California Struggling To Stay Afloat

The folks at Superior Produce are getting squeezed. The Sacramento business provides fruit and vegetables to nine prisons. Now they're being stiffed by their biggest customer - the state of California.

The state owes Superior $250,000 for last month alone, reports CBS News correspondent Ben Tracy.

"If we ran our business the way the state runs the state we would not be in business for 22 years," Cindy Mulhern, owner of Superior Produce, said.

When the state fell behind last year, the Mulherns had to take out a line of credit on their home just to stay in business. This time could be worse.

"The truth is that California is in a state of emergency," said Gov. Arnold Schwarzenegger.

The truth is that California is broke.

Its $15 billion budget deficit is expected to widen into a $42 billion chasm.

The governor and the legislature can't agree on a fix, and every day the state gets deeper in debt.

"We are unable to pay all of the state's bills that come due this month," said California state controller John Chiang.

To stop the bleeding Chiang is halting nearly $4 billion in payments due to state vendors, grants to college students, and funding for organizations serving the disabled.

Although 2.7 million Californians are expecting income tax refunds this month, they will have to wait. The state doesn't have the money.

One California taxpayer, a mother of twins who said she's expecting a refund, Selene Lockerbie, said, "I feel like I've been robbed! I feel like I've been robbed!"

To conserve cash, more than 100,000 road projects, worth $2 billion, have come to a halt while state-funded buildings are left half-built.

Beginning this month, the governor is ordering state offices closed on the first and third Fridays - forcing state employees to take two days each month without pay.

Normally California would just borrow its way out of this mess, Tracy reports. But now it can't even do that. It's hard for the state to get money now, because its credit rating is the lowest in the country.

The state is hoping for a federal bailout, but the governor is looking for revenue everywhere, proposing to tax rounds of golf, auto repairs, veterinary care, and even amusement park tickets.

"Pray for California, 'cause we don't know what's gonna happen over the next few weeks," said Dan Walters of the Sacramento Bee. "This could be really, kinda, the real Armageddon."

It's an economic earthquake already rattling the suddently not-so Golden State.