The headline, rushed online yesterday by news outlets looking for a scoop, makes it clear the state's budget woes aren't getting better. Maybe even worse.

But deeper inside the new in-depth analysis of the Legislative Analyst's Office are examples of a government budget system that's evaporating faster than the polar icecaps.
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As California's state budget fracas begins to heat up, it's getting awfully hard to sort through the numbers, data, and pitches that are being presented to prove particular points.

So let's take a moment to get our bearings. (Note: especially for me, as I was on a brief vacation last week.)
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[UPDATE: It appears that Schwarzenegger is now abandoning his call for about $5.5 billion in borrowing for the year starting July 1, a borrowing plan that the LAO (see below) has criticized. That means, according to his advisers, more spending cuts. --JM]

A new analysis of Governor Schwarzenegger's revised budget suggests that the deficit could end up being as large as $24 billion by July 2010, forcing even more severe choices by lawmakers over the next few months.

Legislative Analyst Mac Taylor released his new report this morning, and estimates that even if all of the governor's budget ideas are adopted, California faces a shortfall in excess of $15 billion the year after next. As a result, he says long-term planning is a must.
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Late word this evening that will get everyone's attention: Governor Arnold Schwarzenegger has informed legislative leaders that if three of the six budget-related ballot measures fail next Tuesday, the state faces a $21.3 billion deficit between now and next July.

In a letter to the four legislators this afternoon, Schwarzenegger actually offered two new assessments from his budget team of what lies in store for California: a $15.4 billion shortfall if Propositions 1C, 1D, and 1E pass, and the aforementioned $21.3 billion if they fail.
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The labor union campaign opposing Proposition 1A has released its first TV ad, attacking the measure's planned budget reserve as a way to "spend billions on pork barrel projects."
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Add this morning's new report from the Legislative Analyst's Office to the growing chorus of warning signs about the fiscal year that lies ahead for California.

The LAO believes that the weakened economy, the shaky budget, and the defeat of the budget-related ballot measures could force state government to seek as much as $23 billion in short-term borrowing from investors in the budget year that begins on July 1.

And now, the kicker: that might be impossible to pull off.
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Perhaps no operation of state government has been sized up for reform more in recent years than the California Lottery.

Lease it... sell it... remove the existing restrictions... all have been discussed in hopes of getting higher profits out of a lottery that's more than two decades old and, in the eyes of many, not making as much money as it should.

In two weeks, voters will be asked to approve a relatively mild tweak to the California Lottery, but one worth major bucks to the state budget. This morning on The California Report, we examined the proposal at the heart of Proposition 1C.

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Four of the six measures on next month's statewide ballot seek to pull money, from various sources, to help plug the state's immediate and near-term budget hole.

One of them, if voters approve, would widen that hole by more than $9 billion dollars.

That measure is Proposition 1B, a complicated one-time solution to a fight over how much state government is legally obligated to pay for K-12 education and community colleges. And it is the focus of our ongoing coverage of special election measures on this morning's edition of The California Report.

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A few weeks from now, once the voters have spoken, pundits will either be calling it the height of political genius... or a political blunder for the record books.

"It" is the multi-billion dollar tax increase that will only happen if voters approve Proposition 1A, the spending constraint/reserve fund measure that makes major changes in the annual budget process.

The tax increase and the rhetorical bombs being lobbied about those taxes are the focus of our second day of coverage of Prop 1A on The California Report.

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Some good financial news for California coming out of the office of Treasurer Bill Lockyer this morning, as more than half of the planned $4 billion in state general obligation bonds were sold before midday on the West Coast.

A spokesman for Lockyer says $2.4 billion in GO bond purchases were made by individual investors this morning. It's been nine months since the state has sold GO bonds, the kind of bonds that are considered to be pretty much the gold standard in government debt (in that they are backed by the "full faith and credit" of the state).

[UPDATE 5:15 pm - Final first day total was $3 billion in bonds sold. "Things are going very, very well," Lockyer said in a phone interview this afternoon.]
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