State Senate leaders threw down the fiscal gauntlet Wednesday, rejecting Gov. Arnold Schwarzenegger's proposal to tap the state lottery for money and proposing $11.5 billion in new taxes to balance the deficit-ridden state budget.
"There's not enough money there to fund next year," Senate President Pro Tem Don Perata said as he unveiled the Senate version of the budget. "We're proposing to raise taxes."
Schwarzenegger wants to "securitize" the state lottery by borrowing against future profits and use $5.1 billion of the loan proceeds for the 2008-09 budget, plus nearly $600 million in loans from various special funds, and fill the rest of the estimated $15.2 billion hole in the budget with spending cuts. He said he opposes broad new taxes, a position echoed by Republican legislators.
Assembly Democrats have adopted a version of the lottery plan and called for $6.4 billion in new revenues. Neither Democratic faction, however, has specified what taxes they want to raise.
Wednesday's release of the Senate budget sets the stage for a two-house conference committee to begin reconciling the minor differences in the two Democratic versions, but the big-ticket issues of major spending cuts and taxes will be negotiated by the governor and legislative leaders.
The constitutional deadline for legislative approval of a budget is June 15, but it's almost never met. The fiscal year begins on July 1, but Perata said flatly that a budget won't be written by then, either. He said he hopes to have a budget in place by Aug. 1, noting that the state faces a looming cash flow shortage in August if a new budget is not in place.
"This is not a morality play," said Perata, who will be leaving the Legislature later this year. "This is life."
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