It was clear already this past July that the nasty and brutal budget deal reached by the Governor and the Legislature would not probably be enough. We now learn from Bloomberg that the State's revenues are already running $1.1B behind expectations in the 3 months June 30 to Sept. 30, the decline being driven by smaller-than-expected returns in sale taxes, which in turn are driven by the 12.2% unemployment rate and certainly not helped by furloughs and layoffs of state workers.
The Bloomberg article also makes clear how much of the current budgetary trouble derives from servicing debt uncurred by the State under Schwarzenegger in trying to balance previous budgets. In addition to old debt, the July budget deal allows the sale of an extra $11B in bonds, "if the market allows," i.e., if the state does not have to commit to extravagantly high rates to force its bonds down investors' throats.
All of this spells trouble for the prospect of higher ed in California. At UC, we have a "soft" promise from UCOP to end of furloughs in 2010-11, but we have already had calls for an extensions (to mitigate fee increases), and the current budgetary stars do not seem to be aligned the right way.
As a counterpoint, in a recent NYT piece, Paul Krugman points out the elementary fact that in an economic downturn public support of education serves the dual purpose of providing counter-cyclical employment opportunities and delaying entry in a dismal job market for high-school (and college) graduates. California is, of course, doing exactly the opposite of what it should be doing.