California Gov. Arnold Schwarzenegger's aides said Tuesday that he is dumping troubleshooter Chon Gutierrez, the acting lottery director who engineered California's participation with the Mega Millions multi-state lottery game, and then sent an adviser to spy on Democrats who are trying to halt ticket sales.

Democrat lawmakers and an anti-gambling group that sued the lottery took a break from their political bombardment of the Republican governor and hailed his decision.

The governor's office has launched "quite a search" that includes "extensive outreach" nationally to "fill the position with a full-time, permanent director as soon as possible," said Schwarzenegger spokeswoman Julie Soderlund in an interview.

The aide would not discuss why Gutierrez has been excluded from consideration, citing a "confidential internal appointments process." Soderlund continued to try to distance the governor from questions surrounding the lottery by referring all other queries to Gutierrez.

Gutierrez spokeswoman Rosa Escutia said the director had no comment on Schwarzenegger's disclosure, which came after Daily Review reports on the Democrat-spawned controversy surrounding the lottery's decision to join the multi-state Mega Millions game last month.

An anti-gambling group has filed a lawsuit claiming the game clashes with the voter-approved Lottery Act. It was envisioned as a revenue-raising tool in Schwarzenegger's government-reform efforts that Gutierrez helped forge.

"I think it's always a good day when the governor holds a career bureaucrat responsible for his or her actions," said Sen. Dean Florez, a Bakersfield-area Democrat whose committee oversees the lottery.

"I suspect this to be the case with the reckless direction the state lottery has followed under Acting Director Chon Gutierrez's tenure."

On Monday, Florez said he wanted Gutierrez either removed or made permanent so he would be subject to Senate confirmation hearings.

Senate Democratic leader Don Perata of Oakland said he "shared the concerns" and "had expressed those concerns to the administration."

On Tuesday, Florez hailed Schwarzenegger's "wise decision to replace Gutierrez."

"I think Gutierrez's performance came up short on all counts, and I appreciate the governor holding him responsible," he said.

"Gutierrez shepherded the ill-advised Mega Millions lottery agreement even though the Legislature's Legislative Counsel found that such participation was unlawful. And Gutierrez's special adviser, Kim Smith, was caught misrepresenting herself as a freelance reporter at a (anti-gambling group) news conference."

The flap began escalating after the anti-gambling group sued, accusing the lottery of exceeding its authority under the Lottery Act.  The group and the legislative Democrats' attorneys believe the act envisioned games only within California's borders.

The issue, if not decided by courts, is headed for debate by lawmakers, who have introduced legislation to amend the constitution, or for placement on a statewide ballot. The bill would not only legalize Mega Millions but also shift more lottery proceeds used for administration to schools.

Republicans have stated that the Democrat legislative actions are nothing more than political one-upmanship, and that Democrats have stood in the way of the Governor's attempts to improve California's financial footing ever since Schwarzenegger took office.

Democrats are also set to grill policy-setting lottery commissioners, appointed by Schwarzenegger, when legislators return from summer recess mid-August.

Reacting to Gutierrez pending ouster, anti-gambling group attorney Fred Jones said, "I hope they find a director who believes they are accountable to the people and their elected representatives."