Rain was falling outside the Embassy Suites last Friday morning, but there was a warm glow inside the main conference area, where AMBAG, The Association of Monterey Bay Area Governments (AMBAG), was hosting its 15th annual ecoanomic conference.

This year, the theme was the ‘’green economy’’ and there was an almost palpable sense of opportunity and enterprise as the hoi polloi of city and county electeds gathered with a broad swath of the entrepreneurial class and heard presentations from “angel investors,’’ serial entrepreneurs, tech geeks and economic forecasters. As balance– I guess– the conference organizers had also invited all the state legislators representing our region to give brief remarks.

THE EVENTS IN SACRAMENTO NOW ARE MAKING BUFFOONS OUT OF THE LEADERS OF THE SIXTH LARGEST ECONOMY IN THE WORLD.

Doug Henton of Collaborative Economics, a Bay Area think tank, gave the Monterey County Workforce Investment Board’s brand new green construction training program accolades. He cited it as a model for other areas of the state to retrain out-of-work folks to retrofit federal buildings and facilities, one of the likely first outcomes of Obama’s economic stimulus package. The Marina Technology Cluster likewise got a plug. Jon Gregory, CEO of Golden Capital Network, highlighted it as the type of business incubator that will bear rich fruit– both for the developers of new products and those willing to take the risk and back them with money. (I sit on the boards of both organizations.)

The financially enlightened and technologically savvy in the room sat forward with attention as panelists talked about private investor money being available to back ventures even in a tight economy. Rates of return, intellectual property rights and best practices for pitching “angel investors’’ got mentions. Others spoke of electric cars, carbon-neutral cement, and emerging solar energy technologies currently being developed, manufactured and shipped within 150 miles.

During breaks, mayors, council members and supervisors trolled the area checking out wares from local green vendors and getting pulled into side discussions and one-on-one sessions with contractors, public agency directors, utility executives and constituents. That’s why I was there.

The painful irony is that as some of the best and brightest in the state gathered to demonstrate innovation and model smart economic development strategies, the state legislature is locked in a budget stalemate that threatens to unravel California. What is taking place in Sacramento right now is beyond critical for the future of California’s economy.

Last week, Moody’s Investor Service warned it was poised to downgrade the rating of municipal bonds from California to below investment grade. Tom Petruno of the Los Angeles Times blogged that California is tied with Louisiana for the lowest credit rating among the states, and is now in danger of claiming rock-bottom. Although Moody’s may not enjoy a sterling reputation in light of their non-warnings about bank assets in the recent past, their rationale sounds right on. Moody’s is poised to rate California general obligation bonds A1 because of the state’s “significant budgetary shortfall, impending liquidity crisis, and lack of legislative solutions.”

Everywhere we turn, there’s real economic peril. This week, emergency room doctors sued the State of California over lack of reimbursements. The superintendent of public education is holding a press conference in Salinas as this goes to press to outline how to stave off bankruptcy for the school lunch fund. Contractors working to repair “funded” and approved road and infrastructure projects in Monterey County have been furloughed. Local attorneys hired by the state to perform constitutionally required appellant work are going without pay. Monterey County department heads are preparing contingency plans for 10, 25 and 50 percent reductions in budgets. The upshot: Bonds will be more expensive, matching grants will disappear, talented and ambitious employees will shun state work and cynicism about government will increase.

We cannot accept this as business as usual. Unfortunately, Californians have developed a tolerance for inactivity from the legislature on the budget. But the events in Sacramento right now are making buffoons out of the leaders of the sixth largest economy in the world. In the private sector, there is also much pain, jobs hemorrhaging, assets being depleted and long established firms disappearing.

Still, at the Embassy Suites, innovation and intelligence were getting their due; the resilience, smarts and the work ethic that have made California a beacon in the environmental and business communities was clearly on display. Unfortunately, it was showing up under a dark cloud. Suffice it to say that none of the green tech start-ups there would hire anyone from the state legislature to run their new business. That sad note resonated with me as I wandered back out into the rain.