- The Washington Times - Tuesday, November 12, 2002

Following his narrow re-election victory with 47 percent of the vote, California Gov. Gray Davis faces by far the biggest budget deficit in the state's history. He has nobody to blame for the state's increasingly precarious finances but himself. After all, following his first election as governor in 1998, Mr. Davis inherited a state budget that had generated a cumulative two-year surplus of $7 billion. Reasonably projected surpluses were even larger. Then, Mr. Davis began writing checks. This summer, Mr. Davis was confronted with a projected deficit of $23.6 billion for fiscal 2002-03.

During the election campaign, Mr. Davis addressed the deficit by using a slew of gimmicks. Tax receipts were expedited, while spending was pushed back into the next fiscal year. To pay for current expenditures, Mr. Davis used nearly $5 billion from the state's share of the long-term tobacco settlement. In keeping with his ludicrous assertion "The problem is not spending, the problem is lack of revenue" California's out-of-control general fund was cut a paltry 0.2 percent. As Stephen Levy, director of the Center for the Continuing Study of the California Economy, recently told the Los Angeles Times, Mr. Davis and the state legislature have engaged in "massive ostrich behavior."

When Mr. Davis took over the governorship in January 1999, the nation was in the midst of an historic stock market boom. Tech-heavy California, buttressed by Silicon Valley, was especially flush with revenues. Profits from capital gains and stock options were pouring billions and billions of dollars into California's budget coffers. Between fiscal 1998-99 and 2000-01, California's income-tax receipts from capital gains and stock options alone more than doubled, rising from less than $8 billion to nearly $18 billion.

Mr. Davis spent this windfall. Annual spending increases, which averaged a once-exorbitant 8 percent during the last four years of his Republican predecessor, exploded during his first two years. In 1999-2000, spending soared by more than 15 percent. During his second year, spending jumped by another 17 percent. Thus, during Mr. Davis's first two years, the general budget increased from $57.8 billion to $78 billion. The increases occurred during a period when inflation rose by less than 6 percent.

Not surprisingly, Mr. Davis received an "F" from the Cato Institute's "Fiscal Policy Report Card on America's Governors: 2002." The analysis revealed that California's state payroll increased by 33,000 during Mr. Davis's first three years. The increase in public employees was larger than that of the next three biggest states combined. Meanwhile, Moody's has downgraded the Golden State's bond rating twice. Mr. Davis did not help matters much by borrowing $6 billion in the midst of the state's energy crisis to pay for future energy deliveries at prices that are two to three times the current market price.

Now that voters have seen fit to re-elect Mr. Davis and the Democratic-controlled legislature, they, too, have become complicit in the state's burgeoning fiscal crisis.

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