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Last Updated: Thursday, 7 August, 2003, 20:06 GMT 21:06 UK
California's continuing crisis
By Rachel Clarke
BBC News Online in Washington

California has the most people of any of the United States and some of its biggest problems too.

California Governor Gray Davis
Gray Davis' popularity has reflected the economy's performance
Those problems have led to the staging of an unprecedented recall election for the state's Governor Gray Davis.

And while Mr Davis' unpopularity is fuelling the demands for a change at the top, the issues will still have to be faced whether he stays in the governor's mansion or if he is replaced by Arnold Schwarzenegger or another challenger.

California's budget crisis has been coming top of voters' concerns, and Mr Davis' woes, in surveys conducted across the state.

From being able to work on balanced budgets, the state now has a deficit of more than $38bn.

That money will not be found magically if Governor Davis loses his job.

The Standard & Poor's credit rating agency has downgraded the value of California's debt, making it more expensive for the state to borrow funds to cover its bills or invest in new projects.

But if they get a change of governor - or even if they do not - voters will want to see improvements in the budget shortfall and in education, where they want more money spent.

Boom and bust

After his election in 1998, Governor Davis used a strong local economy to end the budget deficit even as he allocated more cash to schools.

Booming business brought more money into the state government's coffers than was expected and California again earned its nickname as the land of milk and honey.

California gubernatorial candidate Arnold Schwarzenegger
Old problems may still dog a new governor
Much of the extra cash had been generated from the successes of Silicon Valley and hi-tech industries.

And when the bottom dropped out of the dot-com economy, the Golden State's golden age was up.

The loss of so much of the high-paying hi-tech industry compounded the economic woes felt amid a recession which spread much further than California.

A new governor could not change this overnight, but the public's perception could make a difference.

Mr Davis' record unpopularity stems not just from the state's problems, but the way he has handled them.

It was his Republican predecessor who agreed the deregulation of California's energy industry but when an energy crisis struck in 2001, Mr Davis soon took the blame for not reacting quickly enough.

He had not fully recovered from that when the budget deficit ballooned.

While state legislators also have a key role to play in fiscal matters, it seems that Mr Davis is taking most of the blame for the deficit and unpopular measures to address it, such as the trebling of car registration fees.

He was popular when the economy was doing well, but his perceived failures during difficult times allowed the resurfacing of complaints that he is as grey as his name.

The energy crisis followed by the budget crisis, mixed with economic woes, voters' desires for more spending on schools and an unfavourable perception of him may yet lose Mr Davis his job.

But the problems he has had to tackle will be passed on with the keys to the governor's mansion.

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