To say that California is experiencing a state budget crisis at the moment would be a gross understatement that would not do the situation justice.

The beginning of the 2010-11 fiscal year is now more than 45 days old and California, as was the case in 2008 and 2009, is still without a budget. In fact, they’re not even close.

In recent years, California’s deficit has risen to over 20 billion dollars, nearly 500 million dollars of IOUs clog the state rolls, teachers and public safety positions have been cut, classroom sizes are out of control, and meanwhile, lawmakers continue to bicker over two possible courses for addressing the enormous shortfall: raising taxes or cutting programs.

For his part, Governor Schwarzenegger, who is vehemently opposed to the idea of another tax raise (the last coming in February of 2009), has tried everything from reinstating a measure to furlough state workers to imposing a mandatory minimum wage for those same workers until a satisfactory budget has been passed. Both of these tactics met with resistance from the state controller’s office, which refused to comply with the Governor’s order—a decision that has, at least thus far, been upheld by the courts.

California State Budget Deficit: Why?

So why is California, home to some of the wealthiest people in the nation, in such a state of crisis? Some say it can be traced back to 1978 and the passage of Proposition 13. The Prop 13 initiative cut property taxes by nearly 60 percent and placed a 1% cap on property taxes going forward, forcing California to rely more heavily on personal income tax as their primary source of revenue. This was great for the booming 1980s, but when the nation went into a recession in 1991 the problem of collecting enough revenue to keep programs afloat became glaringly evident, forcing then Governor Pete Wilson to raise taxes by 7 billion dollars. Fast forward to 2009 and 2010 and another, even more profound recession, and the inherent problem with an initiative like Proposition 13 once again “rears its ugly head.”

California is also the only state in the union to require a two thirds majority both for passing and changing a budget and for raising taxes. As you might expect, this provision creates a forum for major partisan battles and promotes political inefficiency at a time when California can least afford it.

With the Greek budget crisis leading the way to worries in Europe, the California state budget crisis is leading the worries in the U.S. Some believe that as goes California, so goes the nation, and that the state budget crisis in California portends the coming financial crisis in the U.S.

Finally, the California state budget crisis can be traced in part to an initiative passed in 1998—Proposition 98—which allocates almost 40 percent of the overall budget to education. This provision makes it extremely difficult to fund other valuable programs and address a deficit that is raging out of control.