PUBLISHED 9/21/08 ----

Gov. Schwarzenegger claims California government doesn’t have a “revenue” problem. It has a “spending” problem.

Guess what! It has both.

There is a disconnect between Californians’ expectations for government services — law enforcement, fire protection, education, roads, you name it — and their willingness to pay.

Since voters’ 1978 passage of Proposition 13, which set limits on property tax rates and passed other “revenue” limiting measures in subsequent years, the options for supporting Californians’ voracious appetite for government services have declined.

This, combined with the state’s sagging economy and the increased cost of government services, creates the perfect budget storm that now engulfs California.

Five years ago, Schwarzenegger came into office in an unprecedented recall election fueled by his promise to curb state deficit spending and reorganize the government. Remember his pledge to “blow up the boxes”?

Well, the governor discovered talk is easier than action. He convinced voters to borrow the state’s way out of debt, but failed to push through on streamlining and downsizing government.

While he was given a brief reprieve as money flowed into state coffers during the housing bubble, the party is now over.

As he revealed his revised 2008-09 budget last week, the state’s deficit had climbed to an estimated $15.5 billion — make that $17.5 billion if you add the “rainy day” fund the governor wants.

To close this gap, he is proposing cuts — but not as many as he proposed earlier this year — and is proposing closing tax loopholes.

But the centerpiece of his budget is a speculative proposal to expand the value of the state lottery. (That means asking voters to approve games, such as instant-payoff video lottery machines — and then lease the lottery to private investors.)

Schools still would receive about $1.2 billion a year from the lottery, with investors keeping the rest. And the state would get about $15 billion from the lease.

As a hammer, Schwarzenegger proposes a temporary 1 percent increase in the sales tax if voters do not approve the lottery lease deal. At 7.5 percent (higher in some cities) California already has the highest sales tax in the nation.

It’s long been recognized that California has a dysfunctional state government and financing system.

The budget the governor released last week does nothing to address this core problem. At best, it’s packed full of gimmicky quick fixes.

Both Democrat and Republican are howling in protest — offering little in the way of real solutions of their own to fix this mess.

No doubt it will be a long, hot summer filled with simplicities, sound bites and budget stalemate. In the end, a late, late budget will be approved by a weary Legislature, late at night — one that shows little leadership and even less of the political courage that’ll be required to begin righting California’s ship of state.

Californians deserve better than this.