It came as a shock last week when I returned from a trip and found almost no one in Southern California knew about the sobering California employment data scooped by the Bay Area media. Periodic revisions to the official statistics now suggest that 180,000 more people than previously estimated lost their jobs in the recession. If so, such data would change our understanding of the state's setback from a mere economic blip into something far more serious.

Then the UCLA Anderson forecast was released and widely portrayed by the local media as offering good news of an incipient California recovery. Actually, the forecast was quite troubling. Silicon Valley, home of many of the state's richest taxpayers, continues to lose employment. High paying job losses in movies and manufacturing are causing statewide incomes to grow anemically, at just half the national rate. Housing and consumer spending, now considered the bulwarks of our economy, may well be reaching an unsustainable peak and soon could decline.

"We're not paying enough attention to (these problems)," UCLA's Edward Leamer told the Associated Press. "The markets are particularly optimistic. They think we're up and running, when we're actually staggering forward."

He's right. We're not paying attention to much of anything economic. Maybe it's the giddy afterglow of the last cheap money boom. Perhaps it's the political and media groupthink that a one-party dominated state encourages, especially in an election year.

The biggest news in a decade is how terribly California has squandered the historic opportunity to solve many of its most pressing needs with its now-vanished budgetary windfall. And, it seems, almost no one wants to think about it.

Of course, news reports do tell us about the impending state budget deficit currently thought to range from $12 billion to $17 billion. Yet, they brush aside the problem by making vague references to the energy crisis, the fall of the "new economy," lagging stock option values or the global recession. Few articles come close to explaining what the figures actually mean or why such a shortfall emerged in the first place.

There are four components to California's statewide finances. The biggest is the general fund, which is largely paid for from annual personal and other tax revenues. Special funds come from taxes earmarked for particular functions like roads. The rest of the state's revenue base is comprised of bonds and federal grants.

When people talk about the "budget" they usually mean the combination of general and special funds, the state spending most directly controlled by Sacramento. These expenditures now total about $100 billion per year. The currently projected budget deficit therefore ranges from a whopping 12 percent to 17 percent of California's spending. Some believe that the budget shortfall will become much worse.

These are truly staggering figures. How could state spending so dramatically overshoot revenues?

Easy. Since 1998, when the state's politics shifted overwhelmingly in favor of the Democrats, Sacramento went on an unprecedented spending spree. California's state budget rose by more than 60 percent in the last 10 years, but nearly two-thirds of that growth took place after 1998. During 1998-2001, in fact, government expenditures rose a remarkable 50 percent faster than statewide personal incomes grew. Public spending vastly outstripped the state's tax revenue base.

We hear virtually nothing about such colossal miscalculation nor the waste it stimulated. Many big ticket items, like Gov. Gray Davis' $30 million freeway overpass project in support of an Indian casino that paid big money into his campaign, were little more than expensive political payoffs. Massive school funding, like the $337 million no one can account for in San Francisco, simply evaporated without much effect.

In just three years, Sacramento's general and special fund spending rose by nearly $60 billion above 1998 levels. Yet, no real progress was made in solving the state's chronic water, housing, infrastructure, health, energy, manufacturing industry, education and growth management problems.

Such a record might be expected to trigger widespread concern. But most Californians seem content to shrug the issue aside. Amid such apathy, our leaders are freely engaging in even more questionable and dangerous conduct.

Despite the state's huge tax revenue declines and the recession, California's proposed budget calls for virtually the same spending as in the previous year. How can public expenditures stay constant while tax income dramatically falls?

The answer lies in the use of the most creative of accounting practices. To plug a projected $12 billion gap--the most optimistic deficit estimate--our leaders are assuming that the federal government will give them an extra $1.1 billion next year from presently nonexistent and unallocated sources. They also propose to "cut" about $5 billion worth of new spending they authorized just last year.

Another $5 billion is supposedly "saved" by borrowing money from other dedicated funds and deferring contributions to state employee retirement accounts. Somehow, $2.4 billion will be raised by selling bonds backed by California's anticipated share of the national tobacco lawsuit settlement, a strategy never before attempted. Finally, tax revenues are projected to quickly rise to the levels reached at the height of the "bubble" economy.

It doesn't take much to critique these assumptions. Dan Walters, one of the few commentators who has bothered to study Sacramento's budgetary follies, compares them unfavorably with Enron. Like the now-disgraced company, he observes, the state's leadership is inventing purely fictitious resources and raiding worker retirement funds to obscure a yawning income shortfall.

Impartial analyses are just as harsh. Earlier this year, the non-partisan Legislative Analyst's Office estimated that even if all of the anticipated budget "fixes" miraculously materialize, California will still suffer a current year deficit of $5 billion and deficits of about $7 billion in each of the following two years. This bleak assessment was made well before the state's potentially worse employment numbers and slow rate of income growth were publicly announced. The true shortfalls may thus be much larger.

By any measure, our political leaders have badly bungled California's public finances and put our future prosperity at risk. Our indifference to this fact is unconscionable. No matter who gets elected in the fall, state budget control must be regained and public accountability restored. It's long past time to insist that our politicians achieve a higher standard.