Yesterday's Media News Group papers, including the Monterey Herald, ran an article purporting to provide "the answer to where California's tax dollars went" - why we're in a budget crisis. Their answer: California overspent.

A MediaNews analysis of state spending since Republican Gov. Arnold Schwarzenegger took office in late 2003 found that he and the Democratic-controlled Legislature have spent money well beyond the rate of inflation and California's population growth -- $10.2 billion more.

Yet the programs that received most of that money are priorities that Californians broadly support or have demanded at the ballot box: tougher prison sentences for criminals, health care for uninsured children and an aging population, and a cut in the "car tax" that they pay every year to register their vehicles.

The problem, according to a report last week from the state auditor, is that Republican and Democratic politicians in Sacramento have shirked their responsibility for the past decade, papering over shortfalls that started after the dot-com bubble popped in 2001.

Like homeowners paying off one credit card with another, they used accounting gimmicks and more debt, rather than raising taxes or cutting spending, to balance the books.

It's a classic case of journalistic truthiness - some facts and accurate analysis wrapped inside a totally misleading frame. But in making this analysis, and emphasizing that the growth in state spending came from core programs - education, health care, and prisons - they have actually reinforced the argument I made nearly a year ago that we have a structural revenue shortfall. As I explained it:

The real problem is that since 1978 this state has cut nearly $12 billion in taxes. This was done during economically prosperous periods, particularly the 1990s. And that lack of revenue has piled up over the years - the state has fallen further and further behind to the point now that our state's governor is seriously proposing ending public education as we know it.

The MNG story is framed as one of "foolish politicians recklessly overspent our money! if only they'd been more careful!" But within the story itself the truth does emerge:

Schwarzenegger's first act as governor, signing an executive order to cut the vehicle license fee by two-thirds, blew a large hole in the state budget. It saved the average motorist about $200 a year but would have devastated the cities and counties that had been receiving the money. So Schwarzenegger agreed to repay them every year with state funds. That promise now costs the state $6 billion a year, or $2 billion more than the rate of inflation and population growth since early 2003.

MNG claims there was $10.6 billion in "overspending" - but $6 billion of it, or more than half, was Arnold's idiotic VLF cut. The article, which conveniently stops its history at November 2003, doesn't include the other $6 billion in tax cuts that have been implemented since 1993 - cuts that would have allowed state services to be funded at the bare-bones levels we've seen during Arnold's reign.   Read More »