As we reported in this morning's radio story for The California Report, yesterday's action (and inaction) by the Legislature on a major prison reform bill fell victim to one of the essential truths in politics: a deal's not done until it's done.

And this one wasn't done... which is why we all get to come back Monday and try again.
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BUDGET DAY PLUS 47 -- Expect some heated policy talk, sprinkled with shrewd politics and a dash of theatrics as the Assembly convenes this afternoon to debate, and vote, on a new state budget -- the first Sunday session of the lower house in more than five years.

On Saturday afternoon, some of the first specifics were released about the budget to be considered. As has been reported several times in recent days, the budget presented by Democrats... one they say was crafted with an eye toward the budget priorities of Governor Schwarzenegger... is almost certain to fail passage, with Assembly Republicans in no mood to approve the increase in high-earner personal income taxes that the bill contains.

But until some of the budget's specifics were released yesterday (with a news embargo until this morning), we didn't have a clear sense of two key issues -- the "rainy day" reserve fund which appears crucial to ultimately striking a deal, and the Democratic plan for using the California Lottery as a source of future revenue.

First, the reserve fund. Assembly Democrats appear to have adopted most of the suggestions laid out back in February by Legislative Analyst Elizabeth Hill. Those recommendations focus on strengthening the existing reserve fund that was created by 2004's Proposition 58. And they include enlarging the reserve to 10% of general fund revenues, making it ostensibly harder to pull money out of the reserve fund, additional transfers into reserves in better-than-expected years, and specific rules about where any reserve funds above the 10% mark go -- including one-time expenses or even one-time tax cuts.

What's probably most worth noting is how Democrats want those "better than expected" years to play out. Specifically, they want to use revenue estimates contained in the budget bill passed the summer before... also known as revenue forecasts controlled, in part, by the Legislature. That differs from the governor's budget reform plan, which relies on revenue forecasts controlled by his own Department of Finance.

The other significant element of the Assembly Democratic plan is borrowing against future California Lottery revenues, known as securitization. The proposal appears to call for borrowing $10 billion from Wall Street, compared to the governor's $15 billion lottery borrowing plan. It also guarantees public schools would keep getting what they get now from lottery sales.

But perhaps more intriguing: the Democratic plan, like Schwarzenegger's, allows larger jackpots (thus eliminating the 24-year old mandate that 34% of profits go to education)... while rejecting the governor's call for allowing the lottery to offer new games.

While that's likely a concession to those who worry about the social and/or moral implications of a major gambling expansion, it may very well jeopardize the amount of extra profit the lottery can generate -- and therefore, the amount of money Wall Street is willing to lend.

Also worth noting: Assembly Democrats have dropped two of their tax increase plans from a few weeks ago -- the cancellation of expected "indexing" of tax rates for upper and upper-middle income earners (it would have given the state an extra $815 million) and a lowering of the taxpayer credit for having a kid (which would have brought in an extra $215 million).

Expect to hear more about all of this later today, and check back in for some live blogging from the Assembly floor.

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.