Capitol Alert

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Gov. Arnold Schwarzenegger called in his special economic adviser David Crane and representatives of three investment houses to again pitch his lottery scheme Thursday, but Democratic leader Don Perata said he remains skeptical the plan could be used to help fill this year's $15.2 billion deficit.

"I think it's pretty conclusive that it's not a budget solution for this year, but it does have potential for the years following," said the Senate's president pro tem.

Schwarzenegger suggested in May that the state "securitize" $15 billion over three years from Wall Street by promising future lottery revenues to investors. The plan would sell $5 billion in bonds immediately to help offset the deficit. Schwarzenegger has insisted the plan is not a borrowing scheme and called it "a gift from the future."

With no budget vote any time soon, Schwarzenegger hosted the first Big 5 meeting in a month and emphasized the clock is ticking for legislators to hand him a spending plan. The state is in its 17th day of the new fiscal year without a budget.

Republicans said they were open to using the lottery plan in this year's budget, but placed priority on a spending cap.

"The serious conversation we're having is about budget reform," said Assembly Republican leader Mike Villines. "I mean, we heard that loud and clear today as well from the financial houses, that the structural budget reform has to be real for creditors and others to see if it's legit. It has to be real, it has to have teeth."

Perata, who has proposed $8.2 billion in tax increases, said a spending cap won't solve the state's fiscal problems.

"I don't think there's a panacea here," Perata said. "I think we do have to be mindful that you either have a static budget or a dynamic budget. A static one says you wake up in the morning and say this is all the money we have. ... A dynamic one says this is what California should be like, and we adjust accordingly."



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