Gov. Arnold Schwarzenegger has now abandoned his goal of fixing the problem that led to his historic election in 2003. With his revised budget proposal, the governor has effectively conceded that California's era of perpetual budget deficits will not end on his watch.

Schwarzenegger long ago began losing his chance to fulfill his administration's original reason for being. The latest wrinkle just makes it official.

His trouble started early, when he proposed spending cuts that were politically unpalatable while failing to follow through on a fundamental, top-to-bottom rethinking of the way the state does business. When the economy briefly surged and brought in billions of dollars in tax revenue, Schwarzenegger lost his zeal for fiscal discipline and committed the new money to ongoing programs that could not be sustained once the economy slowed.

Even after all that, however, Schwarzenegger still had a chance to finish the job he was elected to do before his second term ends in January 2011. But Wednesday's proposal amounts to a surrender to the forces he was elected to confront. He can't, or won't, do what's necessary to right the ship.

His failure is more than just a numbers game. It reflects his — and the state's — refusal to face reality. The public's desire for spending on schools, healthcare, prisons, welfare, roads and other services is not matched by the voters' willingness to raise taxes.

The result: budget deficits year after year. Those deficits and the borrowing to which they have led mean that we're still paying now for services the state provided five years ago, leaving less money available for the things we need today. And years from now we and future Californians will still be paying — with interest — for the services we're getting today.

The unending struggle to deal with the budget also generates bad political energy that poisons the atmosphere in the Capitol and gives Californians and outsiders a distorted view of the state.

As a society, California is actually doing pretty well compared with five or 10 years ago, despite its dysfunctional government.

The centerpiece of Schwarzenegger's latest budget plan is a proposal to take an advance against future earnings from the sale of lottery tickets. He wants to overhaul the state-run gaming operation so that more people play, and more revenue flows to the state from the tickets they buy. Then he wants to get private investors to pay the state $15 billion in exchange for the rights to a portion of those higher proceeds over the next 30 years.

That's a questionable idea. But even worse is that Schwarzenegger has laid it on the table without linking it to a demand that legislators use the new money as part of a comprehensive plan to balance the budget for the long term.

The Democrats in the Legislature are desperate for new revenue to stave off deep cuts in programs they value. Republicans, in many cases no more eager to vote for those steep reductions, also don't want to raise taxes. The governor's lottery proposal gives both sides a way out.

Sensing this, Schwarzenegger wants to leverage the lottery idea to win votes for his plan to create a new rainy day reserve. Technically, the new lottery money would go into the rainy day fund. But since in economic terms it's raining right now, the money would immediately go from the reserve into the budget. Over the long term, tax revenues would refill the reserve whenever collections grow at a rate faster than the 10-year average.

When revenues grow at a rate below average, any money in the reserve would be available to help make up the difference.

But even if the Legislature accepted Schwarzenegger's lottery proposal, adopted every spending cut the governor proposed and embraced his budget-reform plan, the state would still be facing a projected shortfall of about $5 billion in two years. In other words, when the lottery money runs out, the problem is still there.

Schwarzenegger is unwilling to raise taxes to close that gap, and his advisers say they can't find anything else to cut that the governor has not already proposed. When he took office 4 years ago, the state was bringing in about $75 billion in taxes. This year, that number will be about $97 billion. In three years, it's projected to grow to about $111 billion.

That would be an increase of $36 billion a year, or nearly 50 percent, during Schwarzenegger's seven years in office. Beyond that, he persuaded the voters to borrow $15 billion in 2004, and now he wants to extract another $15 billion from the lottery. And still he can't balance the budget.

The governor is fond of saying that California's government does not have a revenue problem, it has a "spending problem." It's time for him to change his mantra, or at least admit that, after all these years, the problem is now his own.

— Daniel Weintraub writes for the Sacramento Bee.