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

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The move puts pressure on both parties, says Barbara O'Connor, director emeritus of the Institute for Study of Politics and Media at California State University, Sacramento.

“It creates enormous pressure for the Democrats to finally come to the table with a consensus proposal,” she says. Right now, she says, they are floating one idea in the state Assembly and a different one in the Senate. “This move creates havoc, and out of havoc usually comes forced consensus,” says Ms. O’Connor.

Meanwhile, the governor is at an economic summit in San Diego with business leaders who are getting close to wanting to be out campaigning for fall elections. A Field Poll released Thursday shows Attorney General Jerry Brown and Sen. Barbara Boxer with narrow leads for governor and US Senate respectively, but also shows a large number of undecided voters.

“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.

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