If I look at the turning point when California went from being a national model for its public services to its long slow slide into being a national embarrassment, it goes back to 1980 and prop 13. This essentially capped property taxes at 1% of purchase price for as long as the owner held the deed. So you buy property. and your property tax never goes up. This accomplished three things: 1) Helped fuel the fire for wild speculation in the residential market, driving prices up into Ponzi scheme levels over a 25 year period 2) Created a corporate tax loophole. There are so many commercial buildings in California that have worked to maintain the original deed, even though the original owner/tenants have long since left, it'll make your head spin. 3) Reduced what had been the backbone of the California state revenue system to a crippled shadow of its former self. Ever since, the response to this has been for the state and local governments to implement temporary sales tax increases (yeah, temporary) and constantly increase the income tax rate for both individuals and businesses. So what you're seeing with Arnold is the effect of nearly 3 decades of complete mismanagement of the state. He didn't start it, he's just finishing it off. There are of course many other factors including exponential population increase from both legal and illegal sources, iron clad unions with the strength of most national armies (the prison guards union leads the way on this, not the teachers), unfavorable business legislation such as Santa Monica implementing a minimum wage of $10.50/ hour in 2001 when the rest of the country was paying $5.15, and stupid, stupid Gray Davis signing the state's soul away to Enron.