The State of California is now coming to grips with the fact that it banked all of its bets on an unsustainable bubble of development, especially housing. We're ground zero for the real estate implosion, as well as the source of much of the "product" bundled as mortgage tranches and sold around the globe to investors. Hence the global recession and the black hole of insufficient tax income to run the state.
One unfortunate reaction to this situation by Sacramento is to try to keep the drug flowing, that is, the income from properties and their development - regardless of the need for more housing or development. Hard to get off the drug when the Feds won't go after the pushers, i.e. the banking sector. That's the worst thing that can happen when foreclosures are emptying out subdivisions and people are leaving the state. An article here in CP&DR makes the case that the State needs to resist the "housing cult".
There needs to be new kinds of investments, the kind that produces sustainable industries, clean energy and the reduction of the building industry that produces nothing but traffic and pollution. We're better off with investments that produce actual capital flows and innovative products, not boxes that create fake money and drain community resources with square footage that needs more and more maintenance and consumes water and energy. There's no productive activity in that, it's just building up a bigger and bigger environmental debt.