The state's main options for addressing its budget dilemma--cutting expenditures and/or raising revenues--would both have adverse effects on the economy. Either type of option would reduce money held by or received by individuals or businesses that otherwise could be used for consumption or investment purposes. Because the state's economy totals more than $1.7 trillion in economic activity each year, however, spending reductions or tax increases totaling between $20 billion and $30 billion would have a relatively small impact on the overall economy.

The state's revenue collapse is so dramatic and the underlying economic factors are so weak that we forecast huge budget shortfalls through 2013-14 absent corrective action. From 2010-11 through 2013-14, we project annual shortfalls that are consistently in the range of $22 billion, as shown below.

Today's LA Times shows how the proposed budget cuts are sending school districts scrambling to get layoff notices out by the March 15 deadline. Although these notices may not always lead to an actual firing, they do have a destructive effect on teacher morale. Already several of my family and friends who teach K-12 in Orange County have begun dusting off their resumes in anticipation of losing their jobs.

In my post at Calitics on Sunday I argued that the cuts, if allowed to happen, would have a reckless and destructive impact on California's economy. The LA Times article points out that there is another potential catastrophe that these cuts might cause. If teachers are fired and class sizes increase, it is going to be more difficult than ever to meet the unreasonable mandates of the odious No Child Left Behind law.

Rialto Unified has made some recent academic gains, and its superintendent worries that deep cuts could stall progress. The district scored a 661 on California's latest Academic Performance Index, below the state's target of 800; the API measures schools and districts on student scores in math, English and other subjects.

While the state API is a different metric than NCLB, if a district is having trouble meeting the API target, it is likely to have trouble meeting the much more onerous NCLB targets. As most educators - and anyone who has been a student - knows, the larger the classes, the more difficult it becomes to learn and achieve.

Among the penalties for missing NCLB targets include "replacing staff" or a takeover by "a private education firm." Either outcome involves less schools, less local control, less parental involvement, and an even deeper economic hit to thousands of working Californians.

Arnold's proposed budget cuts could therefore touch off a cascade of events that delivers a crippling blow to our public education system. The always excellent California Budget Project has put together a detailed list of the impact of those cuts, including a district-by-district list of cuts. Most district will lose at minimum $500 per student, with some rural districts going well above $1,000 per student. Those are staggering numbers.

This was supposed to be the year of education. Perhaps it still can be - it can either be the year we saved education, or the year we destroyed it. Sometimes our choices really are that stark.