Schwarzenegger's new budget proposal to give voters option of borrowing against state lottery

Gov. Arnold Schwarzenegger will propose giving voters the option of borrowing against the state lottery or paying new sales taxes in his latest plan for closing a budget shortfall now estimated at $17.2 billion.

The lottery proposal, according to administration officials, would come before voters as early as November, and hinges on administration estimates that California could borrow against future profits to generate as much as $15 billion over three years.

The governor also will propose changes to the lottery intended to lure more gamblers, such as increasing payouts and updating the games offered by the state to include blackjack and poker themes.

Under the governor's plan, if voters rejected the lottery borrowing, or if the proposal fell through for any other reason -- such as lawsuits filed by Indian gambling interests or lack of a viable lender -- state sales taxes would automatically increase by 1 cent to cover the loss.

The sales tax increase would stay in effect until the state's finances were out of the red. A 1-cent sales tax increase would generate roughly $6 billion per year, according to state statistics.

The governor's new budget proposal is to be released Wednesday.

evan.halper@latimes.com