Since one of the backbones of Arnold's budget plan is IOUs, ya gotta wonder if they will become legal tender. This guy does not find merchants enthused with the idea.
More seriously, debt had been a leading indicator of our state budget problems for years. Arnold came to the Governor's office promissing lots of bold reform, blowing up the boxes, yada yada. So far the only bold change he has made is making debt a cornerstone of out budget. Used to be debt was modest and was to pay for infrastructure. Now, every election we pass bonds to pay for all manner of ongoing state programs and general budget expenditures. California's debt has nearly tripled in just the past six years, from $42.1 billion in fiscal year 2001-02 to $120.1 billion in FY 2007-08. The debt-service ratio--the portion of the state's annual revenues that must be set aside to make payments on the state debt, is on track to reach 10 percent before long. (See Reason's analysis of CA's debt here).
Now paying off the debt gobbles up a large and increasing share of the budget each year, and, faced with falling revenue, Arnold's first response is to go back to the credit card. All this just means that next year there is less money to use after debt payments are made, and another budget crisis.
We Californians will never forget this decade, because we will be paying for it until we die.