"The self-delusion manifested in the manner that California 'balanced' the current fiscal year budget, the myopia involved in ignoring the magnitude of future year shortfalls, and the abdication of fiscal responsibility in failing to provide a feasible basis for funding the long-term pension and health care obligations promised California's public employees, make Wall Street executives, by comparison, paragons of fiscal responsibility."

The leaders also will discuss California's need for a $7 billion short-term loan, a normal borrowing maneuver that has become problematic in the wake of recent tight credit markets. Further problems arose Monday when U.S. District Judge Thelton Henderson said he expects the state to pay $8 billion to build seven new inmate medical facilities and upgrade other units, adding more pressure to the budget situation.

California's finances have tanked so badly that Gov. Arnold Schwarzenegger is considering calling an emergency session of the Legislature within the next month to reopen the very budget that lawmakers just passed - 85 days late.

Assembly Speaker Karen Bass and Gov. Arnold Schwarzenegger, who rarely agree on anything involving public finance, have called for a commission to consider an overhaul of the state's convoluted tax system. Bass no doubt believes that an overhaul would create new revenue streams – from expanding the sales tax to services, for instance.
More money might result, but the best reason for reforming the tax system isn't to raise more money per se. It's to straighten out countless taxing irrationalities and to generate more revenue stability to flatten out a roller-coaster budget that flies upward one year and plunges the next.

California is projected to exhaust its reserves – and dip $1.5 billion into the red – by Oct. 29 unless a short-term loan can be secured.