State tax receipts were up for October -- one of only six upticks in more than two years. But that won't help the state's overall financial situation.
Governor Schwarzenegger estimated that California will have another budget deficit of as much as $7 billion through June. That's on top of the $ 7.5 billion deficit projected for the following year, creating a shortfall of almost $14.5 billion.
"We're not out of the woods yet, we still have a problem. The economy is not coming back yet, the way we want it," said Gov. Schwarzenegger R-CA.
California's continuing financial instability is no surprise. Besides the recession, state leaders relied on fuzzy math to balance the budget and a few groups blocked some of the budget cuts through the courts, leaving the spending plan vulnerable to a shortfall from the get-go.
The Governor and state lawmakers have already slashed state spending an unprecedented $60 billion earlier this year. This new projected deficit means even tougher decisions will have to be made.
With little hope of more unpopular tax hikes, more cuts are inevitable. Schools have already lost billions forcing teachers' layoffs, cutbacks in classes and bus service and new textbooks delays.
"Our schools have been warned more cuts may come. We've already cut, boy, just about everything we can. So how could there be more?" said school teacher Patricia Donovan.
Most state offices are closed the first three Fridays of each month, reducing salaries by 15 percent.
State workers are expected to be targeted again.
"He'll probably extend the 15 percent pay cut that we have. Currently, it's supposed to expire at the end of June," said state employee Noelle Gentelli.
Despite the state's money problems, Governor Schwarzenegger does not expect to bring lawmakers back from fall recess and will wait to make his annual budget presentation in January.