During the first four years Gray Davis was governor,
state spending increased by $20 billion. That spending surge has become a
main theme for those seeking his recall.
Anti-tax Republicans, in particular, repeat these numbers at almost every
opportunity: Inflation and population increases would have driven spending
up by 21%; state revenue grew 25%, but spending grew 40%.
"This is
not a revenue problem," said state Sen. Tom McClintock (R-Thousand Oaks).
"The problem is the 40% increase in spending."
The gap between revenue
and spending is indisputable — it is the heart of the state's current budget
crisis. But a close examination of where spending went up illustrates why
keeping California's budget in balance has become so difficult, regardless
of which party controls the governor's office.
Although the precise
40% figure used by Republicans is debatable, spending during the Davis years
has grown faster than the combined effects of inflation and the state's population
would suggest. But the same was true during the last Republican administration.
Spending from the state's general fund, currently $70 billion, actually
grew by a smaller percentage in the first four years of Davis' tenure than
during the preceding four years under Gov. Pete Wilson, when the inflation
rate was lower.
Analysis of where the money went from the start of
Davis' tenure through the peak of his spending shows that the big increases
— 92% of the change, excluding tax relief — fell into three categories: health
and social services, education and prisons.
Health, Social Services
California has more residents without health insurance than any other state. More than a million of the uninsured are children.
To provide health care to some of those children, the Wilson administration
established a program called Healthy Families. Under Davis, that program
became one of the fastest-growing major parts of the budget.
That
growth was a key reason that health and social services accounted for the
largest chunk of new spending under Davis — 43% of all the dollars added.
Three factors combined to swell the costs of health programs under
Davis: The state expanded existing programs, such as Healthy Families. It
began many new ones. And, as the state made those moves, health-care costs
soared nationwide after having been relatively stable during the mid-1990s.
From June 1998 to June 2002, the state aggressively sought out children of
working parents who lacked insurance and increased enrollment in Healthy
Families more than fourfold, to 562,000 people. But the rapid rise in health-care
costs made each person more expensive to cover. While enrollment went up
four times, costs rose more than ninefold, from $59 million to $546 million,
according to state figures.
Even as the economy soured, Davis continued
to expand health-care coverage. His 2002 budget included $8.8 million to
draw more people into Healthy Families. Currently, enrollment is up to about
660,000 children.
Davis aides defend the expansion of Healthy Families
as cost-efficient over the long term. Healthy Families "is a matter of priority
of the Davis administration and the Legislature," said Hilary McLean, a spokeswoman
for Davis. "Providing health insurance for children saves money down the
line."
The program's supporters, who include many Republicans, say
that, by providing basic health coverage such as immunizations and checkups,
the program reduces the number of children who will develop expensive medical
problems as they grow up.
Davis aides also note that expanding the
program made the state eligible for federal matching funds that otherwise
would not have come to California. The federal government paid two of every
three dollars spent on the program. But even the state's one-third share
has added nearly $250 million to the budget.
Conservatives have objected
to spending money to recruit people into the program — one of Davis' initiatives.
But overall, Healthy Families has enjoyed bipartisan support.
"In
this dire budget situation, one would think we, like everybody else, were
going to be under the ax," said Kristen Testa, health program director for
Children's Partnership, which promotes health coverage for children in California.
"But everybody realized that was a good program, and we were doing the right
thing."
For Davis, however, the large increases for health and social
services programs have posed a political problem — the effects of the spending
are not visible to most voters, said John Ellwood, a professor of public
policy at UC Berkeley.
Spending on medical care and other social
services for the poor "are not the things that the middle class out there
sees," Ellwood said. "They are good if you believe we should devote more
of our resources to the young and poor. But the average Californian is neither
young nor poor, particularly the average California voter."
Education
Unlike
social services programs, education spending in California is tied by law
to state revenues. In good times, that means schools get extra money to expand
programs. When the economy turns bad, they often must scramble to make cuts.
During the recession of the early 1990s, Wilson cut education spending sharply.
Then, as the economy improved and state revenues increased, he and the Legislature
poured money into class-size reduction and textbooks. Smaller classes proved
extremely popular, especially in the suburban areas that were Wilson's political
base.
The need to hire more teachers aggravated an existing shortage.
Schools, particularly in the big cites that had more trouble competing for
talent, had large numbers of inexperienced teachers, many of them lacking
full credentials.
Davis tried to alleviate that by directing a large
portion of his new spending on education toward teachers. The state paid
for more teacher training and provided tax incentives for teachers. It also
provided an additional $1.8 billion that local districts could — and generally
did — use to raise teachers' pay.
Critics called the pay increases
a sop to the politically powerful teachers unions. Davis supporters said
the raises were needed to keep experienced teachers in the classroom.
Davis also created a school accountability program based on expanding the
state's standardized tests and rewarding those schools and teachers that
performed well.
Overall, spending on kindergarten-through-12th-grade
education accounted for 36% of the extra dollars spent under Davis. On top
of those increases, money for higher education accounted for an additional
13% of the growth.
In elementary and secondary schools, spending
per student rose 16%, going from $5,695 to $6,624 in 2002-03. That got California
out of the bottom of national rankings of per-pupil spending and up to about
the national average.
Because education spending is tied by law to
state revenues, the amount school districts get from the state's general
fund has stopped going up since 2000, when the economy worsened. Overall
state spending on education has continued to rise, but largely because of
increased money from the federal government.
At the same time, the
number of schoolchildren in California has increased about 7% since Davis
took office. That has translated into more teachers, often at the higher
salaries, locking districts in and limiting their flexibility when state
funding leveled off or dropped.
As the recall gained momentum this
year, and the budget crisis deepened, most districts wrestled with hard choices
about what programs to cut, and some ended up laying off teachers.
Prisons
In
1995, the Prison Law Office, a nonprofit organization with offices just outside
the gates of the San Quentin penitentiary, sued the state Department of Corrections,
alleging that prisons were indifferent to the needs of mentally ill inmates.
A court agreed and ordered the prison system to hire more psychiatrists and
psychologists.
That was one of several court rulings and settlements
of prisoner lawsuits over the last decade that have helped drive up the cost
of running the state's vast prison system, which now houses 161,000 inmates.
Overall, the number of state prisoners, which grew rapidly during Wilson's
tenure, leveled off after 1998. But the budget for prisons and the California
Youth Authority continued to increase, going up by about 25% under Davis.
The $1.2-billion increase in prison spending accounted for about 8% of the
total rise in state spending under Davis.
Davis' opponents often
criticize him for wage increases given to prison guards, whose union contributed
to Davis' campaigns. Those raises accounted for a large part of the total
increase, state figures indicate.
Another large chunk of the increased
spending came from higher overtime costs, which added $13 million to the
budget. That was attributable in part to changes in the contract, and in
part to prison guards' being able to take days off more easily under the
state's Family Leave Act, which requires co-workers to put in overtime.
But much of the increase in prison spending was driven by one of the same
factors that swelled the budget for social services: the cost of health care.
Prisons are required by federal law and court rulings to care for the sick,
disabled and injured among their inmate populations. As lawsuits led to greater
health-care requirements, and as the cost of health care rose, medical bills
for the prison system have soared by 70% since 1998, adding more than $350
million a year to the budget.
Davis has largely refused to consider
spending cuts for prisons even in the most recent budget, arguing that he
would not compromise public safety. But his close relationship with the prison
guards has opened him to criticism that he is protecting key campaign contributors
in the midst of a crisis.
Other Spending
Beyond those three areas — health and social services, education and prisons — Davis' overall record is more frugal.
In his early budgets, Davis steered some of the state's surplus revenue to
one-time improvements, rather than commit it to long-term spending. His 2000
budget included an increase of more than $2 billion for transportation and
housing, for example. But, as revenue began to shrink the next year, Davis
cut that budget back in those areas rather than reduce his new health programs.
Davis restrained spending below the rate of inflation and population growth
on consumer affairs, which grew 9%; natural resources, up 12%; and environmental
protection, down 1%.
One final item that goes into the Republican
calculation of spending increases under Davis involves a quirk in the way
the state accounts for its vehicle license fee — the car tax.
In
1998, under Wilson, the state reduced the car tax. As part of the deal to
cut the tax, the Legislature agreed to reimburse local governments for billions
of dollars of car-tax revenue they would lose.
The money for local
governments, which used to flow directly to them from the car-tax collections,
was now coming out of the general fund. By the 2002 fiscal year, the reimbursements
to local governments totaled nearly $4 billion and accounted for almost a
fifth of the nominal increase in state spending.
Even allowing for
that, however, spending under Davis still increased by 27%, which was faster
than population growth and inflation combined.
The general fund —
essentially the checking account for state taxes — does not include all state
spending. In fact, it declined somewhat as a share of the budget under Davis.
But examining trends in the general fund remains the best way to assess the
effect that elected officials have on the budget. The other two main sources
of spending by the state — both of which have increased in recent years —
are money from the federal government and proceeds from the sale of capital
improvement bonds. The flow of federal money is determined mostly by policymakers
in Washington; bond funds have to be approved by voters. The state budget
is proposed by the governor, adopted by a two-thirds vote of the Legislature,
and then signed by the governor, who can line-item veto individual amounts.
To avoid what they see as mistakes of the Davis era, many Republicans now
advocate a cap that would allow state spending to increase only to the extent
needed to match inflation and population growth.
Under such a formula,
spending would have grown much less than it did since 1994. But some fiscal
experts say the broad consumer price index measurement of inflation does
not fairly measure the change in the cost of services paid by government.
For example, they note, spending on health care, which made up 15%
of the state budget last year, has consistently outpaced the overall inflation
rate, whether the spending was by government or private companies.
The same is true of higher education, which stood at 7% of the state budget.
The challenge for the governor and Legislature over the last decade has been
to strike a balance between tax cuts and expanded services within a cyclical
economy, said Steven M. Sheffrin, director of the Center for State and Local
Taxation at UC Davis.
"The money wasn't being tossed down a rat hole,"
Sheffrin said of state spending on Davis' watch. "It was useful things that
he wanted to spend money on."
The crisis arose because the spending
was based in part on unstable revenues, and to keep spending in line with
plummeting revenues would have required pulling back on initiatives begun
when the state was flush.
"It does create a stop-and-go policy for the state," Sheffrin said.