BUDGET DAY PLUS 57 -- If legislators are hoping that a raid on money from voter-approved programs is the fallback solution to the ongoing budget saga, they're not going to like the message Governor Schwarzenegger delivered today at an event in southern California.

"It is time to stop putting people through this budget roller coaster ride," he said this morning. "It is time for Sacramento to have the guts and the vision to solve this budget problem once and for all."

The governor's comments at a news conference with local government officials again confirms just how stuck budget talks are here in the state Capitol.

And with every day that now passes, the impact will become more obvious to ordinary folks.

Two significant state payments that were supposed to go out today have now been put on hold: more than $434 million owed to community colleges and more than $1.3 billion in monthly payments to K-12 education. Remember, only two budget impasses have lasted longer than this one... and the all-time record delay in legislative approval is now just four days away. And no one really knows the full effect of what happens by next week.

But the way around the big philosophical budget dispute -- a short-term borrowing of money reserved for various services -- seems to be losing steam.

On Monday, Assembly Speaker Karen Bass was asked about whether she and Assembly GOP Leader Mike Villines were discussing just such a borrowing plan. Bass deflected the point of the question, but reminded reporters that the only other options for closing the $15 billion gap -- more cuts or new taxes -- are essentially off the table.

Schwarzenegger made it clear days ago that he opposes a borrowing plan to break the impasse; today's event was probably designed to remind everyone of where he stands. And local officials in Los Angeles were only too happy to back that up.

"We want the Legislature to know that we are not going to tolerate another raid on local government funds," said LA County Supervisor Don Knabe. "We are watching. We won't tolerate it, we won't accept it."

BUDGET DAY PLUS 55 -- On this balmy Sacramento afternoon, while the political eyeballs are fixated eastward in Denver, it's worth noting that Sunday is the next milestone in California's state budget morass.

No deal by that day will make this budget stalemate the longest in Golden State history. And there's not even a whiff in the air of any kind of deal that will stop such history from being made. In fact, just the opposite.

"There's no huge deal that we're getting ready to pop up in the next few days," said Assembly Speaker Karen Bass.

Bass' reality check, though she says she remains optimistic, was made this afternoon in a brief chat with reporters in her Capitol office.

Both houses of the Legislature are officially in session, and for now it appears only a handful of Democrats sneaked off to the Mile High City. Speaker Bass pretty much closed the door on her own travel plans, telling reporters today that she has no plans to set aside budget business and jump on a plane, even for a scheduled fundraising event in Denver.

And her comments on budget negotiations help reinforce the notion that things remain very much stuck.

That was best exemplified by Bass' tentative comments on chatter about any deal making in the Assembly that would involve borrowing funds from local government, tobacco taxes, and others.

In summarizing her talks with Assembly GOP Leader Mike Villines, Bass laid out the issue thusly:

"He is very clear that [Republicans] will not vote for taxes. And I am very clear that [Democrats] cannot balance the budget through cuts alone. And so we have to find a way to fill the $15 billion gap."

That certainly sounds like the borrowing plan... which probably won't fully close the gap but would bring the numbers much closer together... may be the way out.

The speaker said more worrisome than a raid on these voter-approved funds would be the expensive Wall Street borrowing needed to keep the state afloat if the impasse drags on much longer.

Nonetheless, Bass denied that such a borrowing scheme is the only option. She again suggested the closing of so-called tax loopholes. But few Capitol budget watchers believe that there's enough money to be found in scaling back and/or erasing tax credits.

And so the standoff continues. For those who've forgotten, the record for late budgets was set in 2002; that summer's morass ended with approval of a budget by the Legislature on August 31 and signing by Governor Gray Davis on September 5.

[update: The original posting had the wrong dates in it... thanks to the quick eyes to keep me straight --JM]

BUDGET DAY PLUS 52 -- On this week's edition (a second edition!) of the Capital Notes Podcast, we focus on this week's budget talk... from Governor Schwarzenegger's new budget offering to the consensus that this impasse/logjam is alive and well.

We also examine Capitol Weekly's new rankings of the most conservative and liberal members of the Legislature.

Capitol Weekly editor Anthony York and I also chat about the chance that these embattled legislators may miss their political conventions because of the budget saga. Perish the thought.

And did we mention that the deadlock just passed last year's budget in lateness?

If you've got a state job, it appears your paycheck is safe for August.

The lawsuit filed by the Schwarzenegger administration against Controller John Chiang has been scheduled to be heard in Sacramento Superior Court on Friday, September 12. And because Chiang has refused to implement Schwarzenegger's minimum wage order unless the courts force him to... paychecks will keep rolling out in their normal fashion.

[see below for update]

BUDGET DAY 50 -- Welcome to the newest saga in the budget drama of 2008: will the budget impasse be resolved with borrowing big bucks earmarked by voters for other government services, and are legislative Republicans leading the charge?

In fairness, this isn't actually a new topic; rather, it's newly prominent... after Governor Schwarzenegger called out his fellow Republicans yesterday at the end of yet another unsuccessful budget meeting.

At issue: the possibility of borrowing a few billion dollars from money set aside for everything from local government (through 2004's Proposition 1A) and transporation (through 2002's Proposition 42 and 2006's Proposition 1A) to early childhood programs (through 1998's Proposition 10 tobacco tax) and even money for mental health programs (2004's Proposition 63).

While there's not enough money in these accounts to completely close the budget gap, it's believed that these bucks, plus spending cuts and... well, some good old-fashioned budget gimmicks... could probably get the state at, or near, closing the $15 billion deficit.

But the voter-approved initiatives require the money to be paid back sooner rather than later, sometimes with interest. In other words... it would be a one-time solution that would probably add to fiscal headaches in years to come.

Schwarzenegger's accusation yesterday that it's Republicans pushing this as a solution left the leaders of both GOP legislative caucuses angry.

But it's been mainly Republicans who have expressed public willingness to consider such a plan; Democrats have pretty consistently shot down such talk when it's surfaced the last few weeks.

One interview in particular with reporters that immediately stuck in the craw of local government folks and others (and I know, because a portion of it aired in a story of mine the next day and the phone started ringing just after our newscast) was given by Senate GOP Leader Dave Cogdill two weeks ago today.

Cogdill didn't necessarily say that he wanted to borrow the money, but acknowledged such action as a way out of the jam.

His unedited comments, first to the idea of a tax hike, and then to the issue of borrowing, can be heard below.

In a written statement released yesterday after the governor's public dressing down of Republicans, Cogdill tried to make the point that such borrowing would only happen if Democrats refused to cede any ground off their program priorities.

"If Democrats want to increase spending," Cogdill's statement reads, "they are going to have to either raise taxes or borrow money."

In other words, is it Democrats demanding certain spending... or Republicans rejecting certain revenues? Such ponderances lead to the same kind of brain freeze as a good milkshake.

One thing seems certain: should such borrowing be the ultimate solution to this standoff, it will probably be impossible to ever figure out just whose fingerprints are on it.

[update 2:38pm Schwarzenegger, in a news conference laying out a new budget proposal, seemed to close the door on the borrowing plan, but only after a little prodding from my follow-up question. His final comments on the suggestion: "It is not a wise idea, and I will not do that, no."]

BUDGET DAY PLUS 49 -- That was the simple and straightforward message delivered today by Governor Schwarzenegger after the four legislative leaders left his office with apparently no further progress on resolving the seven week old budget impasse.

The legislative leaders and Schwarzenegger met in one of their well known "Big Five" meetings for about an hour this afternoon. And the first sign of discord came from Assembly GOP Leader Mike Villines, who left the meeting with a not-so-thrilled look on his face.

"You can talk to everybody else when they come out," Villines said as he walked away from the scrum of reporters outside the governor's office. "I don't think [the meeting] was very helpful at all."

Both Democratic leaders apparently left through a back door, thus avoiding any comment on the meeting.

And about 30 minutes later, Schwarzenegger -- who rarely comes out the front doors of his office -- decided to offer his own take on the status of budget talks.

"They all have their ideology, and I totally understand it," the governor said. "But I think we all have to give in order to make this happen."

He also urged legislators to stay at it... perhaps a reference to the around-the-corner national conventions for both parties, which begins with Democrats next week in Denver.

And the governor took special aim at his fellow Republicans, who have refused all proposals for a tax increase.... both Democratic calls for a hike in personal income taxes on the most affluent and Schwarzenegger's own suggestion of a temporary sales tax increase.

"The Republicans want to go out and borrow money, more money before we have paid off our debt," he said in his most pointed criticism to date of GOP legislators.

Schwarzenegger was referring to talk inside the Capitol of borrowing from voter-approved programs to help close the $15 billion budget gap. Several weeks ago, he mentioned the idea in a newspaper interview, but didn't specify who was pushing it.

"I think that's not a good idea," he said.

And then there was this:

"Everyone has to compromise. Anyone that says they don't want to compromise, I think, they're not doing a service to the state of California and to the people of California."

The full audio of Schwarzenegger's comments is below.

A spokesman for Villines denied that Republicans are advocating any new borrowing.

[update 5:14pm And the official response from Senate GOP Leader Dave Cogdill, with a slightly different take on the borrowing accusation: "If Democrats want to increase spending, they are going to have to either raise taxes or borrow money."]

This week's Capital Notes Podcast is a few days late, delayed until after Sunday's big vote on a state budget in the Assembly.

Capitol Weekly editor Anthony York and I examine the dust that's settled since the budget failed to gain passage -- both what it means for the impasse itself, and today's chatter about ramifications for one legislator in particular.

BUDGET DAY PLUS 48 -- Politics is not for the faint of heart.

Less than 12 hours after not voting for, or against, the budget proposed by her fellow Democrats, Assemblymember Nicole Parra (D-Hanford) has been told to pack her bags and move her office out of the Capitol.

That's out of the building and across the street to the building that houses staffers, the Legislative Office Building.

Parra was the only Democrat in attendance (one was absent) on Sunday who did not vote for the budget proposal, which went down in defeat after failing to garner the necessary two-thirds vote. A couple of weeks ago, she told her hometown newspaper that, due to the needs of the 30th Assembly district, she couldn't vote for any budget if there wasn't also a water bond proposal to place on the November ballot. And Sunday night, she simply didn't vote.

The three-term Democrat has had a rough go if it with her party in recent times. Most notably, there were frosty reactions when some thought she was actually suggesting that voters in her district elect a Republican to succeed her this fall. Democrats have spent lots of time... and money... to keep Parra in office, in a district that's one of the only real competitive seats in the Assembly.

The official word... not much. Sources in the Assembly Democratic Caucus confirmed the action, but would only otherwise call it an "internal caucus matter."

Nonetheless, this is one of the more unusual punishments doled out in Capitol history. Lawmakers have been relegated in times past to small Capitol offices, or even had their locks changed for a temporary period for stepping out of line. But getting booted out of the building? That's a new one.

[Below was tonight's "live blogging" of the Assembly budget debate and vote. Thanks to all of you who wrote in while it was happening. By the way, the original Sunday budget preview posting is now here.]

8:16pm Budget fails to get a two-thirds majority. Vote: 45-30. The two in attendance who didn't vote: Assemblymember Greg Aghazarian (R-Stockton) and Assemblymember Nicole Parra (D-Hanford). And with that, it's off to the post-vote press conferences. More tomorrow morning. It was a long debate... and it begins again in earnest tomorrow.

8:15pm The vote. The bell sounds. The tally board is lit up.

8:15pm: We're now officially at four hours for this budget debate. Laird appears to be wrapping up. "I think it's time to get to a solution," he says. "One dollar of revenues for two dollars in cuts and solutions... it's a good budget," he says.

8:06pm: Assemblymember Laird closes and asks for an aye vote. 49 total speakers, he says (and jokes that all Californians are probably glad that there weren't any more). Laird then reminds members of all of the spending in recent times that didn't actually go to state programs. "I don't think there was a single thing on that list," he said, "that was a partisan Democratic item." He also claims the GOP spending cap idea would've led to $18 billion in cuts this year, with $9 billion coming from K-12 education. And he then adds that at least a few Republicans voted for all of those budgets that the GOP now says spent too much. And Laird disagrees with the notion that half the tax increase would have to go to public schools. His argument is interesting, but the hour is late. You can sense the members are ready to vote.

7:55pm: And so it's ending. Assembly GOP Leader Mike Villines rises to speak, and focuses on tax increases of the past -- namely, those enacted by former governors Reagan and Pete Wilson. And he hones in on the Wilson tax hike. "There was less tax money on the table" as a result, he said. Villines said he doesn't know which taxes are now on the table -- sales tax, income taxes. "I just know it's a lot of taxes," he said.

"I think we can do a much better job than this budget," he tells assemblymembers. Villines go on to suggest tax cuts as an economic incentive, even in the face of the current budget shortfall. And as to the fact of a possible deadline to get items on the November ballot-- he calls attention to the fact the Senate is not in session. Translation: a budget deal wasn't going to happen tonight anyway.

7:52pm: Assemblymember Keene gets up to speak, and tells Democrats that their proposed tax increase would actually result in only about half the money for general government services, while the rest would automatically go to public schools through the Proposition 98 guarantee. He mentions this as way of arguing the numbers don't add up. "You start out upside down. Do you realize that? Or does it even matter?"

7:48pm: Thanks to all seven live blog readers for emailing in. The cookies were chocolate chip.

7:45pm: Three and a half hours. The visitors gallery is now up to a whopping seven citizens! One is a young girl... she's chewing gum and leaning over the rail, looking down at the legislators like she's on a weekend trip to the zoo.

7:41pm: For all the rhetoric, a lot of Democrats and Republicans do... gasp... seem to like each other personally in here. Several small bipartisan groupings can be seen from my perch off the floor. Dems and Reeps chatting, even listening to the debate.

7:32pm: "You are all good and decent people. Until you got in this room." -- Assemblymember Mike Eng (D-Monterey Park). He was making a joke, in case it doesn't come through here.

7:30pm: Cookies are being handed out by fellow Capitol reporter Marcey Brightwell. Homemade. Seriously. Good. She apparently just got off the news set at local ABC affiliate News10. That's dedication.

7:23pm: "Let's just get together." -- Assemblymember Wilmer Carter (D-Rialto), who then proceeded to tell a story about how she has a knack for working with "difficult" people. She then pleaded with her colleage to "please don't let me be in trouble" with constituents by having to go home and tell folks she couldn't bring everyone in Sacramento together.

Carter's remarks received applause. Call it the feel good moment of the afternoon/evening.

7:20pm: I had to take a break and finally eat that packed away sandwich. Turkey and cheese, if you're curious. Debate continues, and repetition factor of main points remains high. Visitors gallery is now empty. Thanks to all three of you still reading this for sticking around.

7:09pm: Assemblymember Anthony Adams (R-Hesperia) channels Jack Nicholson as Colonel Nathan Jessep in telling Democrats who say the state needs more money: "You can't handle the truth."

7:07pm: In the interest of reporting a little news, Assembly Speaker Bass just briefly chatted with reporters just off the floor and said she intended to rekindle budget negotiations first thing tomorrow, knowing full well this vote will come up short. She also seemed a little less-than-optimistic that Democratic legislators would be traveling to Denver for the Democratic National Convention.

7:05pm: I'm told three assemblymembers are missing today: Assemblymember Nell Soto (D-Pomona) remains in poor health, as does Assemblymember Sharon Runner (R-Lancaster). Assemblymember Alberto Torrico (D-Fremont) is stuck in Miami, where he traveled to meet his kids returning from Bolivia... and where he ran smack dab into bad weather, courtesy of a hurricane.

7:02pm: An "unidentified" legislator tells me the Harris Ranch joke was actually about a horse in the men's room called "Budget Surplus." I stand corrected. I also will now let sleeping horses lie.

6:55pm: Assemblymember Guy Houston (R-Livermore) just mentioned something about staying out of the restroom at Harris Ranch. The chamber chuckled; I'm told it had something to do with a previous comment about said men's room and some kind of steer enshrined in there. Sorry to tell you I must've not been paying full attention. My apologies.

Also, gallery update: the three optimists left. Two glum new visitors arrived.

6:47pm: Just as the last two citizens in the visitors gallery went home... and all hope was lost... three newbies just arrived. They're smiling. I love their optimism.

6:45pm: Three hours, baby. And... wait for it... yes, more microphones just went up. Hopefully some smart reporter is keeping a full tally of the number of speakers. I've obviously given up on the substance of the debate as it's become... sorry, assemblymembers... repetitive. Not enough revenue... too much spending... all brought to you by the Office of Redundancy Office.

6:43pm: Three hours under our belts. I just saw Assemblymember Bill Maze (R-Visalia) sneak some kind of candy out from under his desk, shared by Assemblymember Rick Keene (R-Chico). I can't seem to get over there to ascertain exactly what kind of candy that was.

6:34pm: More microphones just went up of assemblymembers wishing to speak. Sigh. And wait... oh, man... one of the three remaining gallery visitors just left. Lucky guy.

6:30pm: Assemblymember Ted Gaines (R-Roseville) just mentioned the ill-fated Donner Party. They ate their fellow travelers, you know.

6:28pm: The lifeguard left. I now count three visitors in the gallery.

6:15pm: Two hours. Who had two hours in the pool? You lose. Onward we go.

6:01pm: "A lot of things are broken in this state, including my microphone." -- Assemblymember Bonnie Garcia (R-Cathedral City). Then she tells the chamber she's tired of the annual budget ritual and offers this... unusual... way of expressing her feelings: "I'm sick and tired of the 'you show me yours, I'll show you mine.'"

And then in conclusion, pleading for more discussion on Monday, said Garcia: "Come in your sneakers, wear your damn pajamas... let's get down to work!"

5:54pm: Governor Schwarzenegger underwent arthroscopic knee surgery last night and isn't in Sacramento today. Lucky guy.

5:48pm: Assemblymember George Plescia (R-San Diego) invokes record Olympic medal winner Michael Phelps. See, who says legislators can't speak in ways the common person understands? But I kind of lost the analogy after that.

5:45pm: We're now at the 90 minute mark of the budget debate. I just remembered, somewhat excitedly, that I packed a sandwich in my gear bag. Let 'em keep talking, I say.

5:37pm: More visitors just walked into the gallery above the Assembly floor. They seem puzzled. One teenager has a "lifeguard" t-shirt on. He should stick around; we may need him.

5:28pm: Assemblymember Mike Duvall (R-Brea) brings up the historical record of Calvin Coolidge and tax cuts. Now he's on to lamenting tax increases under Franklin Roosevelt and blames them for the Depression. Actually... and I hate to focus on the historical record... but the Depression is widely agreed to have begun in 1929 when Herbert Hoover was the prez. The comment reminds me of the classic college flick Animal House, where John Belushi's character says the Germans bombed Pearl Harbor.

"Germans?" says one of Belushi's frat brothers. "Forget it," says another brother. "He's rolling."

5:17pm: Oh no, he didn't. Assemblymember Chuck DeVore (R-Irvine) says 2004's Proposition 58, which created a rainy day budget fund, was "completely ineffectual," and he says the strength of the original proposal was "negotiated away". And who does he think did that? Well... He ends his soliloquy with an angry jab at Democrats. "Shame on this body!" he says, plopping down in his chair and pushing his microphone down.

Debate running time currently 1 hour, 2 minutes.

5:13pm: Oh no, she didn't. Assemblymember Loni Hancock (D-Berkeley) drops the name "Grover Norquist"-- the conservative anti-tax crusader who helped orchestrate an event where every GOP member of the Assembly except one (Niello) signed a pledge to not raise taxes.

5:11pm: Okay, sorry to disappoint. But given the repetition of arguments now appearing in floor debate, I think I'll stop chronicling everyone who speaks. Sorry, assemblymembers. But I think we've got the picture... for now.

5:06pm: Assemblymember Mimi Walters (R-Laguna Niguel) slams the tax increase idea.

5:00pm: Assemblymember Juan Arambula (D-Fresno) rises to ask Assemblymember Laird to talk about how last year's reserve evaporated after several doses of bad luck for the state. Arambula then tells the chamber that those things weren't the fault of Democratic leadership.

Update: remember how I said this might not be a long floor debate? Ummm... the number of microphones raised to speak keeps increasing. Oh well.

4:50pm: Assemblymember Bob Huff (R-Diamond Bar) rises to speak. Ah, here come the verbal slings and arrows we were expecting! On Dems calling this a compromise budget: "Compromise with who? Are you talking to yourselves?!?" And then there's this from Huff: "We have a systemic lack of leadership within the Democrat majority party." One Dem legislator shook his head in disgust. Now he calls Sacramento "La La Land." See, who said a Sunday budget debate wouldn't be fun?

The three citizens in the gallery upstairs seem unfazed. I wonder why they showed up?

4:46pm: Assemblymember Mike Feuer (D-LA) rises to speak. He must be an optimist, because he tells the chamber he hears agreement on how to solve the budget problem. Wait, he's a first-term lawmaker. Ah, that explains the optimism.

4:44pm: The following isn't meant to impugn all assemblymembers, but there do seem to be a fair number during this debate who are busy checking the BlackBerries, printing documents off their desktop computers, reading the news online [Olympics, anyone?], chowing down at their desks. Hey, it's Sunday.

4:39pm: Assemblymember Doug LaMalfa (R-Biggs) rises to speak to deride excessive spending and the ills of a tax increase. He, too, laments the lack of bipartisanship. [this just in: Assembly reaches accord... on a lack of bipartisanship. Film at 11. --JM] LaMalfa goes on to tell his fellow legislators to consider the fact that a new cap on state spending, a key GOP demand, might give some pols "cover" when it comes to pointing the blame to reduced state services.

4:37pm: Assemblymember Gene Mullin (D-South San Francisco) is up, channeling a "Can't we all get along?" theme.

4:33pm: Assemblymember Sam Blakeslee (R-San Luis Obispo) rises to speak, saying that Democrats have a "minority among" them that doesn't want to cooperate with Republicans. "Republicans ideas for reform," he says, "are dying in committees."

Blakeslee then delivers this little zinger: "No justice, no peace. If you want us to work with you, then you're going to have to work with us."

4:31pm: Assemblymember Mervyn Dymally (D-LA) offers some historical perspective about another celebrity GOP governor who famously agreed to a tax increase-- Ronald Reagan. Dymally should know; he was in the Legislature at the time. Dymally repeats the call of Democrats for GOP assemblymembers to put their own budget if they don't like this one.

It should be noted that most members of the Assembly are reading a relatively small summary of what's in the budget proposal being debated.

4:30pm: "It is time for Democrats to take their heads out of the sand... What are we doing here?" --Niello

4:27pm: Assemblymember Roger Niello (R-Sacramento) opens up debate for the GOP position. He says he's been getting lots of calls and emails telling him to "hang tough" and oppose the tax increase. He reads from an email written by a citizen who refers to Niello and his colleagues as "you Democrats" in his anger about taxes. Ummm, nope. And to the point of the day: "This is not a compromise budget," says Niello, "and it has no chance of passage."

4:24pm: Assembly Speaker Karen Bass is speaking. [Might this mean a short floor debate? --JM] Bass says this year's budget needs to be mindful of not exacerbating next year's problems, when the economy will again likely be dragging. She tells assemblymembers that a longer budget impasse may cost the state $300-400 million in fees tacked on by Wall Street investors for any borrowing needed to keep the state afloat. Bass calls the state's problem "an extraordinary situation" that requires a tax increase.

4:22pm: Assemblymember John Laird (D-Santa Cruz) opens up debate, saying that "only Democrats have put forward a real plan." And yes, he admits that today's outcome is a foregone conclusion.

4:15pm: Budget debate has begun... earlier than expected. Closed-door caucuses only lasted about 45 minutes, and now the full Assembly is considering both the original budget conference committee proposal, AB 1781, as well as the proposed changes highlighted below.

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.