The state budget is a massive and off-putting document, to be certain, but understanding its essential elements -- the extent of revenues, the scope of expenditures and the irritating gap between the two -- is not rocket science.

The state's general fund revenues, with the exception of a $12 billion one-time windfall in 2000-01, have been remarkably consistent ever since the state came out of a severe recession. General fund revenue from major sources, primarily income and sales taxes, has risen from $42 billion a year in 1995-96 to some $73 billion now.

The deficits that have befuddled Capitol politicians originate in what happened in 2000, when the windfall, mostly from income taxes on high-tech workers, appeared.
Gov. Gray Davis wisely cautioned against a big boost in long-term spending. "I intend to resist the siren song of permanent spending, whether it comes from the left or the right," he said in May 2000. "And I will stand up to anyone who tries to convince the Legislature that they should spend most or all of this money in ongoing expenses."

Davis, however, did not follow his own advice. Within weeks, he agreed to commit about $8 billion of the windfall to ongoing spending, including big tax cuts, thus creating a chronic deficit that in subsequent years was papered over with slippery bookkeeping maneuvers and billions of dollars in loans. The most recent official projections are that with $75.5 billion in revenues and $83.4 billion in spending, the deficit will be $7.9 billion in 2004-05.

Had Davis simply done what he said he would do -- "resist the siren song of permanent spending" -- the state would not have a chronic deficit, and he probably wouldn't be facing a recall election. As the campaign continues, however, Davis and the two principal candidates to succeed him are spinning fanciful accounts of the budget crisis.

Davis, while conceding that "I could have been tougher in holding down spending when we had a big surplus," falsely blames the sluggish economy for the deficit. And his fact-free budget tale is being matched by those of Lt. Gov. Cruz Bustamante and movie star Arnold Schwarzenegger as they vie to succeed Davis.

Bustamante contends that the deficit stems from the 2001 energy crisis, during which the general fund was tapped for about $8 billion to purchase power. And, of course, Bustamante blames the energy crisis on Enron and other rapacious power sellers.

"We had a $10 billion surplus, and they stole it from us," Bustamante said during a major speech. "And now ... education funding has been cut and our car tax has been tripled."

It's a widely believed scenario, but entirely untrue, since all of the power buys were ultimately covered with a bond issue being repaid by utility customers. That means Bustamante is either woefully ignorant about the budget crisis he says he can fix (largely with $8 billion in new taxes that he probably can't get enacted) or he's consciously telling untruths.

Schwarzenegger has a more factual version of how the crisis developed but an equally fanciful version of how it can be fixed. He contends that "a patchwork of special interest giveaways (is) draining precious resources from core programs such as education, public safety and health care," and that the deficit can be bridged without either new taxes or cutting into those "core programs." And he would cut revenues by additional billions of dollars by repealing the recently restored vehicle license fee, widening the gap.

In fact, "core programs" account for the vast majority of the state's budget. Education alone consumes nearly half of the budget, while the Department of Corrections is a $5 billion-plus per year operation, and most of the remainder is taken by health care and/or federally required welfare programs.

The unvarnished fact is this: The budget deficit can be closed only if there are new revenues from new taxes or closing loopholes, or deep cuts in the programs that politicians want to leave untouched. The alternative would be to run up the state's credit cards even more -- which is exactly how Davis and lawmakers got us into this mess over the past three years.

There's no free lunch, and anyone holding or aspiring to the governorship should not be allowed to pretend otherwise.