IN CALIFORNIA it is the worst of times, it is the best of times; but the worst is the more salient. The state's non-partisan legislative analyst, Mac Taylor, has now given the lie to the gimmicky budget the governor, Jerry Brown, and the legislature agreed to in June. They had, rather desperately, chosen to assume that billions in new revenues would materialise. None of them did, said Mr Taylor, who expects receipts to be $3.7 billion behind forecast. He projects a new two-year gap of $13 billion for this and the coming fiscal years—about 15% of the current budget, which itself is about a fifth smaller than it was when the recession struck.

Mr Taylor's analysis has a dire consequence. It necessitates automatic “trigger cuts” (if the state's finance director confirms his conclusion next month, which is likely). This means that schools, universities, welfare recipients and other vulnerable Californians will lose yet more funding. A school year that is, at 175 days, already one of the shortest in the industrialised world could drop another week. Some schools would lose bus services, leaving (mainly poor) pupils stranded.

Mr Brown bears some of the blame. During his campaign in 2010 he made a rash promise not to raise taxes without approval by the people, but then proved unable to persuade the legislature to put the required measure on the ballot. Hence this “all-cuts” budget. Mr Brown is now planning to collect signatures to put a tax increase on next year's ballot.

Most blame, however, belongs not to any one person but to California's system of governance, which has ossified for decades. The state's tax system, designed for an agricultural and manufacturing economy, is now outdated and needlessly volatile. The state's initiative process, the main feature of California's beloved “direct democracy”, is dominated by special interests and leaves voters out of their depth. And the state legislature does not work, both because ballot initiatives have pre-empted it and because the extremists on right and left can block, but not agree on, any reform of consequence.

This is where better times become imaginable. For the past year, California has had its own bipartisan supercommittee of sorts. The Think Long Committee for California, assembled by Nicolas Berggruen, a rich investor, and consisting of stalwarts from right, left and centre in Californian politics, differs from its ill-fated congressional equivalent. First, it actually achieved a consensus, unveiled this week. Second, it actually has a mechanism to turn its recommendations into law: the initiative process itself.

The committee's plan is to place two initiatives on next November's ballot. One would fix California's tax system. In 1950 California got 60% of its revenues from sales taxes, which apply only to goods. Since then, untaxed services have become the mainstay of the economy, so sales taxes now contribute only about 22%. Income taxes, mainly on the richest Californians, have during that time grown from 10% of total revenues to more than half, making state revenues highly volatile.

The Think Long Committee wants to fix this by extending sales taxes to services, and simplifying and cutting income-tax rates. This would be “only very slightly more regressive”, says Nathan Gardels, an adviser to the group, because the poor would get a sales-tax rebate and rich people tend to spend more on services (on accountants, lawyers, fitness instructors, etc). The new system would eventually raise revenues by about $10 billion a year.

The other measure is an initiative to fix initiatives. It would create a council of independent experts, appointed by the governor and both parties, who would screen proposed initiatives for sanity and cost. The council could also place its own initiatives on the ballot.

That leaves the remaining tangle of dysfunction, the hyper-partisan legislature. Two reforms—apolitically drawn districts and a primary system that picks out the two top performers, regardless of party for a run-off—have already been adopted and will be tested for the first time next year. They might help moderate candidates.

David Crane, a Democrat who advised Mr Brown's Republican predecessor, Arnold Schwarzenegger, hopes to amplify these reforms with another effort. By his reckoning, the 120-member legislature could become functional again if an “ethical bloc” of as few as five “principled and numerate” moderates could get elected, to break the stalemate. To support such politicians, Mr Crane and two partners have started Govern For California, a sort of political venture-capital fund. The idea is to finance good candidates to keep them out of the pockets of lobbyists.