The week's big news focused both on fears about Wall Street's ability to lend the state a few billion bucks as a bridge loan, and the brand new (or just heretofore invisible) state budget deficit.

Capitol Weekly editor Anthony York and I also take a quick glance at some of the cash piling up... or not... for ballot measures to be decided by voters on November 4.

[Program Note: At the time we recorded this, the new campaign data for supporters of Proposition 8 still was not available from the Secretary of State, which led us to refer to it as "reported" data. It's now been released, and like good reporters we'll now remove those caveats.]

But the adjoining clamor -- about the state's gloomy finances again being in deep you-know-what -- highlights a different problem: the revenue projections in the new budget are the equivalent of a moldy, squishy tomato you just found in the back of the fridge.

This week, we learned that there's now an approximately $3 billion hole that's opened up in the current budget, perhaps even larger depending on whose estimate you're reading.

And that's where ordinary folks might go: whaa? The budget signed into law only two weeks ago? The one we were told was precariously... but nonetheless... balanced?

Yep. As most insiders knew, that budget's tax revenue projections were way, way out of date.

When the governor released his revised budget on May 14, it projected revenues from the big three taxes -- personal income taxes, sales taxes, corporate taxes -- at a combined $90.5 million in the current fiscal year. When the budget was actually signed into law 132 days later, on September 23, the estimates for those same taxes were... you guessed it... still $90.5 million. And yet, the economic situation was vastly different.

Controller John Chiang's recent tallies tell the tale; general fund revenues in September were $540 million lower than the May revision forecast, and the big three taxes combined were $814 million below that same four (or five) month old forecast.

"The budget ought to have taken that into account," says Fred Silva, a longtime budget watcher who now works with the government reform group California Forward. Silva says this year's record-long budget stalemate brings into sharp focus an issue that should be examined: whether the two existing revenue forecasts -- one completed in December (for mid-January) and one in late April (for mid-May) -- are still relevant in a California economy that's much more fluid.

"You have to have a timely budget if our forecasting cycles are going to remain the same," he said.

Silva says while it's true that recent summer spending battles have also gone long past the July 1 deadline, the economy was more stable then than it is now.

There may be practical reasons why the revenue forecast isn't formally updated, but there's also an undeniably political reason: lower revenues would make it that much harder to strike a deal on a new budget. If it took elected officials under the dome 84 days past the deadline to agree to solutions for a $15 billion problem, how long might it have taken to fix an $18 billion problem? A great example of this was the battle over how much of a reserve the budget had built in, with the final legislative compromise relying, in part, on shrinking the reserve (a reserve that was replenished by Schwarzenegger's line-item vetoes).

There's a big buzz about dedicating next year to fixes in the annual budget process. If so, might someone want to also rethink the decades-old standard of only two full revenue forecasts? Might there need to be a new requirement that a forecast have a shelf life?

"If you go past 45 or 60 days," says budget analyst Fred Silva, "then you ought to do a new forecast."

After all, you're not really going to eat that squishy tomato... are you?

We touched on the revenue issue in this morning's edition of The California Report.

These are just some of the gems about Governor Arnold Schwarznegger that came out of his half hour appearance this morning at the 2008 American Magazine Conference.

The Q&A probably most intrigues those of us who cover Schwarzenegger on a daily basis, because... well... Schwarzenegger rarely seems to let down his guard anymore. It's hard to see how he would ever sit and ruminate on issues with most journalists the way he did with Time managing editor Rick Stengel.

On the Wall Street crisis: Schwarzenegger sounded skeptical about government coming to "save the day" and solve the problem, though he expressed support for current efforts. And he pounced on lenders who struck risky deals with borrowers. "Those loans were made available to people who really shouldn't have a loan to that extent," said Schwarzenegger.

Prez Politics: The governor reiterated his support for GOP nominee Sen. John McCain, and seemed to explain away some of McCain's one-time rosy economic assessments. "You have certain phrases that you always throw out," he said of the campaign trail. "And you use the same kind of stump speech to stay on safe grounds, which is horrible."

One would wonder, then, why the governor relies so heavily at times on the very same kinds of repetitive phrasing and stump speeches on just about every big issue.

Partisan Divide on the Homefront?: When asked about how politics plays out in his own home, with a spouse committed to a different side of this year's big race, Schwarzenegger offered some insight into his kids. And as you can hear below, it would seem his daughter, Katherine, and his son, Patrick, are quite the polar opposites when it comes to poltics.

Hello, Sarah?: In a bit we hadn't heard before, Governor Schwarzenegger said that he placed a call to Alaska Gov. Sarah Palin just after she was picked as the veep choice of McCain. "I called her," he said. "And I said, 'That's what's wrong with the Constitution. Miss Alaska is beating Mr. Universe, and can run for Vice-President or become President. There's something off here.'" The comment was made after Stengel asked whether foreign-born citizens should be allowed to run for the highest office (which the guv has frequently said he supports). "She didn't think it was that funny," deadpanned Schwarzenegger.

The Next Guv?: One thing that Schwarzenegger never does in public is speculate about who might run for office, and who might win. Never, that would seem, until today. Asked about who would be the Democratic gubernatorial nominee in 2010, Schwarzenegger seemed to lean towards Sen. Dianne Feinstein... maybe... while saying otherwise it would be Attorney General Jerry Brown. And then the guv pretty much settled on Brown as the once-and-future chief executive, saying: "He kind of can reach Republicans and Democrats and bring people together." Of course, the GOP governor caught himself... sort of... by also praising potential Republican challenger Steve Poizner, the state's insurance commissioner.

You can hear the full answer below... don't be surprised to see this snippet make waves quickly in the buzz of California politics.

What's noteworthy out of the hundreds of documents being posted online by the Secretary of State depends on your own political preferences; after all, there are 53 congressional seats, 80 Assembly seats, and 20 state Senate seats to be filled by voters. There are also 12 ballot measures to consider, and dozens upon dozens of independent expenditure committees raising money.

Statewide campaigns, in particular, cost big bucks; most campaign pros say it now costs at least $2 million for a week of statewide TV ads, sometimes even more.

The data is enough to cause brain freeze. And so below is a snapshot of a few campaigns and VIPs on the money trail. A reminder that the figures below generally reflect campaign cash through September 30.

Tough Times for Tough on Crime? The campaign in support of Proposition 6 seems woefully short in the cash department, with much more debt than cash on hand. The campaign reported only $16,500 raised in the last three months, while spending some $1.6 million so far in 2008. Debts totaled more than $361,000 and the campaign has been loaned money from the political accounts of major backer Sen. George Runner (R-Lancaster) and his wife, Assemblymember Sharon Runner (R-Lancaster). Of course, the man with the real money... technology millionaire Henry Nicholas... seems to have faded away, in light of this summer's drug and conspiracy charges against him.

The Big Bucks: The leader in California political campaign fundraising this time around clearly seems to be the efforts for and against Proposition 8, the proposed ban on same sex marriage. Prop 8 supporters had not filed reports as of this posting, but unofficial calculations for the period put their totals (two committees) at $17.1 million. Opponents had a tally that hovers near $18 million. The money is coming from all parts of the country, though campaign backers on both sides say most dollars are still from California... and that the identity of contributors is, at best, a minor story.

Meager Millions for Modified Maps: The battle over the redistricting measure, Proposition 11, would be drawing very little campaign cash if it weren't for Governor Schwarzenegger. The campaign accounted linked to Schwarzenegger reports about $3.25 million in contributions for the year, though was left with some $695,000 in cash as of September 30. Another pro-11 campaign reported about $3.25 million in contributions. And the No on 11 campaign? It raised only about $370,000... spent some $675,000... and reported about $322,000 in debt.

Legal Tender: Speaking of debt, the legal defense fund of Senate President pro Tem Don Perata seemed especially short on cash as of last week's reporting deadline. The fund, created to help defray legal expenses while Perata remains the subject of a federal investigation, has raised $310,000 in 2008 while spending much more -- some $565,000. The campaign reported debt of approximately $251,000. And sitting in the bank as of last week: $347.47 in cash.

Party On: The two major parties have also been busy raising cash, especially given that state campaign finance laws allow them to spend much more on individual candidate contests than the candidates themselves. The California Democratic Party reports 2008 contributions of about $11.6 million while the California Republican Party outpaced them by raising $17.8 million. But the tables are turned when it comes to cash left on hand -- the Dems reported $6.3 million in the bank, the GOP about $2.25 million.

We examine the ubiquitous "blanket veto" message that made its way onto 136 bills, and the angry comments from supporters of several health care bills that the governor nixxed, as well as the environmental legislation he signed into law.

Capitol Weekly editor Anthony York and I also discuss some newly public information about who pays for some of the governor's overseas trips and international conferences.

By the way, a longer examination of the bills signed or vetoed (which York and I were both involved with) was on KQED's public affairs show, Forum, on Thursday. The audio for that hourlong discussion is below.

The annual report on "Improper Activities by State Employees" is out from the Bureau of State Audits, chock full of little anecdotes about no-nos the auditors discovered.

The report obviously isn't an indictment of the vast majority of state workers (no emails, please) or of most government agencies. Nonetheless, it always provides some insight into how a handful of folks think they've gotten away with something... for a little while, at least.

Without any further ado...

Two Jobs Are Better Than One: The audit found a full-time employee at the California Department of Housing and Community Development was holding down a job on the outside at the same time she drew a state paycheck. And if that wasn't enough, the outside job was with a non-profit organization that was receiving grants from the department. Total cost to the state: $34,687. Ummm, didn't anyone notice? Apparently not. From the auditors' report: "The employee's managers at HCD did not sufficiently supervise her attendance and failed to respond appropriately to numerous indications that the employee was working simultaneously at the nonprofit."

There's No Business Like... No Business: Over at the state Environmental Protection Agency, auditors found an employee who was apparently taking time off but being paid as though she was on the job. The employee (all persons are unnamed in the audit, by the way) was away from work a total of 768 hours over a 22 month period. That's 19.2 weeks of vacation... assuming a standard workweek... in less than two years. Cost to the state: $23,320. Again, the audit raps the knuckles of supervisors who failed to stay on top of the situation.

On the Job Drinking: At the California Employment Development Department, auditors discovered an employee who was drinking alcoholic beverages while working, which (shockingly) "impeded his ability to perform his duties safely." But it gets better. "Moreover," says the report, "his supervisors had been aware of the situation for years." In the time since the auditors filed their report, supervisors at the agency decided to suspend the worker, without pay, for two days.

The list goes on with other small, but interesting, snippets of folks not necessarily walking the straight and narrow. The incidents came to light through California's Whistleblower Protection Act, and the report was officially submitted to the governor and Legislature today by State Auditor Elaine Howle.

The entire report, in all its glory, can be found here.

Treasurer Bill Lockyer's released his annual debt affordability report for state government today, but it was the particularly dire attached written statement that will make headlines:

"“For 10 days, state and local governments have been closed out of credit markets – long-term and short-term – in spite of the fact that they represent no default risk and provide a good tax-free return to investors," wrote Lockyer. "The credit market is frozen because financial institutions are afraid to commit capital amid enormous uncertainty."

That's particularly bad news for California, as state government typically needs a short-term loan around this time of year to keep the bills paid.

You may remember that the issue of loans was much discussed by both Lockyer and Controller John Chiang during the budget stalemate; at that time, the fear was an expensive loan known as a Revenue Anticipation Warrant (RAW), which was the only option for the state's money needs in the absence of an enacted spending plan. Now, even the frequently used loan known as a Revenue Anticipation Note (RAN) appears in trouble.

Without a RAN loan, the state's cash reserves could be depleted by the end of this month. That means all of those state services that went without during the budget impasse... and more... could end up without cash.

"Payments for teachers' salaries, nursing homes, law enforcement and every other state-funded service would stop or be significantly delayed," says the written statement from Lockyer. "And California’s 5,000 cities, counties, school districts and special districts would face the same fate."

"The last decade, Californians have gained 360 million pounds. Think about that for a little bit. Now when I was in the Austrian army, I drove a tank that weighed 50 tons. Now multiply that by 3,500. That's as many pounds as Californians have gained. That's huge."

On Monday, an initiative was filed with the Attorney General's office to reinstate an "open primary" system in California, but one with some new twists. Those twists seek to resolve the problems with the 1996 system which was approved by California voters but later struck down by the courts.

The proponent of the measure is well known in California politics: Steve Peace, who served in the Legislature for almost two decades.

In a brief phone chat this morning, Peace said the initiative he filed is the exact same "open primary" system that now exists in the state of Washington -- one which was upheld by the U.S. Supreme Court earlier this year.

"We wanted to make sure we didn't deviate" from the Washington measure, said Peace, in order to ensure it would not be overturned by the courts if ultimately enacted by the voters.

The measure would return the June primary to an open system where any voter can choose any candidate, with the top two vote getters -- regardless of party -- then duking it out in November.

What makes the proposal intriguing is additional language that favors non-partisan politics. First, Californians who register to vote would no longer be considered Democrats or Republicans or any other party. And second, candidates would be able to opt out of identifying themselves as belonging to a political party, potentially allowing them to tap into the growing number of voters who identify as "independent."

The system doesn't mean there won't be candidates with a "D" or "R" beside their name, but it obviously changes the dynamics of state elections. It also means that a November election could pit two non-partisan candidates against each other... thus leaving voters to consider two candidates solely on the issues that arise in that campaign.

As to the requirement that all voters are registered without a party preference, Peace thinks that's a big selling point. "Voters like that a lot," he said, because no longer will campaigns be able to target certain mailings and messages based on one's party affiliation. Peace says it also ensures a voter's privacy rights.

The California effort has a long ways to go. Peace says he now works with an organization called the California Independent Voter Project, but that the group won't be the one pushing this initiative through the signature-gathering process; rather, the hope is that a public conversation about the proposal will generate its own group of supporters who will come forward.

Governor Schwarzenegger has a little more than 24 hours left to weigh in on bills sent to his desk by the Legislature. The weekend saw a flurry of signings and vetoes, too many to really keep track. In fact, one of the less talked about truths of this week is whether anyone truly can watch all of these bills. Certainly the shrinking Capitol press corps struggles more and more every year to do so.

Nonetheless, the intriguing side story to all of this is all of the vetoes that are being blamed on the budget impasse.

"Given the [budget] delay, I am only signing bills that are the highest priority for California," says Schwarzenegger in the boilerplate veto being attached to dozens and dozens of proposals.

Of course, determining "priority" is a subjective exercise and the supporters of some of these bills have questioned the governor's own standard. One poignant questioning of the standard came this morning from California's top elections official, Secretary of State Debra Bowen.

Bowen was critical of the governor's blanket veto of several elections-related proposals, including new ways for vote-by-mail to learn if their ballots have been rejected, and why; a bill making it easier for voters to change their mind after signing an initiative petition; and two measures helping indepedent voters understand their rights in choosing party ballots in primary elections.

"I'm dismayed the governor doesn’t believe it is a high priority to let voters know about their polling-place rights or if their votes were counted," said Bowen in a written statement. "I understand the governor is not fond of the Legislature these days, but it's California voters who are being punished."