by Calculated Risk on 11/06/2007 10:24:00 AM

From the LA Times: Schwarzenegger orders plan for 10% budget cuts

Gov. Arnold Schwarzenegger on Monday ordered all state departments to draft plans for deep spending cuts after receiving word that California's budget is plunging further into the red -- largely because of the troubled housing market.
...
Economists say the state's declining fortunes are due in large part to the shakeout in the housing market and a volatile revenue system overly reliant on income taxes.
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[Chris Thornberg, a principal with Beacon Economics] said the trouble in the housing sector is reverberating through the entire state economy, causing income and consumer spending to decline. He noted that unemployment is up a full percent since the beginning of the year, a jump that typically foreshadows recession.

"What's happening right now is big in terms of the revenue hit," he said. "The numbers are coming in way below where they should be."

Drought. Fires. And now recession. Welcome to California.