Currently the talks among the top legislative leaders are centering on education funding and how much to cut or suspend, but still the stalemate continues.
On top of the 5,000 layoff notices that went out to state workers in May, the Schwarzenegger administration is targeting another 2,000 positions.
"The state's budget crisis gets worse by the day. We need to conserve cash so that we can meet payroll," says Lynelle Jolley, with the California Department of Personnel Administration.
State workers are already being hit with three unpaid furlough days. Many are frustrated their work is piling up with fewer people around to do the job.
"It'll be more work for those who are remaining in the various departments. It's a concern for everyone because state employees wonder when it's going to end. I really wish the Legislature would do their job and pass a budget," says David Cousins, a state worker.
While state leaders have made some progress on how to close that $26 billion deficit, a deal has not been sealed, and every day that goes by the pressure mounts.
Wells Fargo, Bank of America, Chase, and Union Bank have stopped cashing in California IOUs for its customers and Governor Schwarzenegger began airing television ads statewide to pressure lawmakers.
The ad says "I will not sign a budget that pushes our financial problems down the road because the road stops here."
"I do not think that ad is helpful. I think it will produce more resistance and more people digging their heels in," says political analyst John Syer, Ph.D.
A grassroots group sick of Sacramento's budget bickering has added pressure of their own by circulating an initiative to make the Legislature part-time aimed at encouraging regular citizens to replace career politicians.
"California has been plagued with bad budgets and gridlock for over a generation now. The reason being that our Legislators, or elected leaders, have lost touch with real Californians," says Tom Kise from Citizens for Reform California.
Wall Street has again weighed in on the budget mess. Moody's again downgraded California's bond rating to slightly above junk status, making borrowing for things like road projects more expensive for taxpayers.