Even though I now live in Nevada, I still follow California news since I lived there for 41 years (and my two sons live in Ventura County - who are looking to move elsewhere). I am a Financial Analyst and I've always worked with budgets, albeit in the private sector, for many years. In a somewhat simplistic analysis, I see California's problems as two-fold: uncontrolled spending with controlled/limited income. Consider these facts (numerical fact sources: Wall Street Journal)

REVENUES - limited or reduced
**Proposition 13 - limits taxing, tax bills must have a 2/3 majority to pass in the Legislature.

**Bad economy - tax revenues are less than CA budgeted for because of unemployment and fewer capital gains since stock market and housing market plummeted. Revenues fell by more than 20% last year, while spending kept rising out of control.

**Internet - sales tax revenues are reduced when people opt to buy on the internet from places w/o a physical presence in the state to avoid paying sales tax. So what does CA do? They just raise the sales tax even more and give buyers even more incentive to go elsewhere to buy. (As of July 1, sales tax is now well over 10%, almost 11% in some areas.)

** Income taxes - did you know that between 50% to 55% of the state income tax comes from the top 1% of taxpayers? Almost 70% comes from the top 5%. In a thread farther down on this page, Mike W. and Penny expressed an opinion that CA needs to raise its taxes. Are you both crazy? Taxpayers have an option: it's called a moving van. Currently, CA ranks second in the nation for moving vans leaving the state (NY is #1 -- NY taxes are slightly higher.) CA has the most progressive tax structure of all 50 states with the second highest tax rate (10.55%) after New York City's of 12.62%. The "soak the rich" system has imploded on itself.

**Unemployment -- As of May, CA's jobless rate was 11.5% and growing. Fewer people paying into the system equals less revenue, but more unemployment benefits paid out.

EXPENDITURES - uncontolled and growing
**No limits on growth of gov't spending -- in the past 5 years, CA gov't spending has grown by over 35% compared to their population growth plus inflation (source: WSJ). Some states limit their spending to a formula of population growth plus inflation, but not CA. Their spending is totally whatever the voters and the Legislature can push through.

**High gov't spending does not translate into jobs - gov't's idea of stimulus to create jobs is wishful thinking. CA is 4th highest in nation for per capita spending -- state/local spending per person in CA is $10,136 -- spending is too often on entitlements (socialism - Joe the Plumber was right) and that does not create new productive jobs, just grows gov't. And gov't workers on average make $80,000 per year, higher than private sector. Gov't does not produce anything like the private sector -- no growth for the economy.

**The initiative process -- CA has so many propositions on the ballot every year and the voters tend to vote yes on way too many of these. It's the car-in-every-garage and chicken-in-every-pot mentality. They want it all and they want it now, regardless of the cost.

**CA schools -- Chris, you mentioned CA schools. Did you know that CA has the highest teacher salaries in the nation, but the second lowest math and reading test scores in the nation? (source: WSJ)

**CA prisons -- CA spends $49,000 per prison inmate, or 50% more per criminal than the average state. (source: WSJ)

**Where CA's money goes -- 3/4 of CA's spending goes for education, Medicaid, prisons and pensions -- and those are sacred cows that no one wants to cut back.

There's an old saying: As CA goes, so goes the nation. Scary thought, now though. CA was once the unrivaled technology center of the globe and NY was its financial capital. CA (and NY) have "progressive" policies that are supposed to create wealth: high tax rates on the rich, lots of gov't "investments," heavy unionization (unionized share of the workforce is 20%), and a large gov't role in health care (one-third of CA residents are unisured or on Medicaid). Sounds a lot like the way the rest of the nation is heading -- scary thought. CA now has the lowest bond rating in the nation, and going lower. And I haven't even touched on the role illegal immigration plays in all of this, which exacerbates the problems. But, hey, the present administration wants to give them amnesty and put them all on our health care system, right?

Governor Schwarzenegger is exploring a 6% flat tax on all individuals and corporations in CA with few deductions -- now we're getting somewhere. If people have to pay their fair share, they'll think twice about how they vote and who they vote for. Voters should have a vested interest in their gov't.

And just to keep this somewhat on-topic (earthquakes), God forbid that CA has a major earthquake right now. How are they going to pay the search and rescue, the doctors and hospitals, the contractors to re-build -- with IOU's?

Barbara