Tucked inside California's thick budget package is a bill that allows the state lottery director to spend money on employee gifts, a practice that came under scrutiny after staff members were treated to a $46,336 party last year.

Guests took home a Nintendo Wii console, iPods, cameras and other rewards.

Under the bill passed by lawmakers, Lottery Director Joan Borucki would have the legal authority to spend money on employee "incentives" as part of California's push to increase lottery sales. Current law states that the director may spend money only on goods and services to run the publicly owned enterprise.

Lottery officials insist the language change would not sanction employee parties. Spokesman Al Lundeen said the lottery commission in May adopted restrictions regarding employee-recognition programs that are similar to those used by other state agencies.

That action came after an audit by the state controller's office found the lottery party to be an inappropriate expenditure.

"The change in the legislation neither sanctions parties nor do they negate the strict regulations adopted by the commission regarding employee incentive programs," Lundeen said. "Its intent is to clarify the powers that the director already has."

The language is contained in a bill that is related to the state budget but has not yet been signed by Gov. Arnold Schwarzenegger.

Schwarzenegger is expected to sign Assembly Bill 1654 because it also relates to a key aspect of the overall budget compromise.

Under the bill, the state would ask voters to authorize an increase in prize payouts as part of an effort to raise $5 billion next year by selling bonds to investors based on future lottery revenue. Without voter approval, next year's projected $1 billion shortfall would grow significantly.

Earlier this year, the state controller's office found that Borucki inappropriately authorized the use of public money for an employee-recognition event in November 2007. It was intended to commemorate the $20 billion the lottery has provided education since it was started in 1984.

The lottery spent nearly $30,000 on a prime rib dinner for employees, retirees and guests at the Doubletree Hotel in Sacramento. It also spent $17,292 on prizes that were handed out during mock lottery games, then billed to the state as "training" expenses.

"It's certainly disappointing, but this whole debacle certainly reminds the agencies as a whole that using money for meals and entertainment is wrong," said Garin Casaleggio, a spokesman for the controller's office.

Under the bill, Borucki would have clear authority to spend lottery money on not just employee incentives, but also on supplies, advertising, promotion and compensation paid to lottery game retailers, among other things.