Four months to the day that Barack Obama took his oath of office, America’s newly regnant leftists woke up last Wednesday to an ominous sign from the West Coast. Voters in California – the nation’s leading practitioner of Obama’s blend of social liberalism and diktat economics – had at last revolted en masse against the Golden State’s fiscal profligacy and interest group-driven politics.

In a special election held May 19, California voters overwhelmingly defeated five ballot initiatives that would have shaved about $6 billion off of the state’s more than $21 billion deficit through a combination of tax hikes, borrowing against future state lottery earnings and raiding funds allocated to children’s programs and mental health spending. In other words, if the state of California were an individual, it would have been trying to get out of debt by breaking the piggy bank, raiding mom and dad’s wallet and taking out a second mortgage. In the aftermath of the election, it’s probably thinking about knocking off a liquor store.

The only measure to pass was Proposition 1F, an initiative that prevents pay raises for elected officials in deficit years. The denizens of Sacramento should note that 1F passed by a margin even greater than those by which the other five were defeated.

California’s trademark populist rage is making a comeback. Voters throughout the state are angry that lawmakers resorted to budgeting gimmicks rather than tackling the tough issues directly. If there had been an initiative on the ballot to abolish the state legislature, it may well have passed.

This is a political tidal wave. In this deep blue state, the Democratically controlled legislature’s approval ratings are now more than 10 points lower than President Bush’s were when he left office. The talk radio hosts who once hailed Arnold Schwarzenegger as a genuine reformer now pillory him as a traitor to the cause of fiscal responsibility. Based on their reaction to the budget measures that Schwarzenegger campaigned relentlessly for, the voters seem to agree. The citizens of the nation’s largest state didn’t just make their voices heard at the polls last Tuesday – they burned the status quo in effigy.

If California Republicans have any sense (and this is a monumental conjecture for a party that is the Bad News Bears of American politics), they’ll read this moment for what it is: a once-in-a-generation opportunity to pull the nation’s largest state back from the abyss and create a national model for the GOP.

The first step will be overcoming the ever-present divisions between the state’s moderates and conservatives. The civil war between the two factions at the national level is nothing compared to the rivalry that has been playing out in the Golden State for decades (remember, California gave us Richard Nixon and Ronald Reagan). This internecine battle has crippled the party’s ability to husband the sweeping reform the state needs. But this need not be so.

Conservatives are focused on keeping the flame of their philosophy alive, even against the gale-force winds of California’s liberalism. Moderates claim to be skeptical of ideology, searching instead for practical solutions to the state’s most vexing problems. But in a state where government is loathed for its comprehensive inability to perform, these goals are compliments, not competitors.

California’s public sector needs a makeover. It’s time for the state to jettison San Francisco liberalism in favor of Silicon Valley dynamism. And through a combination of technology, free markets and a relentless emphasis on reform, the state’s Republicans can do just that.

Republicans can save California’s economy by promoting a ballot initiative to abolish the spending mandates that eat up 85 percent of the state’s budget before legislators even begin the appropriations process. They can lessen the tax burden that has led to a massive business exodus and double-digit unemployment by moving to a flat tax that will increase overall revenues while decreasing individual rates. And they can soften the state’s crushing regulatory atmosphere by offering a cash refund for the cost of compliance to any business that goes a year without being cited for a single violation.

Republicans can save California’s failing public school system – among the nation’s five worst – by a relentless focus on reform. They can sidestep the atrociously powerful teachers’ unions by insisting on “merit pay for politicians,” tying legislative salaries to performance measures in the state’s educational system. They can liberate minorities from failing schools by insisting on a pilot program to provide vouchers for children in the 10 worst performing black and Hispanic schools in the state. And they can weaken the tenure system’s subsidization of California’s worst teachers by offering educators the chance to opt out in exchange for better pay.

Republicans can pave the way to cleaner energy and a healthier environment in this Edenic state by offering tax-free prizes for major breakthroughs in science and technology, a move that would bring a stampede of high-tech companies west. They could simultaneously solve the state’s water and electricity crises by promoting the combined use of nuclear power and desalinization. And they could clear the state’s smoggy skies by subsidizing the use of biofilters instead of laying command-and-control regulations on commerce.

Republicans can clear California’s gridlocked freeways (Los Angeles and San Francisco have the two worst traffic problems in the nation) by pairing congestion pricing with the use of contracting incentives that reward the speedy completion of new roads. They could snuff out the statewide crime problem by applying the “broken windows” model that has made Los Angeles one of the safest big cities in the nation. And they could reign in exploding healthcare costs by creating online databases that compare price and quality for medical procedures and prescription drugs.

Finally, Republicans could reform their rotting state government. They could abolish California’s ineffective term limits in exchange for a part-time legislature with a hard cap on the number of bills that could be passed in any given session. They could eliminate political posturing by allowing the Governor to appoint his cabinet rather than being forced to serve alongside other elected officials that are usually governors-in-waiting. And they could create a sunset commission that would eliminate the inefficient or wasteful organizations among the state’s hundreds of boards, commissions, departments and agencies.

While California’s gerrymandered legislative districts will prevent a Republican majority from forming until an independent commission redraws the lines following the 2010 census, the state doesn’t have to wait for meaningful reform. A performance-oriented focus will draw in moderate Democrats and independents, leading to a statewide agenda that could be modeled on the tangible promises of the Contract with America.

That kind of reform agenda has the potential to save California from becoming the nation’s best argument against federalism. And a successful execution has the potential to show the country that Republicans are capable of governing once again.