California Democrats unveil rival state budget

SAN FRANCISCO, June 5 (Reuters) - Democrats who control California's Assembly unveiled on Thursday a state general fund budget plan that would spend $391 million more than Republican Gov. Arnold Schwarzenegger has proposed.

The lawmakers detail $102.227 billion in spending for California's fiscal year 2008-2009 beginning in July, compared with the $101.836 billion general fund budget Schwarzenegger proposed lost month.

"The Assembly version takes a balanced approach to crafting the budget with tough cuts in every area of the budget, modest revenue increases, and debt costs shifted to lottery securitization funds," the Assembly Democrats' budget report said.

It added that like Schwarzenegger, Assembly Democrats would not seek tax increases to close a state budget shortfall the governor has estimated at more than $17 billion, although that would include $2 billion set aside in reserve.

But the report urged raising $6.4 billion by scrapping tax loopholes and breaks and employing short-term financial moves previously used by state officials.

"It is important to note, that while the specific revenue solutions will need to be worked out as the budget process continues, this amount of revenues can be raised without impacting ordinary Californians or harming the economy," the report said.

By contrast, Schwarzenegger has urged deep spending cuts.

But like Schwarzenegger, the Assembly Democrats proposed California securitize its lottery revenues. However, they would use proceeds from any bonds based on the revenues for schools and to repay state debt, including the state's Economic Recovery Bonds, ahead of schedule.

Schwarzenegger has proposed using proceeds from a lottery securitization be used for schools, for general fund programs and for creating a rainy-day fund for the state.

Schwarzenegger and Assembly Democrats both assume California could raise $15 billion by securitizing its lottery revenues.

Assembly Speaker Karen Bass said the chamber's Democratic caucus does not expect the legislature will meet its first deadline for a state budget plan, but intends to vote on a substantive spending plan ahead of the July 1 start of the state's next fiscal year.

"We will miss the June 15th deadline because of the complexity of the proposals and size of the deficit, but we are on target to vote before the fiscal year with a proposal that is not just a 'drill,'" she said in a statement. (Reporting by Jim Christie; Editing by Carol Bishopric) (jim.christie@thomsonreuters.com; Reuters Messaging: jim.christie.reuters.com@reuters.net (+1-415-677-2539))