SAN FRANCISCO - By the time you read this, California may well have a budget - almost 12 weeks into the fiscal year.

Lawmakers were scheduled to vote late Friday on a compromise endorsed by each party's leader in the Assembly and Senate to avoid a veto threatened by Gov. Arnold Schwarzenegger.

The final budget isn't all that different from the document Schwarzenegger threatened to veto.

To balance the budget and its $15.2 billion structural deficit with no tax increases, it relies on accelerating billions of dollars of tax collections from fiscal 2010 into the current fiscal year.

There is one exception - the original plan to generate about $1.6 billion by increasing payroll withholding for state income taxes was replaced, according to Democratic Assembly Speaker Karen Bass, by a new bill to increase penalties for corporations that underreport their earnings.

The governor also got his way on the main issue that prompted his veto threat - lawmakers agreed that a new rainy-day fund can only be tapped in years when revenues came in below expectations.

While that was a major goal of the governor from a philosophical standpoint, the rainy-day fund won't have a direct impact on the current year's budget because there's no money to put in it.

The final budget does include the governor's proposal to issue bonds against the state lottery, though that won't take place until fiscal 2010.

The full proposal would make structural changes to the lottery itself, in an effort to increase the amount of revenue it generates, with the state securitizing its lottery revenue stream in a structure comparable to tobacco settlement securitization bonds.

The administration is planning to sell $5 billion of such lottery bonds to plug holes in next year's budget.

First, the lottery plan will have to go in front of the state's voters, along with the governor's rainy-day fund, because they require changes in the state constitution.

With ballots for November already in the mail to overseas voters, that means a special statewide election is likely during 2009.

Such a statewide election will also give school districts an opportunity to put local general obligation measures on the ballot and have them pass with only 55% of the vote.

March 3 is the most likely date, according to published reports, because it will coincide with a local election in Los Angeles.

With a budget in place, the treasurer's office will be able to go ahead with plans for a cash-flow borrowing using revenue anticipation notes in the $10 billion range.

Goldman, Sachs & Co. and Banc of America Securities LLC are the underwriters.

Passage of a budget means the state government will release billions of dollars in payments to vendors and lower levels of government that it had no legal authority to make in the absence of a budget.

"We have been working with the Department of Finance on getting an exact picture of the state's cash situation, and that includes how much money needs to be released and when it has to be released," said Tom Dresslar, spokesman for the treasurer's office. "When we get those answers nailed down, that will determine the structure and timing of the short-term borrowing."

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