Borrowing about $5 billion, shortening the K-12 school year by a week, tapping the state lottery and raising the sales tax - these are the main proposals of California Gov. Arnold Schwarzenegger's plan for fixing a $42 billion budget deficit over the next 18 months.

As a part of the plan, the Republican governor is looking at $17.4 billion in spending cuts; $14.3 billion in tax increases and other new revenue; and $5 billion through the state lottery. With that, nearly $95.5 billion will be left in the main general fund of the state, for the budget year beginning July.

According to the latest proposal, the state sales tax will be raised from 5 percent to 6.5 percent starting March 1, and will last till December 2011. It will also be extended to services including repair of vehicles and appliances and veterinary services; and raised on alcoholic drinks. The vehicle registration fee will also be increased by $12 and oil production in the state too will be taxed.

In the opinion of the State officials, without a budget fix - and possibly even otherwise - California will run out of money in February, and will have to issue IOUs to employees, contractors and taxpayers expecting a refund.

Giving details about the plan to reporters, Finance Director Mike Genest said: "We are facing a major crisis, probably the most challenging budget situation the state has ever faced. These are substantial tax increase. These are major program reductions, and even with all of that we couldn't quite get there."