BUDGET WOES TRUTH IS, DAVIS HAS BEEN FISCALLY PRUDENT.

Byline: Michael Bustamante

THE Daily News editorial ``Let's get the truth'' (Dec. 20) plays off the threadbare Republican theme that the budgets of Republican-led states are suffering because of the economy, while budgets of Democratic-led states are suffering because of overspending.

The truth is, it's the same economy, stupid!

California is far from alone in its fiscal situation. Raymond Scheppach, executive director of the National Governors' Association, has pointed out that the fiscal crisis being felt virtually nationwide is battering almost every state budget to the point where there just are no easy choices left. State tax revenues have deteriorated, while health care costs are exploding. Capital gains tax revenues have collapsed, adding to the overall loss of revenue from slow economic growth.

In fact, in the 2001-02 fiscal year, the states collected about $38 billion less in tax revenue than in the previous year, after adjusting for inflation - a drop of almost 8 percent. That trend is expected to continue. Neither the federal government nor the vast bulk of the other states, nor virtually any of the nation's major financial firms, foresaw the precipitous stock market plunge that did in federal and state budgets. In 2002 alone, more than $2.6 trillion in investment funds were erased by the stock market's fall, sending tax revenues plummeting.

Meanwhile, over the past four years Gov. Davis had a budgetary choice. He had to decide between spending what was needed to fix 16 years of Republican budgetary indifference, or clamping down on spending, which would have reduced the immediate budget shortfall but would have continued the state's neglect of education, health care and an aging infrastructure.

He put new funding where it was vitally needed: 70 percent to education, public safety, transportation and tax relief. Another 26 percent went to health care for children, seniors and the disabled. Yet Gov. Davis' budget increase of 32 percent over four years was lower than the 37 percent increase of Pete Wilson's second term and the 45 percent increase seen under the first four years of George Deukmejian. In reality, spending growth under Gov. Davis is significantly less than the average growth for each gubernatorial term since 1959 - even when that growth is adjusted for inflation.

Moreover, recognizing that good economic times were unlikely to continue indefinitely, Gov. Davis dedicated nearly $8 billion of new revenues to one-time spending that would not permanently increase the budget base.

Finally, by focusing on long-term needs, arguably Gov. Davis positioned the state for stronger future economic growth. As the Wall Street Journal argued regarding North Carolina's similar budget growth in a time of economic downturn: ``North Carolina got nailed (by the economic downturn) in part because it was caught doing exactly the right things for the long-term health of its economy: boosting K-12 education, a weak link in its schools, while moving from lower-skill to higher-skill industries. To be sure, it's that ironic twist that gives the state its best hope for recovery.'' That's a pretty good description of California's economic situation today as well.