I’ve been working with Brian Flood to determine how and why the data won’t line up in Google Earth when exported out of ArcGIS into a KML/KMZ file. Brian figured out the following:

there definitely seems to be a shift in GE’s aerials in some places (e.g. none in NJ, mild in Nevada, somewhat severe in your area). However, it looks like the WGS cords returned by GE are correct, so its overlaying your data correctly, its just its other base data is slightly shifted. I suspect this is QA/QC issue for GE

For the next build, I added a xy shift variable that can be controlled by the user, essentially making up for the GE base data errors.

Not a great story but if GE is used purely as a viewer it works. I also will mark the KML with comments so the shift can be undone at a later date (or simply re-exported)

This isn’t good/bad news really as one can manually adjust the x/y shift, but it adds a step to the export that shouldn’t be there and this is compounded by the fact that the shift isn’t constant across the globe. At least now we know what the issue is and hopefully all ArcMap to KML extensions will add the ability to adjust the x/y shift soon.