Next Calif. Gov. Faces Sorry State

Russ Berens

Russ Berens is a dying breed in this state. After 34 years he was still manufacturing clothing in California. But he's finally giving up, forced out by skyrocketing worker's compensation costs. He'll lay off about 200 workers and move his operation overseas, reports CBS News Correspondent Sandra Hughes.

"Each person here has a family," says Berens. "Each person at a machine represents four or five people and I am just laying them off."

California's employers pay the highest worker's compensation rates and employees receive the lowest benefits in the nation. Add that to the list of problems that will end up in the lap of that state's next governor.

"The things that made California the Golden State no longer exists," says Harvey Rosenfield of the foundation for Taxpayer and Consumer Rights. "We have problems in housing, healthcare, mass transit, highways."

If Governor Davis is recalled, whoever wins will be a neophyte politician with just thirty days to create an administration before taking over the fifth largest economy in the world.

This year most states had to raise taxes or make deep cuts to close budget gaps. California's was the biggest with a $38 billion deficit.

Standard and Poor's has even dropped the state's credit rating to near junk bond status.

California's next leader will inherit a balanced budget, but it was done so by borrowing billions and deferring expenses. Revenue was increased by raising college tuition statewide.

Money was saved by pushing back the opening of desperately needed new college campus. Sixteen thousand state workers lost jobs, and California's car tax was tripled.

"A car tax hurts real people, people need their car to get to work," says Lt. Gov. Cruz Bustamante, who is on the ballot to succeed Davis.

That is if they have a job.

California currently has the eighth highest unemployment rate in the nation. Add that to everything else and it's surprising that some 200 people are fighting for the job of governor.