I talked to a long term faculty lecturer who is getting laid off. The universities have drastic cuts and it looks like no lecturer will get rehired, then they will start firing permanent faculty.
Unfortunately there will be more cuts ahead. Sacramento is still using tricks to avoid the big cuts. As you say there is a disconnect with politicians and reality. The longer it takes them to cut, the bigger the cuts will have to be. Debt is dangerous, interest can eat away the funds needed to run the state.
Washington also is also not facing reality, such as the cost of medical care. They cannot even balance the budget under the current system. California going downhill will only make the Washington problems worse. Less taxes will be paid. Unemployment and welfare will drain the budget. Social Security and Medicare already in trouble, will get worse.
CalPERS STRS and other pensions in trouble. With earnings approaching zero then stock prices will approach zero. They also lost money in real estate, hedge funds, private equity,... All the pension funds are in trouble.
The problem as you point out is that the elites in Sacramento, Washington DC, Wall Street, and Hollywood have not figured out the extent of the problems and are continuing business as usual, hoping that we are just in a blip.
Email: So far, things have not changed that much here in Sacramento. With the number of cars on the highways and crowded restaurants, it is hard to believe that there is a recession in the Capital. Maybe, that is where legislators are going wrong. They do not percieve a crisis when the downtown restaurants are full.