SAN FRANCISCO, CA - When Gray Davis took office he inherited a $12-billion two-year budget surplus. For transforming that hefty surplus into a $24-billion two-year deficit, California's governor has earned the first California Golden Fleece Award from the Pacific Research Institute.

Over the past three years, the state's population grew by only five percent, but under Davis per-capita general fund expenditures jumped more than 31 percent. If state spending had been held to 6.2 percent of personal income, as it was in 1998-99, there would be no budget deficit.

Mr. Davis added 34,000 workers to the state payroll, a greater increase than the next three largest states combined. The state now spends $24 billion a year more than when he took office. “The problem is not spending,"the governor declared. "The problem is lack of revenue.”

In reality, Californians send more of their income to Sacramento than ever before. Here are but a few examples of what they get in return:

• Residential and small business electricity customers could pay an extra $5.3 billion over the life of long-term electricity contracts negotiated by Governor Davis at above-market prices (The Utility Reform Network).
  
  
• The FBI estimates that Medi-Cal fraud will eventually total $1 billion (Los Angeles Times).
  
  
• A Los Angeles County grand jury finds that welfare fraud costs taxpayers as much as $500 million a year (Los Angeles Times).
  
  
• The state recently paid for a heart transplant at the Stanford Medical Center for a two-time felon, the cost estimated to be $1 million. The average cost of a heart transplant in the country is just over $200,000. The Davis administration agreed to spend $122 million a year to improve medical care for state prisoners (Los Angeles Times and Sacramento Bee).
  
  
• The Bureau of State Audits (BSA) reports that state payrolls continue to include the salaries of nonexistent employees; 2,400 phantom workers in five agencies alone with combined salaries of $116 million in fiscal year 2000-01.
  
  
• The federal government assessed a $115.8 million penalty against the state for inept administration of its food-stamp program, the most error-plagued in the nation (Los Angeles Times).
  
  
• The lucrative package that Governor Davis gave prison guards limits wardens’ ability to oversee sick leave and overtime, costing taxpayers up to $71 million a year (Los Angeles Times).
  
  
• California National Guard members guarding Bay Area bridges were staying at local hotels including the San Francisco Marriott, rather than local military barracks, at a cost of $750,000 (Contra Costa Times).

Governor Davis has disregarded the welfare of California taxpayers by not using his veto power to reduce or eliminate appropriations. He has also failed to use his executive power to root out fraud and misuse of taxpayer funds. Such fiscal mismanagement has consequences for all.

Californians likely face the biggest tax hike in the history of any state. Corporate executives now rate California as the nation's worst business climate. When Gray Davis took office, it rated second-best. One of only four governors to receive the lowest grade of “F” in the recent Fiscal Policy Report Card on America’s Governors, Gray Davis can now add PRI’s California Golden Fleece Award to his growing list of achievements.

Lawrence J. McQuillan* is director of the Center for Entrepreneurship at the California-based Pacific Research Institute. He can be reached via email at lmcquillan@pacificresearch.org.