it needs to be done sooner rather than later," said Assembly Speaker Karen Bass, D-Los Angeles. "Whether it's April or not, we don't know that."

Schnur said that if lawmakers rely on the ballot box for billions of dollars, it is crucial that they and the governor are unified in support. If any opposition forms, leaders will need to raise money quickly.

"Ballot initiatives of any type rarely pass unless they overwhelmingly outspend the opposition," Schnur said. "There's no reason to think budget-related initiatives would be any different."

State leaders already need voter approval to seek an upfront $5 billion payment from Wall Street this year in exchange for future California Lottery profits. They also have already agreed to ask voters to create a stronger rainy-day fund and give the governor more authority to cut spending midyear.

But state leaders could ask voters to sign off on as many as seven other changes:

• Republicans and Schwarzenegger have asked Democrats to tap two special taxes for general budget purposes, a tobacco tax that pays for First 5 child development programs and a millionaire tax that pays for mental health services. Senate President Pro Tem Darrell Steinberg, D-Sacramento, who led the mental health campaign, said the latter proposal is a "non-starter."

• Taylor suggested two other changes: amending Schwarzenegger's 2002 initiative that dedicates money for after-school programs and redirecting health money from a separate tobacco tax fund.

• Schwarzenegger's budget relies on taking out a $5 billion cash loan this summer that the state would repay by 2011, borrowing that Taylor said may be unconstitutional. Instead, Taylor recommended asking voters to approve a new round of economic recovery bonds.

• Democrats passed an $18 billion deficit-reduction plan that raised revenues with a majority vote rather than the two-thirds vote requirement for increasing taxes. Taylor said lawmakers could avoid legal challenges by instead asking voters to approve the taxes. Legislative budget experts said such a move would require amending the state constitution, a method rarely used for raising taxes.

• Taylor recommended that the Legislature ask voters to approve new transportation bonds paid by gas-tax dollars to accelerate construction.

Taylor said the budget problem is best described as "colossal" – at least until the next time he checks his thesaurus.

"In our November report, we used words like dire and bleak and awful, and since that time the problem has gotten a lot worse," Taylor said. "So we're kind of running out of adjectives."

Call Kevin Yamamura, Bee Capitol Bureau, (916) 326-5548. Jim Sanders of The Bee's Capitol Bureau contributed to this report.