SAN FRANCISCO - Facing a growing budget deficit, California Gov. Arnold Schwarzenegger will call a special session of the Legislature today.

The lame-duck session, which brings back the outgoing Legislature rather than the one that was elected yesterday, will be asked to fix budget problems that have grown in the short time that has passed since the same lawmakers passed the current budget in mid-September - more than 12 weeks after the fiscal year began.

What the governor says today could well impact the state's plans to issue $2 billion in revenue anticipation notes and a sizable general obligation bond issue later this month, said Tom Dresslar, spokesman for state Treasurer Bill Lockyer.

"We're going to wait and see what the governor unveils Wednesday regarding the official shortfall number, his plan for resolving the problem," Dresslar said. "Once that happens, we'll evaluate our options on further debt issuance in this fiscal year."

The treasurer's office had tentatively scheduled its Ran sale for the week of Nov. 17.

California already sold $5 billion in Rans the week of Oct. 13, a deal that was closely watched because of concerns about whether there was enough liquidity in the markets to get the deal done. The deal was done, with the help of yields from 3.75% to 4.25% for seven- and eight-month notes, respectively.

The state needs to sell the $2 billion in Rans to reach its estimated $7 billion requirement for cash-flow management this year.

Unlike the previous deal, the treasurer's office was planning to sell the upcoming $2 billion of Rans with some sort of credit enhancement. That's because Moody's Investors Service would only assign its top rating of MIG-1 to a maximum of $5 billion of notes, Dresslar said. Rans rated below the top level are likely to attract less interest from the important money market fund buyers.

It is widely believed that the current-year budget problems Schwarzenegger will describe today will be even worse than the scenarios described in the official statement for the October Ran sale. That document identified $4.6 billion in "cash pressures" threatening to unbalance the state's $101.9 billion general fund spending plan.

It's not clear how lawmakers will react to the governor's proposals. The administration has signaled cuts are ahead for education and human services, which are sure to be unpopular with the Democratic majorities in both houses. At the same time, minority Republicans show no sign of backing off their opposition to tax increases, which they can block because two-thirds majorities are required to pass such increases.

The governor is expected to try to broker a deal by addressing related issues of interest to lawmakers.

"The whole foreclosure crisis will be very high on our agenda," Assembly Speaker Karen Bass, D-Los Angeles, said at a news conference last week.

The Republican leaders, Mike Villines in the Assembly and Dave Cogdill in the Senate, issued a joint letter last week asking for pro-business policies, such as tax credits for businesses that hire the unemployed or invest in manufacturing.

Schwarzenegger last week cited the state's current budget woes when he signed an executive order creating a panel to recommend reforms to the state's tax system, an idea Bass floated when she became speaker earlier this year. The commission is to make its recommendations by April.

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