California budget 'emergency': bid to recoup $6 billion in pensions

“There are a ton of undecideds out there and so there will be lots of unhappy campers out there on the campaign trail if we don’t have a state budget,” says O’Connor.

Besides political consequences, there are fiscal drawbacks to the state's instability as well.

“These yearly crises are a significant negative for California’s ability to compete for entrepreneurs and talent," says Stephen Levy, Director and Senior Economist of the Center for Continuing Study of the California Economy in Palo Alto. "As the years drag on, more and more people think of California as the state that can’t or won’t get its act together,” he says.

The worrisome state of California's finances extends beyond business, says Jack Kyser, Chief Economic Advisor at the Southern California Association of Governments. “People are concerned about the long-term impact on California … on education, especially the University of California," and on transportation and other infrastructure spending, he says.

There is talk among analysts that there may be no state budget until Schwarzenegger leaves office in January. But one silver lining could be that voters might evaluate the wisdom of California’s high requirement to pass a budget – two-thirds of the legislature. And if they are angry at legislators, things could change.

“This requirement may be reduced to a simple majority if Prop. 25 passes in November,” notes Robert Stern, president of the Center for Governmental Studies. “Polls show [Prop. 25] has 60 percent support because it contains a provision that forfeits all legislative pay forever during the time the budget is overdue.”

Related:

• California faces $19 billion budget deficit despite massive cuts
• Schwarzenegger calls for deep California budget cuts
• Down to the wire on California's budget crisis

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