California Dream 2.0

There's still gold at the end of the rainbow, but in this new version, you need to pay for it.

Throughout its history, California has captured hearts. Millions have swooned over its natural beauty and limitless opportunity, and the state has loved them back.

In the nineteenth century, it gave its residents chunks of gold. In the twentieth, it flowed with milk and honey (and fruit, nuts, and vegetables). It offered stunning backdrops for movies and an amazing university system to hatch amazing high-tech products.

But for many, it's become a state of unrequited love – at least for now. Not only is California overcrowded, smog-impaired, traffic-jammed, and water-deprived, it's also fiscally off the tracks. This week, Republican Gov. Arnold Schwarzenegger signed a hard-fought budget of steep cuts to deal with a deficit of roughly $24 billion. Are these sacrifices a harbinger of what's to come for a nation struggling with a trillion-dollar deficit?

The cuts are painful, and will affect public education, from K-12 to colleges and universities; healthcare for the poor, the young, and the old; welfare payments; prisons; government workers and office hours, and state parks – many of which will close.

Not surprisingly, Californians feel dejected, with only 41 percent describing their state as one of the best places to live – compared to a more than 70 percent favorable rating from the mid '80s all the way back to the '60s, when the Field Poll first started asking this question.

It is premature, however, to declare this Golden-State romance finished.

Many of the charms, attributes, and opportunities that attracted people to California – and which underpin its economy – still exist, and will likely be enhanced as the global economy recovers.

The state is still strategically placed on the Pacific rim, with huge ports ready to accept goods from a re-rising China and other Asian exporters. California will still benefit from Asian finance, tourism, and education.

Even with an unemployment rate of 11.5 percent (nearly 2 percentage points above the national average), California still accounts for 45 to 50 percent of America's venture capital – money that feeds entrepreneurship. Innovation has always been California's strength. Companies are poised to take advantage of an emerging clean-energy age.

The state is also young – yes, populated with many who may be less educated than in the past or who may not speak English well or at all. Nonetheless, the youthful demographics – and attendant enthusiasm – bode well for California.

And California still brims with talent. Some will groan at this example, but 12 days to book, plan, and put on a high-caliber show that accommodated thousands of Michael Jackson mourners at the Staples Center in Los Angeles is one sign that the entertainment industry still has what it takes.

So, key fundamentals are strong, but like some long-standing relationships, the one between California and its residents has "issues." And they are not of the kiss-and-make-up variety.

Hard choices face the state's voters and politicians. If they perhaps haven't quite grasped this yet – and a budget partly patched with accounting gimmicks indicates they have not – they will be forced to as the months roll by and leave more red ink in their wake. This was not the state's first deficit debacle and surely, it will not be its last.

Those choices have to do with fiscal and government problems that have built up over time, problems that are not easily communicated or understood.

Should the state, for instance, flatten its state tax structure, which is overly reliant on revenue from the rich? Should it alter the two-thirds majority required to raise taxes or pass a budget in the legislature? Should it discourage its infamous ballot-initiative culture, or tinker with key initiatives that have hamstrung the legislature?

Grass-roots pressure is building for a constitutional convention to review these and other issues. The Field Poll is readying a survey to see where people stand on them.

What Californians are likely to discover is not that the love is gone, but that the days of free love are over. The California dream, like the American dream, is still achievable. But not on the cheap. It is a lesson that awaits the nation as a whole.

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