California's problems are similar to many other states (Florida, Arizona, Nevada) who's economy was held upright in b/c of an overinflated housing market.
However California's real problem now is the fact that thanks to crazy ballot refernedums the state is f'ed up. For example Californians have passed ballot referendums that have pretty elimiated property taxes (which are schools major funding). They have also passed referemdums requiring a 2/3s majority in state congress to pass any tax hike so its impossible for the state to raise any money unless it can borrow it and now the states bond rating is junk so no one will lend them any.
Meanwhile Californians also use ballot referendums to pass all these other measures that the state is required to fund and while many of them are good in principle (such as requiring a 4:1 Nurses to patient ratio in hospitals, passing measures requiring the state to spend billions on stem cell research, harsh penalities and long prison sentences for criminals et.al) all the while thinking that they don't have to pay for it.
This was all fine and dandy during a housing boom and when the state could easily raise capital by borrowing it cheaply whenever they needed it. So unless Californians wake finally realize that they actually have to pay for things like good schools, health care, police forces with their own money and approve a tax increase to pay down the debt they've made for themselves then the state really is in trouble.
On the flip side there may be a ballot referendum that if passed will legalize pot (it will still be techinially be illegal fed law trumps it but the fed only makes 1-2% of all drug arrests), so maybe stoner tourists will turn the ecomony around?
