SPRINGFIELD - Gov. Rod Blagojevich's controversial plan to raise taxes on Illinois businesses has been rejected by lawmakers, but his bid to lease the state lottery apparently remains alive.

On Wednesday, the governor's chief budget adviser said Blagojevich remains committed to using the estimated $10 billion or more to help reduce the state's pension liability from an estimated $41 billion to $15 billion.

The pending deal is just one element of the state's budget negotiations, which started anew this week in the wake of the House's 107-0 thumping of the governor's proposed gross-receipts tax.

Without the more than $7 billion that would have been raised by the governor's tax hike on businesses, lawmakers are talking about other options to raise money for schools, health care and construction spending.

"They know that we need to raise revenue somehow, so it's just a matter of getting everyone together to accumulate all the ideas that are out there," said Senate Majority Leader Debbie Halvorson, D-Crete.

Among the ideas is Halvorson's plan to expand the state's sales tax base to include services such as haircuts and car repairs.

A proposal to raise the income tax in exchange for a property tax cut continues to be discussed, despite Blagojevich's oft-stated opposition to a tax increase.

And an expansion of gambling remains in the mix as a way to provide new money for a statewide construction program.

"I think we'll see a casino in Lake County and one or more in Chicago," predicted state Sen. Mike Jacobs, D-East Moline.

As for the privatizing the state lottery, Illinois is among several states that are considering the controversial idea as a way to raise money without raising taxes.

In Texas, officials have talked about using $14 billion in lottery money to bankroll a health insurance initiative. The concept also has been discussed in Indiana, Colorado and California.

Although House Speaker Michael Madigan, D-Chicago, has raised questions about the lottery sale, some top Democratic senators say the idea remains on the negotiating table.

"It's being talked about in a positive way," Halvorson said. "We have to do something because that's the revenue we're going to use to shore up the pensions."

Lawmakers on both sides of the aisle said they are keeping an open mind about the proposal.

"We need to look at everything; I don't think, at this point, we ought to be unilaterally opposed to any idea," said state Rep. Roger Eddy, R-Hutsonville.

"Before you give up the goose that lays the golden egg, you want to make sure you're going to get something better in return," added state Rep. Bob Flider, D-Mount Zion.

John Filan, the governor's chief operating officer, said several bidders are interested in leasing the lottery for a period of up to 75 years. Potential bidders have been reviewing the financial history of the lottery in a secure data room.

"I think people have received it very well," said Filan.

Kurt Erickson can be reached at kurt.erickson@lee.net or 789-0865.