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California, hit the reset button

The state has seen this budget drama before. It’s time for a completely new script.

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California isn't the only state with budget woes. Kansas is delaying income-tax refunds. Proposed cuts have prompted protests in Washington State. But locking lawmakers in the capitol until they close a whopping $42 billion deficit? That's high drama, and a sign that America's most populous state needs to rewrite its script.

Too often, the state's budget screenplay comes to the same climax: a showdown over a deficit. And it ends the same way: short-term fixes that don't solve the underlying problems.

In 2003, residents recalled Democratic Gov. Gray Davis for fiscal failure and legislative gridlock. Now they're watching Republican Arnold Schwarzenegger struggle with similar issues, magnified by the housing bust.

No wonder many are leaving the theater. Last year, 144,000 more people moved out of the state than moved in, a trend since 2005.

As the world's eighth largest economy, as a traditional source of innovation and inspiration, California can't afford fiscal and political dysfunction anymore.

In one way, Californians have the same hard lesson to learn as most other Americans. They've been overspending. In 2008, their budget totaled $144 billion. Hold your breath: 10 years earlier it was $56 billion.

They've also succumbed to a common human trait of bargainhunting: wanting Nieman Marcus service at a Kmart price. They won't cut spending, but they're loathe to raise taxes – though they've slowly inched up so that the state ranks sixth in the nation in income taxes.

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