Free Republic

Even before Gov. Arnold Schwarzenegger signs the state's overdue budget, turmoil in the housing and credit markets is cutting into state tax revenue and threatening to make next year's budget battle even worse. Economists say a continuing slump in new-home sales and construction, layoffs and bankruptcies in the mortgage-lending industry, and an increasingly volatile stock market have begun erasing revenue that lawmakers assumed would materialize to cover the $145 billion budget. With another $5 billion deficit looming for the state next summer, falling revenue only will make it harder for lawmakers to close the gap without considering painful cuts to...