The deficit is even greater than previously thought.
Fewer tax dollars coming in to the California Franchise Tax Board, a never-ending foreclosure crisis and long lines at unemployment offices have all combined to make this year's budget deficit much worse than originally projected.
"We don't know exactly the amount, but we know it is more than the $3 billion," said California Gov. Arnold Schwarzenegger Monday.
That news came just one month after Governor Schwarzenegger signed what was supposed to be a "balanced budget."
With the state's financial crisis moving fast, the Governor will sign an order November 5th, calling all lawmakers to back to the Capitol for a special session. He wants to take advantage of the experienced ones before the freshmen start their term in December.
Wall Street is signaling that more budget cuts will be on the table.
"If we don't cut our budget our credit rating is going to go down. They told us that. So, it's going to be a miserable November," said Senate President Don Perata.
Raising revenue is also a priority to soften the blow to any cuts.
State leaders want the federal government to extend unemployment benefits and give out more public works money to create jobs.
"We just want to get the economy moving and jobs is the best way," said Minority Leader Mike Villines.
California's tax system will also get closer scrutiny.
State leaders have long complained that it's too antiquated, based on taxing goods, while services like oil changes and haircuts escape taxation in our modern society, as do many types of internet purchases.
The Governor of California has at least one idea.
"We will create, which we will announce this week, a tax modernization committee," said Gov. Schwarzenegger.
In the meantime, some say the Governor has a much better chance of passing a temporary tax hike with the current crop of lawmakers. Several are not running for reelection and would not suffer any backlash for approving one.
