California faces a $40 billion deficit over the next two years, but in a few weeks it will run out of money to pay for operating expenses. Governor Schwarzenegger says new taxes are needed, but Republicans in the legislature won't go along. Democrats have a majority, but not enough to provide the two-thirds vote required for new taxes. They have been negotiating with Schwarzenegger on an $18 billion stop-gap, but today talks broke down. We get an update and learn more about the "dysfunctionality" of California government.