Legislative analyst says Schwarzenegger’s budget plan is overly optimistic

SACRAMENTO – Gov. Arnold Schwarzenegger’s plan to help close the state’s budget shortfall by borrowing $15 billion against the future profits of a modernized and expanded lottery is overly optimistic and could exacerbate the state’s financial problems, according to the Legislature’s chief budget analyst.

Nonpartisan Legislative Analyst Elizabeth G. Hill, whom both Republicans and Democrats look to for advice on fiscal issues, said the proposal assumes a boom in lottery earnings that is unlikely to materialize. The result, Hill says in a report released this morning, is a “strong likelihood” that the share of money schools receive from the lottery “would fall well short of their current levels – perhaps by $5 billion over the next 12 years combined.”

Hill suggested that a more realistic approach would fall far short of the governor’s goal of raising $15 billion from the lottery over three years. Instead, she suggests the Legislature adopt a plan that would bring in $5.6 billion over two years.

The analyst also takes aim at the governor’s plan to bring long-term balance to the state’s finances with spending restraints. She said the governor’s approach would lead to “counterproductive results.”

Money the administration hopes to raise from the lottery, for example, could automatically get locked away in a reserve under the governor’s plan and be unavailable for balancing the budget even if the state continues to run multibillion-dollar deficits.

“As a result,” Hill wrote, “the administration’s reforms could lock the state’s operating shortfall in place and lead to automatic across-the-board reductions.”

 Evan.halper@latimes.com