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Troubled Times

State budget gap became an overriding issue for Davis

September 28, 2003|Mitchell Landsberg | Times Staff Writer

In the beginning, it was all about the money.

In 1999, when Gray Davis became governor of California, he inherited a $10-billion budget surplus. By this August, it had deformed into a $38-billion deficit.

At the bottom of that extraordinary gap -- $48 billion, the equivalent of the Argentine national budget; almost $1,400 for every man, woman and child in California -- lies the bedrock source of the outrage that has fueled the state's first recall election to target a sitting governor.

As the campaign has evolved, though, other issues have emerged, lending a complexity to the race that wasn't initially apparent. Among these are the state's energy crisis, the governor's leadership style, a new law granting driver's licenses to illegal immigrants, an increase in auto license fees, Davis' efforts to improve education and the environment and his prodigious fund-raising.

All will contribute to Davis' political fate, to be decided Oct. 7 as voters decide: first whether to recall him from office, and then who should replace him if the recall passes. All shed light on a governor whom supporters see as experienced, progressive and smart, if bland and unlucky, and opponents see as a cynical, free-spending sellout.

Still, no other issue carries the weight of that leaden budget gap. Without it, there would be no recall election; Arnold Schwarzenegger would still be known primarily as a movie star; Gary Coleman would still be the last two words in the question: Whatever happened to ... ?

And Davis might well be running in an entirely different campaign -- the Democratic presidential primary.

That was the assumption a few years back, when Davis was sailing through his first term as governor, pushed by a gale-force economy. People may have joked about his wooden presence, and the Legislature bristled at his observation that its role was to "implement my vision." But it was hard to argue with success.

As the economy boomed, so did state revenues -- and state spending. Davis cut business taxes, trying to keep the good times rolling. And for a while, they did.

What Davis' critics now say is that he should have been putting money away for a rainy day. As it turned out, when that day came, it didn't rain -- it poured.

First, as Davis now reminds voters, the economy "tanked" in 2000. Then the state plunged into an electricity crisis characterized by an apparent shortage in supplies and by soaring prices that threatened to bankrupt the state's major electric utility companies. Davis has since acknowledged that he was slow to react -- he eventually agreed to raise rates and also streamlined plans to build a score of electricity generation plants. He also has pointed out that the electricity market was being manipulated at the time by large energy traders and that California's complaints were dismissed by the White House and the Federal Energy Regulatory Commission.

By the time he ran for reelection against Republican Bill Simon Jr. in November 2002, Davis could claim that he had shepherded the state through the energy crisis, although critics said he had squandered millions of dollars by failing to sign contracts earlier that could have locked in lower electricity prices.

But by then, a greater problem was looming: the budget deficit.

His opponents, led by the recall's sponsor, Rep. Darrell Issa (R-Vista), have charged that Davis hid the true extent of the budget problems until after his reelection. Davis has called that charge absurd, saying he had access to no more information than state legislators. The facts are ambiguous but hardly flattering: Davis said before the election that he had "no expectations" about where the budget was heading, despite rising concerns that the state was in serious financial trouble; nine days after the election, the state's independent legislative analyst reported that California faced a $21-billion shortfall; and the next month, Davis projected the shortfall at $35 billion.

The deficit, today, is very much a reality, although the newest state budget projects that it will be pared down to a more manageable $8 billion. Depending on one's point of view, it is an illustration of Davis' bad luck or his mendacity -- or both. It is, in any event, the chief reason recall proponents cite for removing the governor from office.

"The reason that we're all here," state Sen. Tom McClintock (R-Thousand Oaks) said at one debate among recall candidates, "is because I think that most people in California have come to the conclusion that we could not continue another three years down this road with the policies that have bankrupted our state and decimated our public works."

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