Just a note to say things will be back to normal here on the newsblog in the next couple of days, as I unpack my bags from a family vacation.

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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?

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The formal casino compacts announced this morning could pave the way for a 2,500 slot machine casino just off Highway 99 in Madera County. The casino would be run by the North Fork Rancheria of Mono Indians. But a portion of the profits would be given to the Wiyot Tribe of Humboldt County, in exchange for Wiyot abandoning any plans for a casino on the north coast. The state would also get a cut of the casino profits on a sliding scale. Schwarzenegger adminstration officials estimate the early profits would be in the range of $3-5 million a year for Wiyot, and as much as $25 million a year for the state.

There’s a familiarity to the shotgun marriage of the two tribes, as it shares some similarities with the controversial and ultimately doomed deal of 2005 for side-by-side casinos in Barstow. In that case, two tribes were to be given casinos in a location far away from their ancestral homes, largely to sidestep environmental concerns in developing native lands. This time, there’s also an environmental protection issue (with the Wiyot location). North Fork’s reservation is closer to the site in question than was the case in the Barstow deal, though at least one other tribe in the Central valley remains adamant the land in question is in their territory.

The formal gaming compacts are being signed today by Schwarzenegger, but are not yet being submitted to the Legislature. The governor’s advisers told reporters on a conference call this morning that until federal officials approve the 305 acre parcel near Madera, the compacts will be in a holding pattern. That, too, seems to be a nod toward the Legislature’s rejection of the Barstow deal… where legislators demanded that the feds give their blessing first. The governor’s aides also rejected any notion that this new deal sets any kind of precedent, arguing that every Indian gaming negotiation stands or falls on its own merit.

But perhaps the most interesting part of the conference call held by the governor’s tribal gaming team came in their defense of the new casino deal’s adherence to Schwarzenegger’s 2005 manifesto on acceptable new Indian casinos.

That proclamation says, in part, that Schwarzenegger will not agree to any new casino “where the Indian tribe does not have Indian lands eligible” for a Nevada-style casino.

That would seem to kill deals like this one, right? After all, the North Fork tribe doesn’t yet have federal approval for the land near Highway 99.

The answer: the proclamation doesn’t say what you might think.

Schwarzenegger’s legal affairs secretary, Andrea Hoch, told reporters that because both tribes have other land (i.e., their ancestral homes) that is already eligible for gaming, then their quest for an off-reservation casino is not at odds with the proclamation… even if a common language reading of the document suggests otherwise.

“Both tribes have met that criteria and met that threshold,” said Hoch.

The proclamation also stipulates that the “local community” support the project. How to measure that, of course, is the tricky part. Some local officials in Madera County have signed off on the deal, but others in the community have voiced strong objections. And in today’s briefing, there was mention of a telephone poll that reportedly showed the community is in favor.

Is a poll enough proof? During a hearing in the Legislature almost three years ago for the Barstow project, some legislators scoffed at polls… essentially saying that choosing the right sample gets you the result you want. Given their line of work, you can assume they know a thing or two about polling.

One final note: it’s hard not to note that legislation to ban just this type of announcement continues to make its way through the state Senate. SB 1695 by Sen. Dean Florez (D-Shafter) would prohibit the governor from striking deals for land not yet approved by the feds for a casino. The governor has taken no formal position on the bill, but this agreement certainly seems to show he’d veto it if it comes to his desk in its current form.

Nonetheless, today’s news marks a significant new chapter in Indian gaming in California. Expect fans and critics alike to use it as a rallying cry for other proposed expansions in the coming months.

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The latest fracas over California’s landmark tailpipe emissions law is about proposed new regulations from the National Highway Traffic Safety Administration. The regulations seek to raise the minimum gas mileage of vehicles that would hit the streets in the next few years.

But deep inside that 417 page document is a finding that California and other states can’t regulate tailpipe emissions, because doing so amounts to individual states setting fuel efficiency standards… something that only the feds can do.

If that declaration is allowed to stand, it would strike a big blow to California’s landmark global warming law. And that explains why state officials came out today with guns ablaze.

“It’s a power grab,” said California Air Resources Board chairwoman Mary Nichols in an afternoon news conference at the state Capitol. “[The Bush administration’s goal] is to make sure that the U.S. auto companies don’t ever have to face any regulatory requirements that might make them do something that would make the cars more efficient.”

The new document’s apparent attempt to settle the issue certainly seems suspect when you consider that the debate over regulating tailpipe emissions is still making its way through the courts… where, so far, California seems to be holding its own.

And state officials say the argument made by the proposed fuel standards regulation — that tailpipe emissions and fuel standards are inextricably linked — is one they’ve heard before.

Nichols addressed the issue head-on at today’s news conference.

U.S. Senator Dianne Feinstein is also vowing to fight the seemingly stealth action. In a letter dated today to U.S. Secretary of Transportation Mary Peters, Feinstein says that the proposed regulation “is contrary to Congressional intent” on the issue of what states can, and cannot, do when it comes to greenhouse gas emissions.

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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.

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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.

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Capitol Weekly editor Anthony York and I trek through the week’s news with our usual repartee. Consider yourself warned.

Related Information:

“State Launches Unprecedented Review of HMO Coverage Cancellations,” by John Howard & Anthony York of Capitol Weekly

“Perata’s ‘No Show’ Letter to Staff Chiefs Fuels Capitol Anger,” by Anthony York of Capitol Weekly

“Tax Blues… State Government Style,” by John Myers at KQED Capital Notes

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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.

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Still, a fun quip came when the moderator asked Schwarzenegger to name a policy disagreement he’s had with his wife, First Lady Maria Shriver. The governor replied with describing the day he came home a few weeks ago.

“All of a sudden,” he said, “I see an Obama sign in front of my home.”

The audience laughed at the reference to the first couple’s presidential split. She’s endorsed Democrat Barack Obama; he’s endorsed Republican John McCain.

The governor went on to quote his wife talking about Obama. “‘Oh, he’s so cool,’” he said he remembers Shriver saying. The audience at the Alameda event ate it up.

But the best line came next. In a reference surely to make supporters of Democrat Hillary Clinton feel slighted, Schwarzenegger said he sees his household Obama-McCain disagreement as having a silver lining come November.

“It doesn’t matter who gets elected, we’re in.”

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For years, the most controversial part of the tribal gaming process has been casinos proposed for land that either isn’t an ancestral reservation… or land that the federal government hasn’t yet recognized as part of a tribe’s reservation. Critics have derided such proposals as examples of “reservation shopping,” accusing tribes and their deep-pocketed investors of choosing locations solely based on how much money can be made.

The legislation in question, SB 1695, would change the way new casinos are approved, by prohibiting the governor from negotiating with any tribe whose casino land hasn’t yet been sanctioned by the U.S. Department of Interior.

(A quick explainer to those who don’t follow this issue much: federal law lays out a long process for non-Indian land to become a reservation. It also requires a tribe to negotiate a formal gaming agreement, known as a compact, with the governor of the state before opening a casino.)

Governor Schwarzenegger has negotiated a number of casino compacts with Indian tribes since he took office, but his most controversial deals have seemed to be ones where the land hadn’t yet secured a federal OK. Most notable on this list: the long saga of the two tribes wanting to build side-by-side casinos in Barstow… even though the tribes’ reservations are in another part of the state. Schwarzenegger agreed to the casinos long before the feds had ruled on the proposal; earlier this year it was rejected.

The bill, authored by Sen. Dean Florez (D-Shafter), simply says that the governor can’t negotiate a formal compact until the feds have had their say. The current version of the legislation is notably more tame than the original, which would have essentially banned any tribe from opening a casino on land away from its ancestral home… presumably even if that tribe no longer has a reservation (and many don’t).

The bill sailed out of the Senate Governmental Organization committee this afternoon, which Florez chairs (its one dissenting vote: Sen. Pat Wiggins, a Democrat whose northern California district includes one of the tribes that wanted to go to Barstow).

A spokesperson for Schwarzenegger said the guv won’t take a position on the bill until it reaches his desk.

If the Legislature sends it to him, it certainly puts him in an interesting position: if he signs it, it would seem to imply that some mistakes were made in the past. And it would seemingly derail secret negotiations he might currently be conducting with some tribes (though there’s no official confirmation that any casno negotiations are even underway).

But if he vetoes it, critics of the rapid expansion of Indian gambling will say the governor is ignoring the plight of communities that don’t want casinos, and that he’s being inconsistent with his earlier pronouncements about the siting of new tribal gambling facilities.

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