Ah, where to begin?

Governor Schwarzenegger’s new budget proposal reminds me of the old adage that journalists have used so much that it’s become a badge of honor in our profession: if people on both sides of something are mad at me, then I must be doing something right.

Of course, it’s never that simple… in the news biz, or with this state budget plan.

The $144 billion spending proposal seeks to erase what the governor’s advisers say is a $17.2 billion shortfall (to be fair, it’s actually $15.2 billion in red ink, with $2 billion more for a reserve). $9.1 billion of the solutions are spending cuts. Those are, in several cases, serious cutbacks… many in health and welfare programs.

But it’s the new revenues the guv is counting on that are getting a lot of the attention.

And more than 60% of those new revenues are found in Schwarzenegger’s unusual… and already controversial… plan to sell bonds repaid by future profits from the California Lottery. The governor’s team doesn’t like that many of us are calling it “borrowing.” Call it “securitization,” or “selling future lottery profits,” they say. But it’s also true that the state would be asking for a loan from Wall Street investors for $15 billion in future lottery earnings up front, to be paid back with interest.

Only $5.1 billion of that loaned cash would be used now; the rest would be stashed away. The entire plan would have to be blessed by voters in November, because the lottery itself was created by an initiative in 1984.

The lottery idea isn’t a new one. Three other states — Oregon, Florida, and West Virgina — have already embarked on somewhat similar lottery bond offerings.

But what is new is the ultimatum that Schwarzenegger and legislators (who’d have to agree to place it to the ballot) would be sending to voters: agree to change the lottery… or the state will enact a 1% sales tax increase.

The threat of a tax increase immediately had legislative Republicans threatening to go to the mattresses. But it may also become perceived as a “give us your money one way or the other” kind of strategy: buy lottery tickets or pay more in sales tax at the register.

And how might you get more people to play the lottery? Many of the ideas were discussed back in March when a state Senate committee considered the idea of lottery privatization: more marketing… perhaps even to younger Californians… more machines in more neighborhoods… and bigger jackpots. Those same kinds of changes are currently enshrined in SB 1679 by Sen. Dean Florez (D-Shafter), a lottery reform bill upon which the governor’s plan appears modeled.

But bigger jackpots means that the long-standing guarantee of 34% of lottery sales going to education must be eliminated. And that’s raised the ire of the powerful California Teachers Association, which formally opposes SB 1679.

Education’s role in lottery revenues would be further diminished by something made explicit today in a Q&A between reporters and Schwarzenegger’s budget director, Mike Genest: Wall Street investors would have first dibs at future lottery revenues. “Education revenue is subordinate” under this plan, said Genest.

Something tells me that’s going to be a tough pill to swallow.

There will be much more to examine on this issue… and the budget battle… in the coming weeks. But one other thought to ponder on this sweltering day in Sac Town: the lottery proposal and the governor’s much ballyhooed budget reform plan both have to be on the November ballot.

The first (and official) deadline for getting them on the ballot is June 26. That’s fine if the budget’s enacted in time, too, for the July 1 fiscal year. But almost no one in Sacramento thinks that will happen… meaning elections officials could also be scrambling to get these two measures included in the fall lineup.

That title has only been used once before in the California Assembly (and then only under unusual circumstances), but it’ll be the buzz word for today when Karen Bass is sworn in as the 67th speaker of the lower house.

Bass hooked the top job several weeks ago, but today formally assumes the title and the power. The 53-year-old Los Angeles Democrat replaces Fabian Nunez at the helm, three months after Nunez’s gambit to modify the existing term limits law was rejected by voters.

Speaker Bass spent some time with several Capitol reporters over the past few days, including a brief interview with me late last week.

In such a setting, it quickly becomes clear that she’s much more succinct than the often verbose Nunez. That truncated communication style may be the perfect fit for her similarly slim agenda as leader of the Assembly. In almost every recent interview, including ours, Bass has said that there are only three things on her to do list: solving this year’s budget mess, examining systemic reform of the state tax code, and strengthening California’s overburdened and often neglected foster care system.

Click below to hear my profile of Bass that aired this morning on The California Report.

Aside from the big items on her agenda, a few other comments on recent issues from my interview with the new “Madam Speaker”:

Redistricting: Bass says she supports an effort to remove political map drawing duties from the hands of the Legislature… but she’s stopping short of an endorsement of the proposal that appears headed for the ballot thanks to the work of Governor Schwarzenegger and government reform groups. In fact, she expressed reservations about the proposal, and a desire to see what might come out of a new effort on the issue pledged by the outgoing Speaker Nunez.

Health care reform: Bass also said she’d like to return to last year’s discussion on changes to the state’s health care system… and dismisses any speculation that legislative efforts on the issue are all but dead in the near future.

Foster care reform: And back on her pet issue, Bass explained her interest in a future ballot initiative to find a new way of paying for the state’s troubled foster care system… and why the needs are so great.

Today’s big ceremony in the Assembly chambers will feature a who’s who of VIPs, including many of the politicos who once held the job of speaker. And then it’s back to work… and Bass’ greatest challenger… as Governor Schwarzenegger unveils his much anticipated revised budget tomorrow afternoon.

If you’re one of those folks who are following the latest discussions about the fiscal troubles of the state, a word of advice: believe everything. Or nothing. Or something in between.

Spending and revenue estimates in Sacramento are always like the latest fad in fashion… they come and they go. They’re hip one day, tragically dated the next. That’s been true for years, way before Governor Schwarzenegger took office.

But few other chief executives have sparked so much chatter… and offered so many estimates about the budget… in so few days.

The latest guesstimate came on Monday, when Schwarzenegger told an audience in Garden Grove that the state budget is “$20 billion out of whack.” That would lead to a budget crisis second only in magnitude to the shortfall that helped spark the recall of former governor Gray Davis in 2003.

As of yesterday, the official word was that the governor was “speaking rhetorically.” Might that then mean that the governor’s numbers aren’t necessarily rooted in reality? After all, my handy Webster’s Dictionary offers one definition of rhetoric as “the use of exaggerated language; bombast.”

But today, Capitol reporters were told that the number could, in fact, be real.

“[Schwarzenegger] has internal estimates” that show as much as an additional $10 billion in budget red ink, according to gubernatorial press secretary Aaron McLear. “That’s why we need to start working on this now.”

McLear declined to reveal any more about those internal projections, though may have more later on whether this is a lack of revenue, an abundance of spending, or both.

But he did lay out a rationale for how you’d get to $20 billion:

The governor’s budget team believes that as of this winter the state faced a $7.4 billion deficit in fiscal year beginning in July, down from $16 billion and thanks to a series of possible money saving proposals were enacted. Add to that $2.8 billion, says Schwarzenegger spokesman McLear, for the governor’s desired rainy day fund. Then add on the still nebulous $10 billion in new problems… and you get pretty close to $20 billion.

Of course, the rainy day fund isn’t really part of the deficit… i.e., an actual shortfall in revenues or an abundance of mandatory expenditures. Take that out and the governor’s new number maxes out at a little more than $17 billion.

Now, the caveats. We’re still waiting for a clearer picture of revenues. And while the April 15 checks are still being totaled over at the Franchise Tax Board, there’s new word that things might be looking better than (or not so bad as) expected. That, however, is only one piece of the revenue pie: there are also corporate tax revenues and sales tax revenues that figure into the issue.

But if the deficit projections start inching toward the big two-oh, it’s hard to see how even the governor’s 10% across-the-board cuts (strongly opposed by Democrats) would erase the problem. And yes, that probably brings us back to a debate over some kind of a ____ increase.

You can fill in the blank, can’t you?

It looks like the flow of moneycoming in to state coffers has picked up as personal income tax returns are processed, but there’s still a long ways to go.

As mentioned last week, Controller John Chiang has a new page on his website where you can see (with a time lag) the tax revenues come in each day in April. You may have mailed your check on time, but it takes a while for all of that cash to be processed.

New data shows Monday was the biggest day so far in April, with almost a net of $1.6 billion in tax dollars (that’s the amount after refunds). That brings the total for the fiscal year up to almost $40 billion.

But the burning question is: will this be enough? Governor Schwarzenegger’s current budget plan predicts that total will be $45.3 billion by the end of the month. That means the state still has a way to go as all of those remaining envelopes are opened at the Franchise Tax Board.

For weeks, Governor Schwarzenegger has barnstormed the state trying to drum up support for his effort to reform the annual process that governs the state budget. But back here in Sacramento, he may soon run short on time for a substantive debate over just how to do that.

The governor’s current thoughts on budget reform were laid out in his State of the State speech in January. But changing the budget process requires that voters first amend the state constitution. And before they can do that, there needs to be legislation introduced… which hasn’t happened.

And the clock is ticking.

A check of state election law and some quick math courtesy of elections officials shows that any proposal for the November 4 ballot is supposed to be approved by the Legislature and signed by the governor no later than Thursday, June 26.

That’s just about two months if you’re keeping track at home.

At this morning’s weekly briefing for the press corps, Schwarzenegger spokesman Aaron McLear said that a formal budget reform proposal is immiment. “Time is on our side,” he said, while also emphasizing that the governor wants the issue resolved this year.

And McLear said that a legislator has agreed to carry the bill, but he declined to identify the legislator. This afternoon, one well-placed legislative staffer said that negotiations over what the budget reform plan will look like are actually still ongoing… which makes the administration’s pronouncements seem a tad optimistic.

To be fair, the sketch laid out by the governor in January does include some specifics for policy wonks to chew on– including the squirreling away of excess revenues in good years, and automatic cuts when a deficit is projected and the Legislature fails to act.

But there are far more questions about how it would actually work. And one only has to turn the clock back to 2005 to see how the fine print of Proposition 76, Schwarzenegger’s most recent budget reform plan, spelled its doom. In particular that time, education advocates decried the measure’s ability to slash funding for public schools.

And as you can hear below, in a piece I filed for The California Report a few weeks ago, some Democrats are also leery of giving the executive branch new powers over the budget… no matter how it’s designed.

As Capitol watchers might guess, June 26 is nowhere near a hard and fast deadline. Lawmakers are notorious for going into extra innings when it comes to getting something on the ballot… even sometimes agreeing to pay for supplemental ballot pamphlets long after they’ve missed the printing deadlines.

But it seems folly to suggest that there’s lots of time left for a major change in budget governance in 2008. And the delay stands in stark contrast to the governor’s message in dozens of local forums in recent weeks that there’s real “urgency” to the issue.

And the later things get officially started on the issue here at the Capitol, the more likely that budget reform will get folded in with negotiations over the current budget morass.

Where else would a headline like that be written than here at the state Capitol? A few items of note as the week begins…

A NEW TAXXX: Today was lobbying day for the adult entertainment industry, one of the more unusual annual rituals at a statehouse was unusual is the norm. The fully clothed ensemble that made their way to Sacramento had a particular gripe this time around: pending legislation to impose a new (and extra) 8% tax on adult DVD stores, theaters, and nightclubs. The money collected by the tax in Assemblymember Charles Calderon’s bill, AB 2914, would create a new fund to supposedly mitigate the impact of such businesses on local communities.

Let’s just answer that burning question now, shall we? Yes, adult film stars were in attendance. And no, I shouldn’t have Googled them in advance when I didn’t recognize the names listed on the press advisory (seriously, KQED, I was doing research).

Now that we have that out of the way… the industry representatives argued the tax would send many in the multi-billion dollar sex industry packing to other states. “You do not want this industry to relocate,” said Jeffrey Douglas of the industry-sponsored Free Speech Coalition.

Of course, AB 2914 could pose an interesting dilemma for some legislators, namely Republicans. After all, if you’re a social conservative you’d probably love nothing more than to see the XXX industry move out. But if you’re a fiscal conservative, you’re probably loathe to enact a new tax. Oh, the irony.

A FALL CLASSIC AT THE CAPITOL? Hundreds of college students from around the state descended on Sacramento this morning to protest Governor Schwarzenegger’s proposed budget cuts, and the likely ensuing tuition hikes. Such a protest has become a predictable, though unfortunate, reality at the state Capitol in recent years. And among those speaking from the podium on the Capitol steps, Senate President pro Tem Don Perata… perhaps the best situated of any of the speakers to reject the governor’s budget plan.

“We need to raise taxes in order to educate Californians,” he told the crowd. And if that wasn’t enough tough talk, Perata repeated his recent pledge to stay in session as long it takes to get the budget Democrats want. “If we have to watch the World Series from this building, we will do it.”

SADDLED UP: Speaking of budget cuts, a smaller group of protesters was on the other side of the Capitol this morning to lament another part of the governor’s spending plan. About two dozen folks had marched from the nearby Sutter’s Fort to protest Schwarzenegger’s proposed spending cuts for California state parks, many of them wearing clothes from the 1800’s. Others made the journey on horseback and in vintage wagons… which led to a different kind of spectacle: one of the many hitched-up horses relieving himself on the street in front of the Capitol, just as a repulsed group of college students from the other event happened to stroll by.

Yes, it’s April 15th. Yes, it’s not a fun day for those of us (myself included) who wrote a check to the state. But this year, it’s even worse if you’re a state lawmaker trying to balance the books for the fiscal year that’s about to begin.

New data out today from the budget shop of Governor Schwarzenegger shows that revenues collected in March for the state’s General Fund were $912 million less than expected for the month… and as a result, total revenues for the year are almost $1.2 billion behind projections. Keep in mind that those revenues come from several sources, only one of which is personal income taxes; corporate tax revenues were also down, for example.

But in April, it’s personal income taxes that everyone cares about. After all, this is the month where most of those taxes are paid for the year. And the presence (or lack thereof) of those revenues are why state budget writers go back and revise their proposals in May… just weeks before the new fiscal year begins on July 1.

Every day this month, the folks at the Franchise Tax Board are opening those tax envelopes and adding up the totals on the checks. This is a process budget wonks have been keeping tabs on for years. This time, however, it’s easy for anyone to monitor. Controller John Chiang has a new page on his website where daily preliminary tax receipts are being released.

In other words, you can see for youself how much is coming in… and how it compares to the tax revenues that came in during April of last year.

As of yesterday, the site shows almost $1.6 billion in personal income taxes have been mailed in this month. That seems to be running slightly ahead of 2007 (though the report is lagging by a day or so). No data has yet been entered for today. And remember, just because you mail it by tonight… the folks at the FTB may not actually get it in their hands for a few more days.

It will be interesting over the next two weeks to watch these totals, and to see just how in the hole the state really is. Remember, most everyone assumes that the budget-balancing actions taken by the governor and Legislature earlier this year may have only solved about half of a problem estimated at near $16 billion.

But remember, revenues were already behind projections when April began. And the governor’s budget assumes a whopping $12.1 billion in personal income tax revenues will come in this month alone. How close will we get? The controller’s website will have some answers over the coming days.

With April 15 right around the corner, state tax officials have released their list of the biggest tax debts owed to the Golden State… and it’s hard to miss the name of O.J. Simpson coming in at #15.

Actually, the official list from the state Franchise Tax Board lists him as “Orenthal Simpson” of Miami, Fla. The notorious celebrity owes taxes and penalties totaling $1,527,925.92.

There aren’t many other instantly recognizable names on the list, though a little searching revealed that one of those fingered by FTB officials is Altovise Davis, wife of the late singer/actor Sammy Davis, Jr. She comes in at #8 on the public list, with a state tax debt of $2,708,901.75.

The list of tax debts adds up to some $123 million in money owed to state government. Granted, that’s not much when compared to a current budget deficit of at least $8 billion. But tax officials say what’s fair is fair, and the list is publicized in hopes of, well, embarrassing some of these folks into coming forward.

Something tells me, though, that it might be hard to embarrass O.J. at this point.

The full list is here.