On the eve of a series of referendums proposed to increase taxes on Californians, the Golden State’s legislative budget analyst warns that both the legislature and the governor have seriously underestimated the budget shortfall.  The state has a $23 billion gap even after the legislative compromise earlier this year supposedly eliminated the red ink and could default by July:

California could run out of money as soon as July, the Legislature’s chief budget analyst warned Thursday, as a new poll showed voters poised to reject five budget-related measures on the May 19 ballot.

If the propositions do not pass, the state could find itself as much as $23 billion short of the money it needs to pay its bills over the next year, according to a new forecast by Legislative Analyst Mac Taylor. The poll, from the Public Policy Institute of California, found that even as voter interest in the ballot measures rises, all are trailing except the sixth one — Proposition 1F, which would bar pay hikes for lawmakers in deficit years. …

Adding to the fiscal woes, the Obama administration is threatening to pull $6.8 billion in stimulus funds from California in a dispute over an earlier state budget cut.

“The Legislature is going to need to act promptly,” said state Department of Finance spokesman H.D. Palmer. “We have a fairly short window to get a lot done.”

Predictably, the political class has exploited this by warning of criminals running free in the street:

On Thursday, the administration advised law enforcement officials that it was preparing plans to commute the sentences of 38,000 state prison inmates, including all illegal immigrants. It also is considering closing some prisons and sending inmates to county jails, according to a copy of the proposal obtained by The Times.

Under the plan, 19,000 illegal immigrants — 11% of state prisoners — would be turned over to the U.S. Immigration and Customs Enforcement Agency after having their sentences commuted. An additional 19,000 “relatively low-risk offenders” would have their sentences commuted as well.

Earlier in the week, the administration warned local officials that it may raid their budgets for $2 billion and close firehouses.

Ah, yes, because California doesn’t spend money on anything but police and fire departments.  The Governator didn’t pledge six billion dollars for stem-cell research, for instance, or other non-essential nonsense.  This is a typical, extortive, dog-in-the-manger ploy by Schwarzenegger and the Sacramento elite.  Either give us your money, they warn, or we’ll sic the criminals on you.

Instead, California should concentrate on ridding themselves of the excess spending and regulation that the state has built over the last several decades, and concentrate on sustaining growth.  The state could rake in billions in leases and taxes and create tens of thousands of jobs by allowing oil exploration and production off its coast, for instance.  Arnold could lead a charge to lower business taxes in order to encourage investment, including the sky-high sales taxes that depress consumption.  Most importantly, they could start getting serious about trimming non-essential spending from the state budget and start shedding bureaucrats instead of driving business out of state.

Instead, the state prefers to set criminals free to punish its citizens for telling Sacramento that they spend too much money.  Maybe Escape from LA wasn’t so far-fetched after all.