In January 2009, it was projected that our state’s budget would face a $40 billion deficit. In response, the CA legislature agreed on a new budget that would combine less spending and more borrowing, as well as some tax increases. As part of the agreement, six propositions were placed on the ballot. Three of these (1C, 1D, and 1E) had to pass if the budget was to balance.
Nevertheless, recent estimates by the Legislative Analyst’s Office show that tax revenues are well below projections used earlier in the year. So these props, even if passed, could not forestall more painful cuts in the near future.
With this Special Election, the state legislature handed us a slate of props so complicated and vague that even the Legislative Analyst was at a loss. His summaries in the Voter Information Guide often conceded that the effect and interpretation of each measure was simply unknown. As a result, voters' confusion and outrage was high, and all but Prop 1F failed.
Prop 1A - Failed
In 2004 voters mandated a "rainy day fund" into which 3% of the state's budget would be deposited every year. For several reasons, the current balance of that fund is ZERO. Prop 1A would increase the size of the state's reserve target to 12.5% of revenues (approximately $12 Billion). Some of this money could be spent on Infrastructure and State Bond Debt, or, if Prop 1B passes, on education. The state's ability to draw from the fund for other purposes would be extremely limited. Also, deposits into the fund would only occur once education spending levels mandated by Proposition 98 (1988) have been attained.
In addition, the February 2009 budget contained several tax increases. These included a Sales and Use Tax increase from 8 to 9 percent, a near doubling of the Vehicle License Fee, and a Personal Income Tax increase of .25 percent. If passed, Prop 1A would extend those tax levels for one to two years.
Finally, Prop 1A would grant the Governor new authority to reduce certain types of spending during the year without getting legislative approval.
There are several things wrong with this proposition. First, it further erodes the legislature's discretionary control of the budget. As I've often written, more than two thirds of our state budget is already spoken for, giving our elected representatives little control over its finances. Second, Prop 1A mandates priorities on our spending when state revenues are higher than anticipated. These priorities, such as funding obligations for Prop 98 and debt repayment, may not be our priorities ten years from now, and shouldn't be in our state's Constitution. Finally, as a Constitutional Amendment, Prop 1A will be extremely difficult to change.
Still, after years of borrowing money through bonds, the idea of our state having to save money for the future is a tempting one. And we desperately need a budget. Prop 1A would move us out of this deadlock, but will it move us in the right direction?
Supporters for this measure are not the ones you would normally associate with anything that includes a tax increase- CA Taxpayers Assoc., CA Chamber of Commerce, and Schwarzenegger's California Dream Team (who? They gave $700K). Opponents include teachers' unions, health workers' unions, and property rights groups.
We're in a bad predicament, and Prop 1A is not pretty. But voting "no" will not necessarily lead to something better. There are reasons why CA is unable to pass a budget, but this Prop does not address them.
Nevertheless, Your Political Friend is holding his nose and voting YES. A crap deal is sometimes better than no deal at all.
PROP 1B - Failed
1B is designed to settle the legal dispute over how much the state owes public schools under Prop 98. That Prop, passed in 1989, requires the state to dedicate a minimum percentage of its budget to education.
Prop 1B, which is contingent upon the passing of 1A, would obligate the state to pay $9.3 Billion over 5-6 years (beginning in 2011-2012) to K-12 schools and community colleges.
One might ask, “If Prop 98 already obligates the state to pay this money, why are the proponents introducing a new proposition?” Their answer is they want to avoid a lengthy legal battle that might require the state to pay the money all at once. This, in their view, offers a "measured approach".
However, opponents argue that Prop 98 requires the state to pay only $1.4 Billion, not $9.3 Billion. The $7.9 Billion discrepancy, they argue, is a result of supporters' misinterpreting the state Constitution.
So should we, the voters, decide who's interpretation of the law is correct?
Your Political Friend thinks this is a matter for the courts. If the supporters are in the right, they'll get the money they deserve. If they are wrong, Prop 1B will be a gift we can't afford.
Your Political Friend is voting NO.
Prop 1C - Failed
Known as the Lottery Modernization Act, Prop 1C would raise $5 billion in the short term by borrowing against future lottery revenues. This money would be used to pay off part of the current budget deficit.
Current law requires 34 percent of lottery profits go to schools. This measure would eliminate that requirement entirely. To compensate for this loss to schools, Prop 1C would dedicate more General Fund money to Prop 98 funding. However, this would end up costing the state more in the long run, as Prop 98 funding increases at a faster rate than do lottery profits.
As a one time fix, this idea might still be a good one. Of all the Props on the ballot, Prop 1C is the only one that would make a difference to our budget this year.
However, Prop 1C would allow the legislature to continue to borrow against the lottery fund as often as they want, without voter approval and without limit. In this political climate, where raising taxes and passing bonds is unpopular, the lottery fund will become an extremely attractive cash cow. We shouldn't let that happen- borrowing by any name will still leave us in debt.
Your Political Friend is voting NO.
Prop 1D - Failed
The California Children and Families Act (also known as the First 5 program) was passed by voters in 1998 with the mission to expand early development programs for children up to age five. It is funded with dedicated revenues from the cigarette tax. The program's current annual revenues are $500 million. In addition it's reserve of unspent funds is about $2.5 billion.
Prop 1D would withdraw $340 million from the program's reserve fund, as well as temporarily divert $268 million per year from First 5 funding for the next five years.
The money made available by Prop 1D would be subject to appropriation by the Legislature. Supporters say that the money would be used to fund MediCal and other health programs, but there is nothing in the legislation that would require it.
The supporters include RJ Reynolds, the tobacco company that fought the creation of the First 5 program in 1998.
The opponents are correct to point out that the wording of the proposition is extremely misleading. It claims to "protect children's services funding" while it actually cuts funding. They are also correct to point out that this prop is only a small, temporary fix that will not address the major structural changes that need to be made to the budget. Finally, they indicate that money spent on these programs now will likely save us much more in future costs.
In truth, the numbers here are hardly draconian. $340 million is less than 14% of the program's reserves. And, with its remaining reserves, the program can easily compensate itself for the missing $268 million in annual revenue. Why is the First 5 program carrying such a large reserve in the first place?
Still, I cannot understand going after this program, which has been a success, while more wasteful programs go untouched. There will be little benefit to the General Fund, but a larger detriment to children's programs.
Your Political Friend is voting NO.
Prop 1F - Passed
In 1990 voters created a Citizens Commission to establish the annual salary for most elected state offices. Prop 1F would amend the state Constitution to prevent the Commission from approving salary increases for state officials when the General Fund is expected to end the year with a deficit.
This sounds a bit mean spirited, but not unreasonable. In a year when our state runs a deficit, should anyone get a raise? The public outrage at corporate CEOs is justifiable, as these people pull in massive bonuses while their companies fail. Why shouldn't we be angry when legislators get raises while our state falters?
Let's look at the history: Since 2000 the commission has raised the pay of elected officials four times. Over this period, the total pay increases for each official have been equal to or less than the rate of inflation.
You see, we're not talking about a lot of money here- at most, a few hundred thousand. It's not enough to help our budget, and it's certainly not enough to influence the lawmakers whom this measure is meant to punish. Does anyone think this will get Democrats and Republicans to finally agree?
In addition it will punish those officials who have little or no part in passing the budget- the Attorney General, the Secretary of State, and the Insurance Commissioner, among others.
Prop 1F is kind of like Glenn Beck. You can understand why people like it, but, really, it's just angry and dumb.
Your Political Friend is voting NO.
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