Governing California without a housing boom is hard

It's like déjà vu all over again here in the Golden State as the Gubernator looks to extricate himself and the state from massive budget deficits by slashing spending in the current fiscal year and proposing more cuts for next year.

Apparently a housing boom that has now gone decidedly bust is having an undesirable (yet very predictable) impact on the revenue side of the ledger as fewer homeowners are paying fewer property taxes as the foreclosure rate soars.

Of course it doesn't help that fewer workers are paying less income tax as the unemployment rate surges and that fewer consumers are paying less sales tax as home equity ATMs continue to shut down all across the state as home values continue to decline.

It's a lot harder to govern the largest state in the country California - what would be the eighth largest economy in the world - when you no longer have one of the most enormous speculative financial bubbles the world has ever seen pushing up asset prices, creating jobs, and fueling consumer spending.

This LA Times story fills in some of the details:

Gov. Arnold Schwarzenegger's ambitious policy agenda collided with fiscal reality Thursday as he rolled out a proposed budget that threatens to unravel his investment in schools, healthcare and criminal justice programs.

At the same time he is pushing a $14-billion expansion of healthcare to nearly all Californians, his budget calls for a rollback of existing medical programs for the needy.

His hope of improving schools may be dashed by what he says is a need, for the first time in years, to cut by hundreds of dollars the amount spent on each student.

And an expansion of the prison system he hoped to reform is now eclipsed by his proposal to release tens of thousands of inmates and lay off prison guards.

Schwarzenegger's budget recommendations put into stark contrast the disparity between his vision of what the state can accomplish and what it can afford in the current economy -- especially, say state finance experts, if he sticks to his promise not to raise taxes.

Well, he had four good years.