The suit was filed by Akin Gump Strauss Hauer & Feld LLP on behalf of Charles Young, former chancellor of the University of California, Los Angeles, and director of the Museum of Contemporary Art in Los Angeles. The suit described Young as "a citizen, taxpayer, and voter of the State of California, interested in seeing that the California government carries out its public duty consistent with constitutional mandates..."

The legal theory of the suit, which names the Legislature's chief clerks as the technical defendants, is that when voters passed Proposition 13 in 1978, cutting property taxes and requiring a two-thirds vote for tax increases, it was a "revision" of the state constitution rather than an "amendment."

The constitution allows amendments to be made by initiative petition but allows revisions - generally a more fundamental change - to be made only through a constitutional revision commission or a constitutional convention.

It's essentially the same argument that opponents of Proposition 8, the 2008 measure that outlawed same-sex marriages, made in attempting to persuade the state Supreme Court to void that measure. But the court, which had earlier sanctioned same-sex marriages, ruled that Proposition 8 was valid.

The two-thirds vote requirement has largely thwarted efforts by Democrats and liberal groups to raise taxes to cover the state's periodic budget deficits since Republican votes are needed. A few Republicans did vote for new taxes last February, but the budget remains imbalanced, and GOP leaders, along with Gov. Arnold Schwarzenegger, are insisting that the remaining deficit be covered by spending cuts rather than new taxes.

Personal income taxes in June were $987 million below what Gov. Arnold Schwarzenegger's administration had estimated in its May revision of the state budget, while sales taxes were down $154 billion.

The two shortfalls were offset, in part, by $1.31 billion in corporate taxes that were 41.2 percent above estimates -- attributed by Chiang to one-time payments by corporations to avoid a new state penalty for underpayment.

The below-expectations revenues make the state's 2009-10 budget deficit, pegged by the administration at $26.3 billion, that much worse. Schwarzenegger and lawmakers are stalemated over how to deal with the gap. Chiang's office has begun issuing IOUs in lieu of checks to many state creditors because of a severe cash crunch.

"California continues to pay for its history of unbalanced budgets," Chiang said, "The state spent $10.4 billion more than it collected last year alone, and is now without enough cash to cover all of its payment obligations. Our major sources of revenue have continued their trend downward, leaving no viable option but to craft a new budget that recognizes California's recovery has yet to begin."

The full monthly controller's office report may be found here.

By Roeder's calculations the immense California Public Employees' Retirement System (CalPERS) is one of the most optimistic, while CalPERS-managed systems for legislators and judges are among the most conservative and the state's other big system, the California State Teachers' Retirement System (CalSTRS) is in the middle.

Roeder's explanation of how these assumptions affect the health of the retirement systems, as well as the detailed rankings, are available here.

The 57-year-old Lancaster lawmaker told his 14 GOP colleagues that he will leave the post at the end of this month, according to the blog, written by state GOP official Jon Fleischman.

Runner said that resigning the chairmanship will allow the post to be held by someone who is not seeking higher office and, at the same time, trying to qualify and pass a statewide ballot measure.

Runner has filed his statement of intent to run for the Board of Equalization seat held by Republican Bill Leonard, who will be termed out next year. Opponents in the GOP primary are expected to include state Sen. Roy Ashburn and former Assembly members Barbara Alby and Alan Nakanishi.

Runner also is pushing a ballot measure that would require voters to produce photo identification at the polls.

The weak international economy is dampening demand for California's agricultural products and other goods, Jock O'Connell, a consultant to the UC center said.

California exports totaled $9.5 billion in May, 25.2 percent below the $12.7 billion in goods the state shipped abroad in May of last year. "The May export numbers offer no encouragement that economic recovery will be a near-term thing," O'Connell said. "These were the lowest California export totals for the month of May since 2004."

California's manufactured exports fell by 28.0 percent in May, while agricultural goods and other non-manufactured exports shrunk by 23.3 percent. Re-exports of goods previously imported into the state were off by 15.4 percent.

On a year-to-date basis, California exports are down by 22.6 percent compared to last year when the state's exports totaled $59.9 billion. So far this year, the state's exports have amounted to just $46.4 billion.

Imports through California ports have been hit even harder. The UC analysis of Commerce Department data showed that the value of foreign goods entering the United States through California dropped by 31.7 percent in May.

O'Connell pointed to an International Monetary Fund report issued earlier this week indicating that international demand for goods will continue to be weak. That report forecasts that, of California's leading trading partners, only China is expected to enjoy an expanding economy this year.

The IMF predicts that Mexico, California's top export market in 2008, will see its economy contract by 7.3 percent this year. Canada, the state's second largest export destination, is expecting a 2.3 percent decline..

Among poor families, those with incomes of $22,000 or less, 1.73 persons leave California for every one that comes here, PPIC said in a report entitled "Are the Rich Leaving California?" The ratio drops as incomes rise, with those in the top quintile, with incomes of $110,000 up, the least likely to leave. At the very top, families with income of $300,000 or more, the ratio drops to 1.09.

That said, the states without personal income taxes, such as Texas, Nevada and Florida, are the most likely destinations for high-income families and individuals leaving California. However, those states are also among the most frequent destinations of low-income families as well.

The data don't include the latest increase in state taxes, which Gov. Arnold Schwarzenegger and the Legislature passed in February. And they use Census Bureau numbers that disagree with the state's own demographers, who believe the outflow from California is much lower than federal analysts detect.

California is highly dependent on personal income taxes from the highest-income residents. The top 1 percent of taxpayers pay half of state income taxes and about a quarter of all state revenues. Opponents of tax increases argue that raising rates will drive them out of the state, citing golfer Tiger Woods as an example of a high-income Californian who moved to Florida. But the PPIC study bolsters the countervailing view that raising marginal tax rates would have little effect on interstate migration.

The fuller PPIC report is available here.

Major banks are set to stop taking the state's IOUs by the close of business.

And -- news flash! -- state leaders have just discovered $26.3 billion in pennies raining from heaven on the Capitol Park lawn!

Yeah, right. That would be, uh, 2.63 trillion pennies. Try taking that to the bank.

Unfortunately, Furlough Friday is no joke. Forget going to the DMV. It's closed. It'll also be closed July 17 and July 24.

But state prisons, state parks, hospitals, developmental centers and other 24-hour operations will maintain normal hours of operation.

So will the California Highway Patrol and Cal Fire stations.

And the Franchise Tax Board, in case anybody wants to pay a tax bill with a state IOU.

Speaking of IOUs, the State Controller's Office began printing them July 2. Through Wednesday, 91,213 IOUs worth about $354 million had been processed.

If the budget is not resolved, the office expects to print $2.87 billion in IOUs through July.

Which, after today, recipients won't be able to take to the bank either...

The Marijuana Policy Project is running television commercials, "featuring an actual California marijuana consumer," to urge the governor and the Legislature to tax and regulate pot.

The speaker in the commercial is Nadine Herndon, 58, of Fair Oaks. She is a retired policy analyst for the state of California.

Here's her argument -- in the ad -- for why pot should be the sweet elixir to the state budget woes:

"Sacramento says huge cuts to schools, health care and police are inevitable due to California's budget crisis. Even our state parts could be closed. But the governor and legislature are ignoring millions of Californians who want to pay taxes.

"We're marijuana consumers. Instead of being treated like criminals for using a substance safer than alcohol, we want to pay our fair share. Taxes from California's marijuana industry could pay the salaries of 20,000 teachers. Isn't it time?"

Bruce Mirken, director of communications for the Marijuana Policy Project, complained in an e-mail today that too many California television stations -- including four in L.A. that flatly turned it down -- fear the pot ad is too smoking hot to run.

But Mirken said the spot is airing on KXTV News 10 and KOVR TV-13 in Sacramento, on KRON and KPIX in San Francisco and will run, beginning Saturday on KCBS in Los Angeles. It is also running on cable stations, on CNN, Headline News, MSNBC and CNBC, in Santa Barbara, San Diego, Bakersfield, Monterey, Fresno, Palm Springs and Palm Desert.

But two dozen protesters, egged on by the California Republican Party, radio personality Mark Williams and anti-tax crusader Lew Uhler, dressed themselves in purple T-shirts to march on the Capitol and offices of Assembly Speaker Karen Bass and Senate Pro Tem Darrell Steinberg.

Their message: They're fed up with the political clout of the purple-shirt wearing Service Employees International Union members and Democrats who are demanding new taxes to help alleviate California's budget crisis.

The SEIU, with 700,000 members in California, including in-home health care workers and others who stand to lose under proposed state budget cuts, has bankrolled a television advertising blitz on the budget. The union calls for a mix of new taxes and spending cuts to protect social services.

The GOP protesters charged that Democrats in the Legislature are under the political spell of the powerful union that frequently turns out hundreds of demonstrators in purple SEIU colors.

"They only listen to purple shirts," said Williams, accompanied by protesters in purple tees reading, "Will you listen now?"

"I even brought a bottle of pomegranate juice," he added. "Maybe they'll listen to me."

Or maybe not.

Asked to respond to the purple protest, Jim Zamora, spokesman for SEIU Local 1000, declined.

"We're not going to comment," Zamora said. "We're not listening to them."

PRI, a conservative think tank based in San Francisco, created a California Enterprise Value Index, using data from Standard & Poor's, and found that even when the economy was hoping in 2006-07, California's business growth lagged that of the nation as a whole and since then, business value has dropped faster.

"The index is a barometer of the relative underperformance or overperformance of California's economy as a result of public policies and other factors," said Lawrence J. McQuillan, director of business and economic studies at PRI, adding that it reflects relative capital-debt inflows to the state, and the willingness of companies to have headquarters in California rather than other states.

"We created the index to help business leaders and lawmakers better understand California's current economic climate -- in particular, we hope that it would serve as a wake-up call to lawmakers," McQuillan added. "California has been steadily falling behind in economic performance relative to other states and sound policies are needed to bring a vibrant business climate back to the state."

The study found that in 1963, the typical California public company enterprise value (EV) was nearly 34 percent greater than the typical EV in America, but today, the typical California EV is nearly 30 percent less than America's typical EV. California's median EV has fallen $43.5 million in just the past two years.

The full PRI report is available here.

Earlier this year, Gov. Arnold Schwarzenegger and legislators agreed to indirectly shift $350 million in local redevelopment funds -- tax money collected on property in redevelopment projects -- into the state treasury.

The California Redevelopment Association challenged that shift and won a favorable court decision, but the most recent legislative versions of the budget retake the $350 million for multiple years, with a technical change that state officials say would make it legal.

The association, in an e-mail today to its members, warns that as Schwarzenegger and lawmakers struggle to close the budget deficit, a much bigger shift of redevelopment funds may be in the offiing.

"At this writing," the warning said, "the situation remains fluid in the state Capitol as state legislators and the governor look for anything to close the state's $26.3 billion budget deficit. (The figure may go higher.) The elements of a compromise keep changing, but the one constant in the proposals being advanced by Democrats is a taking of redevelopment funds. In the last week, the amount has varied from $700 million to $1.35 billion this year!

"As usual, bill language is not available to review, but as best we can determine, the latest proposal is an unprecedented $1.35 billion ... transfer for FY 2009-10 with payments due on May 10, 2010."

State officials justify the shift, whatever amount it may be, by the interaction of redevelopment law and Proposition 98, the state's school finance law. The former allows cities to retain incremental taxes generated by redevelopment projects while the latter requires the state to compensate schools for any shortfalls in local property taxes. That means, state officials say, that the state bduget must give schools an additional $2 billion each year because cities are keeping redevelopment property taxes.

By forcing redevelopment agencies to transfer some of their property taxes to schools, the state then is able to reduce its aid to schools by the same amount through a device known as the Educational Revenue Augmentation Fund.

Redevelopment agencies are vowing to renew their legal challenge to any shift, regardless of the amount.

Pompei most recently was the press secretary for Nebraska Sen. Mike Johanns and communications director for his senatorial campaign. She previously worked as deputy press secretary for presidential candidate Mitt Romney. A native of Santa Monica, she is a graduate of UC Berkeley.

"Sarah has top-notch campaign experience in some of the most competitive races in the country," said Whitman's communications director Tucker Bounds.

"Our campaign couldn't ask for a more effective communicator to have on board," he added.

"During a discussion about the California budget crisis on the July 8 edition of MSNBC's Morning Meeting, host Dylan Ratigan interviewed former Rep. Tom Campbell (R-CA), but at no point disclosed that Campbell is a Republican," Media Matters said in a report. "Ratigan introduced Campbell as "a former California state budget director" and 'currently an economics and law professor at Chapman University,' and also stated that Campbell has 'the best budget familiarity.' During the segment, on-screen text also stated that Campbell is 'considering running for governor of California;' indeed, Campbell is currently seeking the Republican gubernatorial nomination."

Media Matters describes itself as an organization aimed at rooting out conservative bias in the media. Its full report on the Campbell interview is accessible here.

Texas may be replacing California as a national model of economic growth and governance, a new article in the British magazine The Economist suggests. But, the article says, both states could learn from the successes and failures of the other.

"The truth is that both states could learn from each other," the article concludes. "Texas still lacks California's great universities and lags in terms of culture. California could adopt not just Texas's leaner state, but also its more bipartisan approach to politics and its more welcoming attitude towards Mexico.

"There is no perfect model of government: it is America's genius to have 50 public-policy laboratories competing to find out what works best--just as it is the relentless competition of clever new firms from Portland to Pittsburgh that will pull the country out of its current gloom. But, to give Texas some credit and serve as a warning to Mr. Schwarzenegger's heir, at this moment America's two most futuristic states look a lot more like equals than ever before."

The full article is available here.

The 30-second spot, to be aired statewide, accuses Schwarzenegger of reneging on a 2004 deal in which education groups agreed to suspend the school-funding initiative temporarily.

The ad begins with a televised image of Schwarzenegger and a narrator saying, "We'll never forget."

"He said he was sorry," the ad says. "He said never again. But since then, $12 billion more in education cuts. And now Schwarzenegger says he'll break the minimum guarantee to our schools again. Summer schools, already canceled. Class sizes, on the rise. Art and music, eliminated. Tell the governor, 'We haven't forgotten. Protect our schools and put our kids first.'"

The TV spot is running on broadcast and cable channels in all major media markets -- Los Angeles, San Francisco, San Diego, Sacramento and Fresno, said Becky Zoglman, CTA spokeswoman.

Aaron McLear, Schwarzenegger spokesman, said the governor does not base public policy on TV advertising.

"Regardless of how many ads are run against the governor, he is standing strong for a balanced budget that makes the necessary cuts to live within our means," McLear said.

Schwarzenegger's office is seeking suspension of Proposition 98 this year to help close a $26.3 billion budget hole that is growing by about $25 million per day. The move would lower by $1.4 billion the base from which future school funding is calculated.

Under state law, suspension requires the funding base to be restored eventually, but school groups worry that billions could be lost before the state economy improves and restoration occurred.

School funding is an obvious target in solving a massive shortfall because elementary schools, middle schools, high schools and community colleges consume about 40 percent of general fund revenue.

Camille Anderson, a spokeswoman for Schwarzenegger, said that the governor is willing to consider any alternative budget cuts proposed by the Legislature that would eliminate the need to suspend Proposition 98.