Establish priorities through "Reality-based Budgeting"

Scrap the current budget. Ignore historical rates of agency/program funding. Priorities and performance must drive budget allocations. Crafting a sustainable budget requires legislators to address four key questions at the start of every session:

* What must the state accomplish?
* How will the efficacy and efficiency of services be evaluated?
* How much money does the state actually have to spend?
* What is the most effective and efficient way to deliver essential services given available funds?

These documents further explain and illustrate the application of reality-based budgeting.
Reality-Based Budgeting: How to permanently resolve state budget gaps
Zero-Base Budgeting in the States
Seven Key Aspects of Governing During Crisis
The Next California Budget: Buying Results Citizens Want at a Price They Are Willing to Pay
Changing the Budget Status Quo
Blueprint for a Better Budget
How to Find and Eliminate Wasted State Money

Privatize

Identify what the private firms can do cheaper and more efficiently, and let them do it. Incentives matter. While there are many good people in government service, the bureaucracy just doesn't possess the drive for efficiency and effectiveness of the private sector. Privatization of infrastructure and state operations would reduce budget burdens and improve service delivery.

These documents further explore how privatizing operations can reduce costs:
What Works: Fixing State Budgets
Public-Private Partnerships for Corrections in California
Top 10 Ideas to Cut Waste, Balance the Budget and Stimulate the Economy Without Raising Taxes
Blueprint for a Better Budget
Private companies can manage state parks

Force Government Contractors to Compete.

This is an adjunct to privatization. Government wields a monopoly over a range of services. This raises costs and lowers quality. Instead, private firms should be invited to bid on government work, thereby exposing civil servants to the discipline of competition.

These documents explore the benefits of competition in government work:
What Works: Fixing State Budgets
ALEC Model Legislation
How Competitive Contracting Can Help Balance the Budget without Raising Taxes
Blueprint for a Better Budget

More Transparency

Accountability is a cornerstone of representative government. Accountability also is dependent upon government transparency. If citizens cannot see what's being done by elected officials, regulators and the state bureaucracy, citizens cannot reward excellence or punish failure. See SunshineReview.org for a 10-point checklist of transparency obligations and check out these pages for even more details on the importance of transparency:

Transparency Key to Fixing State Budget Crises
Start Building a Better Budget: Seven steps to saner state spending