Schwarzenegger Has Plan to Close State Budget Gap [Borrowing and Taxes]

New York Times ^ | May 15, 2008 | Jennifer Steinhauer

[Zakeet]

To close California’s huge budget gap, Gov. Arnold Schwarzenegger has a plan: get a Wall Street investment firm to lend the state $15 billion against future proceeds from its rather unsuccessful lottery program, with the lending firm taking large risks for a low-yield return.

And if that fails, the state’s sales tax will go up a penny over the next few years.

The lottery idea with a tax increase only as a backup reflects the severity of California’s $17.2 billion budget gap and Mr. Schwarzenegger’s unwillingness to reverse course on a longstanding pledge not to raise taxes and to continue pressing his most unpopular budget cuts from this year.

The state, like many others around the country, has struggled mightily to bring order to a budget greatly hampered by the mortgage crisis, other weaknesses in the housing market and a slowdown in personal income tax payments.

[Snip]

Mr. Schwarzenegger also seeks $10 billion in cuts to the budget, but has scrapped his most controversial plans, like the early release of 22,000 prisoners, the closing of many state parks and hundreds of thousands of dollars in cuts to state education.

The budget does call for the cut of a $111 million health care program for legal immigrants, and would divert nearly $830 million in gas tax money pegged for public transportation projects into the general fund.

[sergeantdave]

Here’s a solution: raise the price of lottery tickets to $50 and require everyone to buy five per week. Oh, and make certain that every lottery ticket pays out one dollar.