Much of the blame for the state's continuing budget shortfalls over the past three years can be placed on the dismal performance of the California economy. The substantial population increases of recent years have maintained constant upward pressure on demands for state services. At the same time, declining employment levels, lower real per capita incomes, and falling property values have limited the ability of the state's major revenue sources to meet these demands. Despite substantial gains in the national economy over the past year, economic activity in most regions of California continues to decline or stagnate.