The Observer has a solid if depressing overview of the enormous financial problems facing the State of California now.
Much has been made globally of the problems of Ireland and Iceland. Yet California dwarfs both. It is the eighth largest economy in the world, with a population of 37 million. If it was an independent country it would be in the G8. And if it were a company, it would likely be declared bankrupt.
A recent commission here just floated an idea to raise the already steep income tax on the middle class AND tax all businesses 4% on gross receipts. Sounds like a swell way to encourage businesses and people to leave the state.
Much of the problem is the proposition system which brought a) Prop 13 which froze property taxes for many to artificially low levels and b) the requirement that budget matters must pass the legislature by 2/3’s. The proposition system is flawed, easily gamed, and is broken. It should be replaced with something that actually works.