As Republicans attempt to oust Democratic Gov. Gray Davis, their effort is fueled by the charge that he and the Democratic-controlled Legislature spent a surge of tax revenue late last decade too freely and for too long.
Lawmakers are haggling over a state budget that is 13 days overdue, and recall backers point to irresponsible spending as a key reason for California's staggering shortfall and their conviction that Davis should be tossed out of office.

"Under Gray Davis, California went from a surplus to a record $34.8 billion deficit -- more than the deficits of all other states combined," says the Web site for Rescue California, the group that collected the bulk of signatures on recall petitions.

Democrats counter that the spending spike reflected an infusion of money to California's poorly ranked schools, a cut in vehicle license fees for drivers for which the state reimbursed local government, and what they say were badly needed expansions to health programs for the poor and disabled. The deficit, they say, was purely the result of a drop-off in dot-com dollars and an economic slump that battered nearly every state. They also point out that many Republican lawmakers voted for the very programs that have boosted the spending they now denounce.

"In the good years, we spent money on a couple of priorities that I think Californians feel are important," said Assembly Budget Committee Chairwoman Jenny Oropeza, D-Long Beach.

No one at the Capitol quarrels with the premise that spending shot up after Davis took office. In 1999, his first year in office, Davis signed an $81.3 billion budget -- an 8 percent increase over former Republican Gov. Pete Wilson's budget the year before -- with widespread support from legislative Democrats and Republicans. Last year, Davis and lawmakers approved a $99 billion budget.

Budget analysts and Republican critics point, in particular, to Davis' first three years in office, when state spending soared by 34 percent.

Aware that the revenue bubble could burst, Davis promised to pour the bounty into one-time expenses rather than ongoing programs.

But he overrode his own conservative spending instincts to appease lawmakers and others, said Fred Silva, former state Senate fiscal adviser now with the Public Policy Institute of California. "Everybody voted for more money for schools, on a bipartisan basis. And they didn't raise taxes to do it," Silva said.

"In his first budget, Davis took a lot of the spike in revenues and put it into one-time expenditures," he said. "But in his second and third years, he put a lot of the spike ... into ongoing programs, like education. The Legislature wanted him to do that, and he did it."

Davis was also under pressure from an array of outside forces. The California Teachers Association, for instance, was threatening to back a ballot initiative to raise school spending to the national average. Davis agreed in 2000 to spend $1.8 billion on education, much of which went to increasing teachers' salaries.

By 2001, at the tail of the tech boom that pumped unusually large amounts of cash into state coffers, California government was spending $4,927 per person, compared to $3,683 in 1998, according to U.S. census figures.

The largest share of California's spending growth in that period was in K-12 schools, colleges, health care (including government health insurance for children) and the vehicle license fee cut, according to the Legislative Analyst's Office. Spending hikes for K-12 education accounted for $5 billion of growth, the single largest chunk in the three-year span, the nonpartisan analyst said, which Davis and Democrats say reflects residents' priorities.

"I think of that as something that we should all be proud of," Oropeza said. "... I don't think we can afford to go back into the basement of the funding of our kids' future."

Another major piece of the spending increase came from the slashed vehicle license fees for drivers, reflected as a cost because the state reimbursed local governments for the difference. Finance officials last month triggered an increase in the fee back to 1998 levels because of the state's fiscal woes, an action recall proponents say fueled their efforts to get petition signatures.

GOP leaders now complain that state spending far outpaced population growth and inflation under Davis' watch. But Republicans, too, were unable to resist the temptation that came with a bulging state bank account. Many voted in favor of the budgets that raised spending dramatically. Others proposed new programs or expansions of their own and asked for hundreds of millions of dollars for pet projects, such as swimming pools and parks in their home districts.

GOP leaders, however, argue that the vehicle license fee cuts and new tax credits enacted then were designed to boost the state's economy and were worthy ways to spend the influx of cash.

The bigger problem, they say, is that Democrats failed to reverse their spending habits quickly enough when revenue fell.

"It's a situation relative to the last two budgets," said Assembly Republican leader Dave Cox. "Clearly, the last two years and this year we were spending beyond our means and ... we were using one-time funding to paper over ongoing expenditures.

"When you find yourself in a hole, the first rule is to stop digging," he said.

Cox, who voted in favor of the 1999 and 2000 budgets, says he supports maintaining education spending and would cut elsewhere. The Fair Oaks Republican previously said he opposed a recall election but now avoids taking a stance on the issue, saying it has no bearing on budget talks.

Meanwhile, a nationwide recession that many blame for California's woes has left nearly every state with a tapped-out treasury and facing deep cuts or tax hikes -- even those with Republican legislatures or governors.

"At the same time that states were increasing their spending, they were also cutting taxes, they were also building up budget reserves," said Nicholas Jenny, senior policy analyst for the New York-based Rockefeller Institute of Government. "If you keep getting all this extra money, the temptation is overwhelming to do something with it."

Davis' finance director, Steve Peace, said no one could have predicted states would suffer their steepest revenue decline since World War II. "It's easy to say, 'Well you should have anticipated that ... revenue related to capital gains was going to go away.' And people did anticipate that," he said. "They didn't anticipate the dimensions of it."

Peace also said the governor and Legislature have cut spending steadily since the economic slip in 2001. The state's spending fell 1.6 percent last fiscal year and is projected to decline by 5.7 percent in the current fiscal year.

"Even if you accept the criticism that certain discretionary decisions could have been made by the Legislature and-or the governor ... we've already taken the cuts to account for 100 percent of that and more," Peace said.

That explanation doesn't satisfy recall backers. "When companies go bankrupt," Rescue California says, "the CEO takes the blame."