First, California will stop paying vendors who sell goods and services to the state and elected officials will stop getting their pay.

Then, funds for community colleges and schools will be cut back, forcing them to borrow, if they can, to keep operating.

That's were the first impacts will be felt if Sacramento fails to adopt a state budget by tonight's midnight deadline.

"This is no longer an academic exercise," Controller Steve Westly said in an interview as the constitutional deadline approached for adopting a state budget. "We are talking real people with real problems who will begin to be affected. And it will just grow worse."

Gov. Gray Davis and the Legislature have been at odds for months on how to deal with a state budget facing a $38 billion shortfall.

Davis has triggered a tripling in the vehicle license fee and is backing a temporary half-cent increase in the sales tax to pay off the billions borrowed to keep the state afloat. But Democratic legislators have balked at many proposed spending cuts.

Republicans have fought all tax increases, with Senate Minority Leader Jim Brulte threatening to campaign against any member who crosses party lines to back a tax increase.

Even those Republicans who have tried to stand up to the pressure and offer alternatives, such as Assemblyman Keith Richman, R-Granada Hills, have found little or no support. The same is true among the Democrats.

Davis is willing to look at any alternative, aides said.

"The governor has said to show him a balanced budget and he'll support it," spokeswoman Hilary McClean said. "But so far, we have seen nothing from the Republicans.

"Not passing a budget on time this year is not only irresponsible, it's dangerous," McClean said. "There are people's lives and businesses and educational future at stake. The governor will look at anything that is responsible."

Westly said the most immediate impact will be felt among state vendors, who will not be paid for any work performed from Tuesday on.

Monthly payments -- totaling $400 million -- due in July will not be paid to community colleges or K-12 schools.

Elected officials will not receive any pay until the budget is adopted, and state workers could face pay cuts by late August.

A legal decision won by the Howard Jarvis Taxpayers Association in May requires Westly to stop payments for programs if the state doesn't have a budget.

"It basically did away with our options," Westly said. "Last year, I was still able to make some payments to community colleges and other groups. Now I can't." Los Angeles city and county officials said the lack of a state budget would not cause them any immediate damage. What officials are concerned with is an overall reduction in spending or the state acting -- as it has in the past -- to take away money that has traditionally gone to local government.

Mark Drummond, chancellor of the Los Angeles Community College District, said the impact of the state's problems has been felt already with dramatic cutbacks in course offerings.

The district was able to borrow some money to continue operations, but that cash is expected to be gone in August, and there will be no other options.

"Once it runs dry, we could try to issue warrants if any bank would take them, or we have to shut down our operations," Drummond said.

Drummond said summer school operations have been eliminated at all its campuses except in East Los Angeles, and plans are being developed to reduce the curriculum in the fall.

At the same time, prices are expected to go up with tuition costs going from $175 to $275 a term while class sizes increase to 40 students.

"I know it doesn't sound like much, but this is a lot of money for working students," Drummond said. "It has a major impact on them."

Also, he said the district is cutting out a number of programs that should reduce its student population by 30,000 to 100,000 this coming year.

Joseph Zeronian, the chief financial officer for the Los Angeles Unified School District, said the budget impasse in the short term would not affect the nation's second-largest district.

LAUSD has a daily cash balance of about $1 billion and has also borrowed $670 million worth of tax-exempt securities to improve its cash flow.

"Basically, for the short term, it should not affect our programs. If it's prolonged, it's a different matter," said Zeronian. "This is a serious situation that the state and schools are facing."

Zeronian said he was assured by Westly's pledge to continue to issue school districts so-called revenue limit payments -- the largest single component of K-12 education funding -- regardless of whether a budget is passed on July 1.

LAUSD's annual revenue limit reaches $3.3 billion based an an average daily attendance of about 700,000 students out of an enrollment of nearly 747,000.

However, the budget impasse would temporarily stop the flow of categorical funds to boost low-achieving schools, special education, transportation, gifted and early childhood programs.

Once the state budget is approved, Zeronian expects further budget cuts will be necessary.

"In the last two years, after the budget was adopted, school districts had been required to make further reductions in their programs and budgets," he said. "I think we are hopeful that won't be the case again, but we certainly would not be surprised."