Nonpartisan group crticizes state budget assumptions

A California budget watchdog group has plenty of skepticism over proposals to borrow against future lottery revenues to solve a $15 billion state budget deficit, but doesn't believe voters will punish legislators in November for whatever deal is reached.

Jean Ross, executive director of the California Budget Report, said in a telephone press conference Tuesday morning that Gov. Arnold Schwarzenegger's proposal for lottery revenues would be a tough sell for voters who want to avoid encumbering the state with more debt.

"It's clear that that money from the lottery has been over pledged, and we're being very conservative in our projections," Ross said.

She explained that under the governor's proposal - which would have to go before voters in November for approval - this year's budget deficit would be repaid in later years by revenues from increased lottery sales.

That's unlikely to happen, Ross said, because there's both evidence that gambling sales of all kinds are flat or in decline, and that most people who play the lottery are low-income residents unlikely to boost their spending on lottery tickets.

As well, Ross said, borrowing against the lottery and repaying it could cost as much as $50.2 billion, dwarfing the $15 billion gap the borrowing would close.

Most realistic projections of when revenues would climb enough to meet that obligation point to five to 10 years from now, Ross added.

Ross spoke on behalf of her group, a nonpartisan analysis and research organization, as state legislative leaders seemed to have made little progress toward a state budget for 2008-09.

Tuesday was the start of the new fiscal year, but more often than not in the last two decades, that day has come in California with no new budget.

Still, the mood of the electorate on the budget deadlock is more likely to be felt in any ballot proposal having to do with the lottery than individual races in the state Assembly or Senate, Ross said.

Vulnerable Democrats will want to avoid being seen as in favor of service cuts, and vulnerable Republicans will likewise want to avoid tax increases, Ross said.

Because most California legislative districts heavily favor one party or another, and because term limits will force many legislators out after this year, very few races are in a position for budget battles to affect them.

Ross did not offer a prediction as to how soon legislators will compromise and create a budget, but noted that the state has la cash crunch, ess ability than normal to borrow money, and may do so at more expensive rates.

She also said that rumors about budget negotiations suggest a tax cut in future years on businesses, troublesome because that could potentially add to deficits in years ahead.