In a political environment where everything these days seems to be portrayed as either black or white, Legislative Analyst Elizabeth Hill's new report on the governor's budget implies there are actually shades of gray.

Her annual analysis of the budget proposal is hot off the presses (read it online here), and it finds both good and bad items in the Schwarzenegger proposal, while also suggesting some actions sure to set tongues wagging at the Capitol.

A few notable findings:

* K-12 education: Hill says the governor's plan covers growth in student population and cost of living, but then saddles local school officials with new costs that don't have an identified way to pay for them (one example: having local officials pay the state's portion of teacher retirement contributions).

* Scrapping Schwarzenegger's after-school program? The LAO report suggests that lawmakers repeal Proposition 49, the after-school program initiative that marked the governor's first political endeavor in 2002. Budget deficits have meant the program has actually never been funded, and Hill says it's an example of bad "autopilot" budgeting (ever heard that phrase before?)

* Social Services cuts are real: True to her non-partisan roots, Hill does not debate the merits of the governor's proposed $1.1 billion in cuts to these programs. She simply says they would result in real savings in future years, which would mean possibly smaller deficits.

* Shared costs for the Bay Bridge: The LAO agrees that there are hard decisions to be made about how to pay for cost increases in replacing a portion of the Bay Bridge, and says in the end the cost should be shared by local and state governments. Expect Bay Area Democrats to jump on that idea ASAP.

Look for today's analysis from Legislative Analyst Liz Hill to stir the debate once again about whether the governor's budget cuts go too far.

In short, Hill estimates there will be $2.2 billion more in revenues (this budget year and next) than estimated by Governor Schwarzenegger in his budget proposal last month. You can read her report here.

Some of it is one-time revenue, and another chunk could end up going to schools under the complex formulas embedded in Proposition 98.

But these numbers are sure to make some, especially Democrats, wonder whether some of the budget cuts proposed in January are necessary.

Hill told reporters this afternoon that about 48% of the budget decisions proposed by the governor are, essentially, cuts; 38% are loans and borrowing. When asked how much was coming from social services, Hill said it's around 20% of the overall decisions, minus borrowing.

And she again criticized the administration's efforts to impose a spending control plan that would trigger across-the-board budget cuts when deficits were left unresolved. The governor is scheduled to stump for that very proposal in Sacramento tomorrow.

WASHINGTON, DC-- If you're looking for an in-depth analysis of Governor Schwarzenegger's Washington, DC field trip... you might want to stop reading. I'll have a full look at that this morning on The California Report (audio posted online later in the day).

If, however, you're looking for some of the interesting leftovers from Thursday's California extravaganza, then read on...

* Who?!? At 9:00am, a group of school students from Virginia stood outside the south entrance to the U.S. Capitol. When they were told that Speaker of the House Dennis Hastert (R-Ill) would soon arrive in the driveway, there was silence. When they were told Arnold Schwarzenegger would arrive next, high fives and cameras came out in full force.

* Scheduling? Rep. Bill Thomas (R-Bakersfield), chairman of the House Ways And Means Committee, scheduled a bill for action at 11:30am... a half-hour into the meeting called by the governor with all 53 members of the CA House delegation. Why the conflict? Democrats hinted it was a cheap shot at sitting down to talk. But gubernatorial communications director Rob Stutzman shot back, "When you're in the majority, you have things to do."

* Ouch: A couple of dozen photographers and reporters crammed into Rep. David Dreier's (R-San Dimas) sitting room to get photos of the governor and some Republican lawmakers. On the way out, several reporters heard one GOP southern California congressman shouting at a TV videographer, after the lawmaker had apparently been hit in the head by the camera.

* Majority rules? When the governor met with the House GOP members from California, we're told that 15 of the 20 lawmakers came clean and admitted they oppose Schwarzenegger's efforts at redistricting reform.

* Bobbleheads: If you remember the guy who made the Schwarzenegger bobbleheads last year and was sued by the governor's attorneys, then you might have understood what the non-reporter asked who got his own question in at the news conference near the Capitol's Statuary Hall. John Edgell says the case cost him $20,000, even though the bobblehead profits were given to a cancer charity. He lives in DC, and showed up to ask the governor, "why did you sue me?" The governor said, "I don't know what you're talking about" and moved on. Edgell then called Schwarzenegger a "sissy", as he displayed the latest version of the bobblehead-- a likeness of the governor in a pink dress... supposedly sold as a "Governor Girlie Man."

* Crash course: Many of the reporters covering the day's events are based in DC, but work for California news organizations. As such, they were caught a little flat-footed on state government details. Several reporters asking Assembly GOP Leader Kevin McCarthy about his redistricting proposal (also the governor's plan) had to ask, more than once, how that "special session" works in which the bill was introduced.

* And on a serious note: The governor traveled downtown for a news conference with Common Cause, in which the group endorsed his redistricting plan-- while carefully sidestepping his prodigious fundraising. But in response to a question I asked, Schwarzenegger said he intends to reintroduce his campaign finance legislation, which would have banned fundraising during budget season. You'll remember last year's version (AB 3006, Haynes) fizzled out... either left to die by Democrats, or quietly yanked by the governor, depending on your political persuasion. No word on when Schwarzenegger will take up the issue again, or whether the proposal will be modified to address some of last year's concerns. Stay tuned.

WASHINGTON, DC-- Today's full slate of meetings and events here in the nation's capital essentially boil down to one question: how much of California's budget problem can be solved by asking the feds for more cash?

Governor Schwarzenegger is here, along with the four leaders of the Legislature, to discuss that very issue with the entire California congressional delegation (though we think it will only be the 53 members of the House of Representatives, with separate meetings later with Senators Dianne Feinstein and Barbara Boxer).

But in recent days, it's seemed as though the trip originally billed as "How To Get More Federal Money" has turned into something more like "The California Wish List." The meetings scheduled today are likely to not just focus on the budget, but also tack on other discussions, like how the state can avoid having more military bases on this year's list of closings.

Perhaps part of this trip's refocusing may be due to the cold, hard reality of the facts: California's ever-smaller portion of the federal budget is largely due to formulas that are used year after year.

A thoughtful analysis by the non-partisan California Institute For Federal Policy Research concludes that there are two big problems. First, California's population is younger than that of many states-- which means less Social Security, Medicare, and Medicaid money. Second, the federal government's formulas for other social programs place a lot of emphasis on per capita income. California's is high... but so, too, is the state's poverty level. The federal formulas assume the two factors are opposites (in other wordds when one goes down, the other goes up). As a result, California gets short-changed.

But changing those formulas would be complicated. And it would take major political heavy lifting by both the governor and the California GOP members in charge of the big fiscal committees. All of that may make the hype of the "Collectinator" tough to back up.

I hope to have an update on the day's events later... and will have a full wrap-up Friday morning on The California Report.

The dollars are starting to roll in over at the state Franchise Tax Board, where the second year of a popular tax amnesty program could again provide some quick cash for the state's fiscal problems.

You'll remember that lawmakers approved giving taxpayers with outstanding tax bills one last opportunity to pay what they owe, without most penalties and without prosecution. Last year, a program for those who might have abused tax shelters in the past netted $1.2 billion.

This program may not be as profitable, but seems off to a good start. In the two weeks since it began, the amnesty program as brought in $4,904,495.17 from more than 15,000 applications. The program runs through March 31st.

The folks at the FTB say some of those applications for amnesty have come from other countries.

And the oldest tax bill? From 1971.

Political reporters spend a lot of their time trying to see if there's such a thing as unbiased "facts" when it comes to state budgets.

I'm still looking... but at least some data released this morning by the Assembly Revenue & Taxation Committee makes for an interesting discussion.

The committee and its chairman, Democrat Johan Klehs of Hayward, have released a "reference book" that examines some of the fiscal realities of the state tax system. It also shows what suggestions would actually mean in dollars and cents.

As you read the following factoids, keep in mind the governor's estimate of the deficit for 2005-06 of $8.6 billion.

What happens if you...

* reinstate higher tax rates (10% and 11%) for those earning more than $138,566 (single) and $277,132 (joint)? $2.2 billion in extra revenue

* increase the overall state sales and use tax by a quarter of a cent? $1.321 billion in extra revenue

* increase the overall state sales and use tax by a full penny? $5.283 billion in extra revenue

* eliminate the state's Refundable Child Care Credit (AB 480)? $225 million in extra revenue

* increase the state taxes on beer, wine, champagne, and liquor by 50%? $79 million in extra revenue

* increase the state taxes on cigarettes by 50 cents per pack? $528 million in extra revenue

Those last 2 are my favorite, because they happen to be the only tax hikes that a recent poll showed most Californians support when it comes to help erasing the deficit.

As Assemblymember Klehs said in releasing this report, "You cannot smoke or drink your way out of this deficit."

[And my apologies for the absence of the past few days... I was attending a two-day retreat of our KQED Radio News division in San Francisco. -JM]

Embattled Secretary of State Kevin Shelley will not be called to testify tomorrow before the Joint Legislative Audit Committee.

In a conference call this morning, legislative leaders agreed to delay the JLAC hearing-- and Shelley's appearance. However, the decision wasn't official until just this afternoon.

In case you haven't been following every chapter of the saga, a quick recap: a recent state audit officially raised questions about whether Shelley's office misused money from the federal Help America Vote Act. The money was supposed to help pay for election reforms, but the audit concluded that some of the money may have been used to pay consultants to attend Democratic party activities.

The committee is trying to determine whether federal election money was misspent by the Secretary and his staff... and Shelley was supposed to testify under oath about all of this on Thursday.

The simple reason for the delay, according to people on both sides of the aisle: newly appointed special counsel for both parties need more time to examine the documents. For example, the attorney representing the Republicans (Sacramento attorney Jim Sweeney) was chosen only yesterday.

While you might expect Republicans to be criticizing any delay, Senate GOP Leader Dick Ackerman said in an interview today that he supports it.

"Most of the other hearings, like the [2000 hearing to investigate then-Insurance Commissioner Chuck] Quackenbush and the [2002 hearings focused on the former Davis administration's software contract with] Oracle, there were counsel engaged rather early", he said. "In this one, there were not."

Senator Ackerman also said he believes the problems can be traced back to JLAC Chairwoman Nicole Parra and her decision to require Shelley to testify under oath. That decision, in Ackerman's mind, meant that legal counsel would have to be involved, due to what sworn testimony might mean to any number of pending Shelley investigations.

Of course, the real question now: will Shelley ever testify? Today's agreement calls for a delay of any JLAC hearing for about two weeks. And some believe Shelley may simply resign from office before his turn at the committee hearing arrives. But his spokesperson says Shelley "fully intends to cooperate with the committee."

There are several news reports out today taking a look at the final 2004 tallies of campaign fundraising. But what might be missed in the hypothetical 2006 race for governor is that the current chief executive is sitting in third place... when it comes to cash on hand.

It's true that Arnold Schwarzenegger proved his fundraising prowess in 2004, taking in a combined total of some $25 million dollars (various news agencies, by the way, seem to have calculated the numbers differently; our estimate is a simple sum total of 2004 contributions to 5 Schwarzenegger-controlled accounts).

But the governor began 2005 in a relatively cash-poor situation. He reported a total of $2,368,346.33 in the bank. And even that number is misleading, because some of those accounts are for "issue" campaigns (like his many ballot initiative efforts) and could not be used to run for re-election. Counting just the money that could be spent on a 2006 race, he had $685,724.62.

That's not exactly chump change, but it's dwarfed by the war chests that the two most talked-about Democratic challengers were sitting on as of January 1st.

State Treasurer Phil Angelides reported cash-on-hand in his 2006 committee totaling $12,366,161.63. Plus, he had a little more than $2 million, combined, in two other accounts (including the issues campaign he created to challenge Schwarzenegger's budget policies).

State Attorney General Bill Lockyer had a pile of cash that came in slightly smaller, at $10,914,709.29. He also had another $262,431.83 in a separate account.

Even state Controller Steve Westly (who most insiders believe would not run for governor in 2006 if Schwarzenegger decides to take the plunge) had more cash in the bank-- technically-- than did the chief executive as of January 1st, reporting $1,743,463.09. Again, it depends on whether you're counting all campaign accounts, or just those that could be used for a governor's race.

The numbers are another example of how much it costs to run for the marquee offices in California. And should Schwarzenegger decide to vie for a full term of his own in 2006, it's doubtful that he'll have trouble finding the money.