Legislative Analyst Weighs In On Revised State Budget

The state's legislative analyst says she sees a few dents in Governor Schwarzenegger's shiny new plan to use the lottery to close the state budget deficit. The Governor wants to rev up lottery ticket sales, then borrow against the new revenue to balance the state budget now. But KPCC's Julie Small says the woman who watches the dollars and cents says the plan could shortchange California schools.

Julie Small: The governor says if California can double the sales of lottery tickets, it can sell bonds secured by future lottery revenue, fill in the budget deficit, and still get schools their annual share of lottery proceeds. But Legislative Analyst Elizabeth Hill calls that a risky bet.

Liz Hill: When you sell $15 billion, and actually you'd have to sell closer to 20, with different insurance requirements and whatnot, that 20 means you have a larger debt payment to pay the bondholders back.

Small: Hill says bondholders would get paid first. Schools would get whatever's left, if there's anything left. Hill says the governor is overestimating how much and how fast lottery sales can grow. Her calculations say that if the governor's lottery plan is wrong, it'll cost education $5 billion over the next decade.

Right now, schools get about a billion dollars a year from the lottery. But California's "budget nun" found some virtue in Schwarzenegger's approach. Elizabeth Hill praised the Governor's plans to use new revenue to close the state budget deficit, not just cuts.

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