Reihan Salam provides a useful overview of recent history:
After Arnold Schwarzenegger's recall victory, there was a brief window when it seemed as though a center-right coalition could curb the power and influence of public sector workers. But Schwarzenegger's efforts were beaten back by a well-funded and extremely effective campaign. The rest of Schwarzenegger's gubernatorial tenure was spent in a mad scramble to "the center," and California's public sector headed into the buzz-saw of the financial crisis in parlous shape.
I saw Schwarzenegger's 2005 defeat as a last stand. Very few politicians could match Schwarzenegger's charisma and deep pockets. The successes we've seen in curbing the collective bargaining rights of public sector workers have been limited in the years since. Indiana, for example, is an unconventional state, in which it only took an executive order to give public sector managers the flexibility they need to reform rigid work rules and compensation schemes.
Wisconsin has been a test case for what a less-than-charismatic, less-than-inspiring conservative governor can accomplish in a state where the power of public sector workers is firmly entrenched, and the results haven't been pretty. While I firmly believe that Gov. Walker deserves the support of taxpayers, there's no question that he wasn't prepared for this fight. Public employee unions, Organizing for America, MoveOn, and a variety of other organizations have focused considerable attention on the state, sympathetic media outlets and reporters have offered a selective portrait of the underlying compensation problem that has been amplified by the blogosphere (watch how the term "grossly overpaid" has spread), and, most importantly, Governor Scott Walker has played a weak hand rather badly. Dave Weigel explains how Walker has found himself in this position, and I haven't seen any roadmap as to how he might get out of it. At this point, I wouldn't be shocked if Walker were turfed in a recall election, thus bringing us full circle.
The most disheartening thing about Schwarzenegger's failure as a reformer: afterward no one else seemed to have any bright ideas for saving California from fiscal ruin. Preserving the status quo may be a short term victory for labor even a better policy option than letting Walker win, depending on your perspective but huge public employee pensions and work rules that make it harder for government to work efficiently aren't going away. According to Reihan, "The Walker bogeyman has given pro-union Democratic governors more leverage to win concessions from public sector workers." Time will tell.