Fiscal hawks couldn’t ask for a better demonstration of the real problem in government deficits.  California has struggled with its budget for years, repeatedly claiming to have solved gaping holes in its finances, only to see them arise again.  Yesterday, the state announced that deficits have returned — and not because they didn’t get enough money.  In fact, the revenue shortfall came to just 9% of the problem (via Instapundit):

California still lacks a 2010-11 state budget but its deficit is already widening as revenue falls below official forecasts and spending runs above expectations, Controller John Chiang said today.

Revenues in July, the first month of the fiscal year, were $91 million or 1.9 percent below the pending budget’s forecast, Chiang said, while spending ran nearly a billion dollars over the forecast.

Got that?  The first month’s deficit was almost a billion dollars, of which 9.1% could be attributed to the poor economy in California.  Instead, 90.9% of the problem is out of control spending from Sacramento.  But instead of tackling the 90.9% by slashing spending, we can rest assured that the legislature in Sacramento will try solving the 9.1% problem by hiking taxes and fees, and making the economy even worse as a result.

Reason notes a little bit of irony in this announcement:

John “Cobol” Chiang, the state controller who is unable to fix his paycheck-cutting devices to reduce state employee payments, nevertheless reports that the state managed to spend a billion dollars more than projected during in the month of July.

Interesting, that.  Also, Chiang doesn’t appear to have much trouble cutting other payments:

Chiang added that unless the Capitol’s budget stalemate ends soon, he will begin issuing IOUs, technically called “registered warrants,” to pay some bills in late August or early September. An enacted budget would allow the state to seek short-term cash flow loans from commercial lenders.

How about just cutting spending? Instead of issuing IOUs, California needs to demand fiscal responsibility and a more modest approach to government.  Fix the 90.9% problem, and it’s almost certain that the 9.1% problem will take care of itself.  That’s advice Congress should take as well.