Government regulation may not be the answer for Wall Street. He hates stump speeches. His son is more conservative than he is. He made a congratulatory call to the most talked about woman in politics these days. He has a predicition as to who will succeed him in office.

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.

It's been a lousy day to talk money for ordinary folks, but a busy day on the money trail for political reporters in California... as the latest pre-election campaign finance reports give a quick glimpse at cash raised, spent, and left for just about everyone involved in the November 4 election.

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.

The end of the year at the state Capitol is our focus this week on the Capital Notes Podcast, as we examine the bills signed or vetoed by Governor Arnold Schwarzenegger.

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.

You can say one thing about those pesky state auditors: they sure are picky about how taxpayer dollars are spent.

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.

With the historic budget impasse's conclusion, it may be conventional wisdom to think the state's fiscal woes are -- at least temporarily -- over. But this morning, the state's top investment officer warned that California is in danger of running out of money due to the uncertainty of what happens next on Wall Street.

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."

Governor Schwarzenegger, at an event signing SB 1420, legislation requiring restaurant chains with at least 20 locations to post caloric information on menus and menu boards, a law to be phased in between 2009 and 2011:

"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."

Political watchers know well that the single fastest growing, and most influential, group of Californians are those who decline to pick a party when they register to vote. As such, there may soon be a new push to reshape state elections in favor of non-partisan politics, while pushing the major parties to the side.

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.

With the fatigue of the budget saga slowly starting to fade (especially for those of us who took a few days off, which explains for the missing podcast last week), the annual process of bill signings and vetoes is also about to draw to a close.

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."

The audio is here:

In next year’s special election, voters will be ask to change… and essentially sever… the almost 24-year relationship between the California Lottery and public education. They’ll also be asked to approve a borrowing plan related to the lottery with no specific limits.

On this morning's edition of The California Report, we examined the measure being sent to voters next year to "securitize" future profits from the long struggling California Lottery, a plan now estimated to provide $10 billion to the state budget over the next two years.

Securitization is, for all intents and purposes, borrowing… in that it asks for money now, to be paid back over time. In this case, Wall Street investors would receive their money back – with interest – over 30 years from lottery revenues.

The proposal that will appear on a special election ballot (June 2, 2009 as it now appears) will ask voters to remove K-14 education from its historic place as the recipient of lottery revenues. Instead, an amount roughly equal to current lottery education dollars ($1.2 billion) will be built in to the Proposition 98 school funding guarantee. The existing lottery revenues, says Governor Schwarzenegger's budget team, will then be sent to the state's General Fund to cover that extra Prop 98 funding.

But the interesting changes lie elsewhere in the deal.

For starters, the ballot measure voters will consider removes all limits on how much revenue can be pushed back into prizes, thus ensuring the biggest jackpots in California Lottery history. Bigger jackpots, as other lotteries know, bring more revenues… and the lottery's new focus will be almost exclusively on bringing in more money.

That's because those extra revenues will go to investors who loaned the state money. And while the investors won't be holding debt backed by the "full faith and credit" of the state (as in general obligation bonds), it will no doubt be in the state's interest to have those payments made, with interest. Might that put the state's General Fund on the line if everything goes bust? Perhaps.

The real question, says Jason Dickerson of the Legislative Analyst’s Office, is how much will Wall Street lend the state… and at what interest rate? Dickerson says it's likely that lottery notes will require a higher interest rate, simply because they’re not backed up – technically – by the state treasury.

"This is a good investment," said Schwarzenegger's finance director, Mike Genest, in a budget briefing with reporters yesterday. He rejects any concern that the current volatility on Wall Street might affect the appetite for lottery debt.

The existing plan is to borrow $5 billion for the 2009-2010 budget year, and another $5 billion the year after that. But is that the end of it?

Maybe. However, our reporting discovered that neither the actual constitutional amendment to be approved by voters nor the accompanying bills signed by the governor Tuesday mention that $10 billion amount.

"The measure going before the voters would allow unlimited borrowing in the future," says Dickerson. Finance director Genest says that's an unrealistic assumption, because the financial markets have only a limited appetite for such a product. However, he conceded on Tuesday that there technically are no limits to how many times future lawmakers could go back to Wall Street and ask for more. Of course, that would require even more revenue from the lottery.

The other question that voters probably won't know the answer to: how much more money can be squeezed out of the lottery? The governor’s original plan for allowing new games to be offered was rejected by the Legislature; the proposal that will appear on the ballot only removes the specifics on how lottery revenues must be divvied up.

Schwarzenegger bragged earlier this year about doubling lottery profits; expect such promises to get some serious scrutiny should voters approve what might amount to a serious expansion of state government’s gambling enterprise.

BUDGET DAY PLUS 84 – At last, the count has ended.

The final stanza of the 2008 budget saga was finally written this morning, as Governor Schwarzenegger signed the budget into law… on this first day of autumn.

Only 280 days to go until the next countdown for fiscal year 2009-2010.

A few items are worth noting, as the drama comes to a close:

The Blue Pencil: Schwarzenegger’s vetoes… $714 million ($510 General Fund)… are not the most he’s ever crossed out of a budget. The record was set last year; however, remember that the summer 2007 vetoes were ones largely already anticipated by the Capitol community, given they were a crucial part of the final deal with the “Gang of 14.”

The governor said today that this year’s vetoes were all about creating a larger reserve than the one was left with by the Legislature, which was about $800 million. The vetoes were in all kinds of programs, but the real dollar savings – close to 60% -- came from just two places: housing assistance for senior citizens and public transit. Several interest groups took particular aim today at Schwarzenegger for the $190.8 million cut from rent and property tax assistance for seniors.

Photo Op vs. Politics: Schwarzenegger decided to do a low-key budget signing… with his staff only allowing photographers in to see the official event. But his political team decided to link the budget impasse with the governor’s support of Proposition 11, the redistricting proposal on the November ballot. They clearly wanted the Prop 11 story line as part of today’s budget coverage. But some reporters… present company included… opted to not mention the Prop 11 event at all in their stories. Today’s news was the budget, not a proposal that is still being hotly debated as to its possible long-term impact on political paralysis at the Capitol. And, not surprisingly, the governor got questions from reporters at the Prop 11 event that were almost exclusively about… the budget.

Bonds and Ballots: At that Prop 11 event, the governor mentioned that he’d like to see a water bond on the special election ballot, an election (we think) will be scheduled for June 2, 2009. But as reported on Sunday, the state Constitution seems to limit bond measures from the Legislature to general election and primary ballots. Trouble is, the constitution is about as clear as… mud on this issue. Some are suggesting a water bond could be submitted as an initiative, though that route takes a lot of time and money.

Bills: Now the focus switches to the bills left on the governor’s desk. 875 of them, according to his office, that must be acted on in the next 6 days, or else become law without Schwarzenegger’s signature. No rest for the weary, it seems.