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California Governor Jerry Brown announces his public employee pension reform plan October 27, 2011 at the State Capitol in Sacramento, California. Gov. Brown proposed 12 major reforms for state and local pension systems that he claims would end abuses and reduce taypayer costs by billions of dollars.

First, just as California's budget woes appear to be on the mend as we pull out of the recession, comes some bad news.

A report issued today by National Association of State Budget Offices warns that spiraling health care costs and reduced federal aid means the state will continue to have to make cuts in its programs.

So whether the whole country goes over the fiscal cliff or not, it looks like California faces more budgetary belt tightening.

Tracy Gordon, a fellow at the Brookings Institution in Washington DC, joins the show to explain the findings of the report.