Schwarzenegger Calls for Emergency Bills As Money Runs out in California

Facing an $11 billion budget shortfall, California Governor Arnold Schwarzenegger called the newly elected state legislature into an emergency session Monday.

Under California Proposition 58, which allowed the governor to call the emergency session, the legislature has 45 days to address the gaping hole in state finances.

The gist of this is that California may run out of money to meet its debts as early as February.

Even assuming lawmakers can break the stalemate - which given the ideological stakes involved is not at all certain - the situation for the Californian economy isn’t great. Normally we’d apply that old Kissingerian adage about student politics - that the fights are so vicious precisely because the stakes are so small - but given that California is the ninth largest economy in the world, that clearly isn’t the case.

Speaking at a conference of the National Governors Association in Philadelphia, Mr. Obama said his background in the Illinois state senate made him particularly sympathetic to the needs of state and local governments. And he declared himself open to good ideas that work, whether they come from Democrats or Republicans.

California's financial collapse is staggering. Equally staggering, the legislature's inability to come together to solve the problem.

There is a reason why Californians legislate through propositions. It's the only way things get done, for better or for worse. One unintended consequence, says public policy expert Joe Kotkin, is "it really is enabling irresponsibility" in Sacramento.

Schwarzenegger said their failure to act has cost California an additional $1.5 billion to $2 billion because the state continues to spend at the same rate even as revenue declines.

His projection assumes lawmakers act on the final day of the new session and implement all the governor's recommendations. The figure could be lower if they act quickly, said his spokesman, Aaron McLear.