Assembly Leader Says Reworked Lottery Plan Could Help With Deficit

On Monday, Senate and Assembly Republicans said they would not support Gov. Arnold Schwarzenegger's (R) lottery plan to help reduce the state's $15.2 billion budget deficit, but Assembly Minority Leader Mike Villines (R-Clovis) said the lottery plan could be modified to generate more revenue, the Sacramento Bee reports.

Senate Democrats rejected the lottery proposal outright, while Assembly Democrats support the plan to borrow from the lottery to pay down the debts and close other tax loopholes.

However, Villines said the state could borrow funds from reserves in the First 5 California program, an early childhood health and education fund, and then repay those funds with lottery proceeds. First 5 is funded by a 50-cents-per-pack cigarette tax that voters passed under Proposition 10 (Lin, Sacramento Bee, 7/1).

Villines also said Republicans would support borrowing funds from Proposition 63 reserves if there is a plan to repay the loan (Goldmacher, Sacramento Bee, "Capitol Alert," 6/30). Proposition 63 is a voter-approved initiative that increased the state income tax on high-income Californians to fund mental health services (California Healthline, 2/19).

Villines said that he expects the two sides eventually to agree on about $10 billion in reductions to the deficit but that the last $5 billion is "the unresolvable number" (Sacramento Bee, "Capitol Alert," 6/30).

California joins dozens of states nationwide battling high inflation, decreasing tax revenues and an economic downturn that is creating budget gaps for the next fiscal year, which begins today for many states, the New York Times reports.

Many states also continue to be strained by high Medicaid costs, despite attempts to increase access to health insurance (Steinhauer, New York Times, 7/1).