When the Davis Administration took office it inherited a two-year budget surplus of $12 billion. How it turned that surplus into a deficit of $24 billion is a sad tale for taxpayers but instructive for politicians willing to learn.

Under Davis, the budget has ballooned from around $65 billion to $100 billion. One reason is that during the governor’s first three years, the state hired 34,000 new employees. Each enjoys generous benefits, practical immunity from dismissal, and most if not all, will be members of public-sector unions with a vested interest in higher spending, higher taxes, and further expansion of government.

On October 23rd last year, the Davis administration announced a hiring freeze, which requires explanation. In Washington, when an agency expecting a 20-percent increase instead gets a 10-percent increase, they call this a “cut.” In Sacramento, in similar style, a freeze does not mean a freeze.

From the end of October 2001 until the end of March 2002, the government of California hired 9,311 new employees, little change from the same period the year before, when the state hired 13,007. Under the freeze, some agencies hired at a more rapid pace. These include the Department of Corrections, Franchise Tax Board, and the Department of Employment Development.

The growing deficit did not prompt California to follow federal mandates that limit welfare to five years. State welfare lobbyists work to ensure that welfare remains an entitlement for life.

The California constitution requires a balanced budget. There will have to be cuts, and state agencies are portraying any reductions as the end of civilization and they have the ear of Democrats in the legislature.

A growing deficit and troubled economy should have a chilling effect on spending. But Assembly Democrats proposed bills that required more spending. One by Los Angeles Democrat Jackie Goldberg would have banned sports teams’ names such as “Braves” and “Warriors,” with the state picking up the tab for the changeover.

Under Davis, California did reduce the car tax, which may be seen as tokenism given the state sales tax of nearly 10 percent, a measure other states, such as Nevada, do without. Prominent Democrats now want to raise the top state income tax to 11 percent, and many others want to restore the car tax, which amounts to balancing the budget on the backs of the workers.

Gov. Davis recently signed AB1493, a measure that will not improve the environment but is certain to make automobiles more expensive. His long-term deals and loans for electricity have locked California into high rates, above market prices.

By law, education is the largest expenditure in California but the state Department of Education (CDE) is a study in waste. As a state watchdog commission noted, the department simply hands out money with few controls and even punishes those who blow the whistle on financial misconduct.

Waste, spending and imprudent hiring are key factors in turning a surplus into a deficit. So is the belief that all problems have a political solution, and that actions have no consequences. But all is not bleak.

Even in deficit conditions the governor has been able to raise more than $50 million for this fall’s reelection campaign, more than any gubernatorial campaign in American history and breaking his own record of $35 million in 1998.

Despite claims to the contrary, Davis will likely raise taxes, which will further spur the exodus of productive workers. So for those who still want to live here, real estate prices may drop at last.

Sally Pipes is the President and CEO of the Pacific Research Institute, a California-based think tank. She can be reached via email at spipes@pacificresearch.org.