Most Californians by now are aware of the incredible $38 billion shortfall we had in our 2003-2004 budget. How did a problem of this magnitude come about? Was it irresponsible spending, or perhaps lack of awareness by our budget planners? Is it really all Gray Davis' fault?

The answer is none of the above. Economic conditions in California changed rapidly in 2001, causing an immediate and significant downturn in revenue. The problem is that California's budget is roughly $100 billion, and it was not possible to make significant spending reductions at the same speed. Just as a fully-loaded oil tanker takes 2 miles to turn, A budget the size of California's takes time to change.

Contrary to popular claims, a state cannot be run like a business, and it isn't subject to the same management techniques. For example, if a company faces a sudden downturn in sales, it can lay off staff quickly to lower its expenses. But in California we have schools in session during the year. We can't simply fire 10,000 teachers and throw kids out on the streets. We can't make sudden 10 percent cuts to fire, police, and emergency services without suffering dramatic negative consequences. In addition, we have construction contracts that are in progress and can't, or shouldn't, be terminated. And pensions have to be paid on time - we can't simply cut pension checks in half or stop sending them out.

The budget shortfall is due to the fact that tax revenue dropped faster than we could respond with spending reductions.

But what about Governor Davis? Remember that California is required to have a balanced budget each year, and that the budget requires a 66 percent majority for approval. This means that each year, both Republicans and Democrats have to agree on the budget in order for it to go into effect. In fact the budget planning and approval process is lengthy and complicated, and it involves many people, not just the Governor. So the problem can't be pinned on one person or even one party.

Finally, note that the vast majority of states in the US are facing similar problems this year. Is it just a coincidence, or could it be that poor economic policies at the national level are affecting all the states in a significant way? And furthermore, is it just a coincidence that a state dominated by Democratic officeholders is suffering the most at a time when the national government is dominated by Republicans who are openly hostile to our needs? Just a few things to think about as we consider the reasons behind our budget woes.