for cuts, insists that taxes must rise, too. But in California, any tax increase requires the support of two thirds of the state legislature, and the Republican minority refuses to play ball. Result: deadlock. So for the time being, state agencies (eg. health and welfare providers) will have to be paid in IOU notes instead of money.

How have things got to this pass?
The causes lie deep in the state's political structure - notably in its adherence to a form of participatory democracy that has undermined the authority of state government. Like 23 other states, state laws can be proposed and enacted by popular vote: in the 'initiative process', any proposition supported by around 500,000 signatures can be put to a state-wide referendum. (For example, California's anti-same-sex-marriage lobby last year spent $74m successfully persuading voters to re-impose the ban on same-sex marriages that the state's supreme court had lifted.) Unlike the other 23 states, however, propositions that win a majority cannot be over-ridden by the legislature; nor do they tend to have an expiry date. And since these initiatives almost always commit the state to devoting resources to unfunded programmes, but almost never propose new ways of raising money, the system has a built-in tendency to crash, especially given the impact of the most notorious initiative of all - Proposition 13, passed in 1978.

What are the effects of Proposition 13?
Two things. First, it cut property taxes to 1 per cent, making the state reliant on other taxes, primarily its income tax. This has made California a boom-and-bust kind of place: when citizens are earning, the state does well: with income tax bringing in more than 50 per cent of revenues, the state coffers swelled by 40 per cent from 2003 to 2008. But this year, with citizens feeling the pinch, revenues are expected to fall by 20 per cent: suddenly there's no cash.

And what's the second big effect of Proposition 13?
It made any tax increase dependent on the support of two thirds of the state legislature. A tax cut, on the other hand, needs just a simple majority. Hence, for all its liberal outlook, California's entire political system is structured towards tax cuts. Since 1993, Democrat and Republican legislators alike have reduced its revenues by an estimated $92bn, handing tax breaks to everyone from oil companies to pornographic bookshops. Proposition 13 makes Californians believe they can have the best of both worlds: low taxes and high public spending.

Can't they just repeal it?
No. The initiative process is embedded in the state constitution, dating back to 1849. To get rid of it would involve calling a constitutional convention, the first since 1879. That idea is popular with many of the state's business leaders and reformers, not least because it could freshen up the state's derided political establishment, but it has two major drawbacks: first, it would involve another referendum, and California's voters are unlikely to approve anything that could lead to higher taxes; secondly, it would take time, and that is something the state of California just doesn't have.