Schwarzenegger's budget shows lessons learned

Lesson No. 1: Never say "never," as in "Read my lips . . ."

Lesson No. 2: Don't be afraid to flip-flop in an emergency, especially when you're not running for reelection.

Lesson No. 3: Close your ears to the simplistic mantra, "We don't have a revenue problem; we have a spending problem." Most of all, don't parrot the chant. You may wind up eating your words.

At lunchtime Wednesday, unveiling his revised state budget proposal, Schwarzenegger performed a flip-flop and ate his words.

For five years -- until a couple of months ago -- Schwarzenegger crusaded against tax increases and promised never to raise them. Running for reelection in 2006, he pummeled his Democratic opponent, Phil Angelides, as a tax-and-spender. And he has constantly recited the conservative anthem: "We don't have a revenue problem . . . "

The governor was even seen on Sacramento TV on Sunday asserting that "I am very much against raising taxes."

Could be. But on Wednesday he proposed to raise the sales tax by 1 cent on the dollar if the budget for the fiscal year beginning July 1 falls short of enough revenue to make ends meet. Never mind that he also proclaimed that his budget plan "holds the line on taxes." It holds the line only if a higher sales tax isn't deemed necessary to balance the books.

Schwarzenegger conceded he had concluded that the state's budget deficit -- projected at $15.2 billion, even without a reserve -- could not be erased "by cuts alone." He has become convinced, the governor told reporters, that there is a need for both spending cuts and higher revenue.

Give Schwarzenegger credit for the budgeting creativity he has been asking from legislators.

Schwarzenegger proposed that the state first try to generate its revenue boost from the state lottery. Under his plan, Wall Street investors would pay the state $5 billion annually for three years. Investors would recoup their $15 billion from lottery profits, plus 5.8% annual interest, over perhaps 30 years. (Education would continue to receive its $1.2-billion annual cut from the lottery.)

Administration officials immediately objected to the news media and legislators of both parties dubbing this scheme "more borrowing." Gubernatorial spokesman Aaron McLear spun it as selling off some future lottery profits.