Arnold Schwarzenegger's regime keeps lurching from one disaster to the next.

California's lawmakers are looking to revamp the budget but according to this news report, the budget might be looking okay now but it will create a disaster in 2010-2011 because it was using a raft of accounting tricks and cuts to pay its bills. All that means is it's deferred the crisis for another year. Some of these accounting tricks include moving employee salaries out a day, deferring school aid and withholding acceleration increases by 10%. Again, all that does is stall the inevitable.

All of which prompts The Guardian to ask the obvious question: will California become America's first failed state?

"The state that was once held up as the epitome of the boundless opportunities of America has collapsed. From its politics to its economy to its environment and way of life, California is like a patient on life support. At the start of summer the state government was so deeply in debt that it began to issue IOUs instead of wages. Its unemployment rate has soared to more than 12%, the highest figure in 70 years. Desperate to pay off a crippling budget deficit, California is slashing spending in education and healthcare, laying off vast numbers of workers and forcing others to take unpaid leave. In a state made up of sprawling suburbs the collapse of the housing bubble has impoverished millions and kicked tens of thousands of families out of their homes. Its political system is locked in paralysis and the two-term rule of former movie star Arnold Schwarzenegger is seen as a disaster - his approval ratings having sunk to levels that would make George W Bush blush. The crisis is so deep that Professor Kenneth Starr, who has written an acclaimed history of the state, recently declared: "California is on the verge of becoming the first failed state in America ... California's education system has become so poor so quickly that it is now effectively failing its future workforce. The percentage of 19-year-olds at college in the state dropped from 43% to 30% between 1996 and 2004, one of the highest falls ever recorded for any developed world economy. California's schools are ranked 47th out of 50 in the nation. Its government-issued bonds have been ranked just above "junk" ... Much has been made globally of the problems of Ireland and Iceland. Yet California dwarfs both. It is the eighth largest economy in the world, with a population of 37 million. If it was an independent country it would be in the G8. And if it were a company, it would likely be declared bankrupt."

California desperately needs a political overhaul. Otherwise, the world's eighth biggest economy will drag the rest of America down. It's a tall order but then, of all the American states that I've been in, California is probably the only one that can reinvent itself. If it fails to do that, it will leave America damaged for a long time.