After months of deadlock, the California Legislature early today approved a plan to close a $42 billion shortfall in the state budget. This is welcome news because it spares the state from financial collapse. If, as expected, Gov. Arnold Schwarzenegger agrees, the state will be able to pay its bills (including tax refunds), and it won’t have to cancel billions of dollars in public works projects – which would add tens of thousands of workers to the jobless roles.

Still, Californians are not likely to celebrate. This “solution” requires $11.4 billion in new borrowing (in addition to $15 billion in spending cuts, $12.8 billion in new taxes and $2 billion in federal stimulus money), and it was only achieved after months of stalemate that brought embarrassment to the state.

During this time, the state’s credit rating fell to last among the states. We’re now looking up at that paragon of good government, Louisiana.

And keep in mind this package of 33 bills is only designed to deal with the deficit for the next 16 months.

State government still refuses to confront the structural reasons for the ongoing deficits, or to otherwise consider reforms that would make state government more efficient. When it comes to choosing between creating a more effective government or protecting selfish interests, state politicians are happy to pretend that the status quo is working just fine.