A mess of measures

Making sense of the six initiatives on the May 19 ballot

BEHIND THE MEASURES <br> Gov. Arnold Schwarzenegger was joined by Senate President Pro Tem Darrell Steinberg (third from left) and law-enforcement and business leaders in this Feb. 26 press event announcing formation of the pro-initiatives campaign group Budget Reform Now.

Gov. Arnold Schwarzenegger was joined by Senate President Pro Tem Darrell Steinberg (third from left) and law-enforcement and business leaders in this Feb. 26 press event announcing formation of the pro-initiatives campaign group Budget Reform Now.


Our position:
For the CN&R’s endorsements on the May 19 ballot initiatives, please see Editorial.

Memories are short in California, but it’s worth remembering, as the May 19 special election approaches, that as recently as mid-February, state legislators had been locked in political gridlock for months, unable to come up with a budget that could garner the two-thirds approval needed for passage.

The six initiatives on the ballot cannot be understood without knowing what it took to break that gridlock back in February.

The lawmakers’ challenge was daunting. Not only did they have to come up with a mix of spending cuts (abhorred by Democrats) and tax increases (abhorred by Republicans) to offset a budget deficit projected at $42 billion, they had to work around and through a thicket of 17 earlier, voter-approved spending and taxation mandates that severely limited their options.

Due to those measures, which date back to 1978, when voters approved the landmark property-tax measure Proposition 13, as well as the two-thirds vote needed for final budget approval, the state’s budgeting process has become dysfunctional almost to the point of paralysis. That’s especially true at times of crisis such as now, when the country is in deep recession, tax revenues have sunk like rocks, and the state’s bottom line is severely out of whack.

Lawmakers had been under intense pressure to compromise and reach agreement. After months of fruitless negotiations, the governor and party leaders in both houses of the Legislature—the “Big Five,” as they’re known—finally went behind closed doors and pounded out a compromise agreement. They then took it to the lawmakers, who remained on the floor for nearly 46 hours until final agreement was reached.

It was not a pretty process. Unabashedly political deals were made; deeply held ideals were suspended. Knowing a special election would be needed, Democratic lawmakers carefully avoided putting anything to a vote that would attract big-money opposition, such as levying an oil-severance tax or increasing taxes on alcoholic beverages.

In perhaps the most egregious example of dysfunction, a single holdout Republican senator—Abel Maldonado, of Santa Maria, whose vote was essential to obtain two-thirds approval—forced Democrats to agree to put both a state spending cap on the May 19 special-election ballot and an open-primaries initiative on the June 2010 ballot.

As Frederica Shockley, an economics professor at Chico State University and longtime observer of state government, put it, Maldonado was able to “sell” his vote to the Democrats because of the two-thirds rule, which allowed his party to hold up the budget despite being in the minority.

In the end, lawmakers agreed to $14.8 billion in spending cuts, including to public transit, health care, schools and the courts; $12.5 billion in temporary tax increases; $5.4 billion in new borrowing; and establishment of a $1 billion reserve fund.

Several aspects of the compromise require voter approval in the form of ballot measures, which is why the May 19 special election is being held.

Voters will be forgiven for thinking the measures are a wildly mixed bag. They’re a complicated set of patchwork remedies and suspect trade-offs, and polls show that, two weeks out, voters are skeptical.

“It kinda makes sense that this is what the legislators came up with,” explained Charles C. Turner, who teaches state and local politics in the Political Science Department at Chico State. “Unfortunately, it makes no sense as something the voters will support.”

For one thing, he said, voters don’t like having to decide whether to tax themselves. “There’s a reason why most states don’t leave budgeting in the hands of the people,” he explained. “We want more [in the way of services], but we don’t want to pay more. We elect these people to make tough choices, not to put them back on us.”

Even the legislators themselves aren’t sure how they stand, Turner pointed out. Case in point: the Republican Party, which is officially opposed to the six measures but earlier contributed $650,000 to the governor’s “yes” campaign. The California Democratic Party, at its recent state convention, could not quite come up with the 60 percent vote needed to formally endorse the package.

Shockley, who says she is opposed to Proposition 1A, questions the need for the measure. “Budgeting is a complex process that requires discretion,” she writes in an e-mail. “We are only deceiving ourselves if we think that another proposition will solve our budget problems. What we really need is a constitutional convention to eliminate all the constraints on budgeting so that California can adopt a structurally sound budget.”

The ballot measures are widely backed, however, by such mainstream, centrist groups as the state Chamber of Commerce, public-safety agencies, the League of California Cities, the California Teachers Association, university and college boards, the AARP and dozens more. Major newspapers—including the Los Angeles Times, the Sacramento Bee and the San Francisco Chronicle—also support the measures, though some—the Bee and the Times, among others—are opposed to Proposition 1B.

Interestingly, opposition comes from both the liberal left and the conservative right. Several major labor unions oppose the package, especially Proposition 1A’s spending cap, while such groups as the Howard Jarvis Taxpayers Association oppose its tax hikes.

Here’s a rundown of the initiatives:

Proposition 1A: The linchpin of February’s budget deal would do three things. One, it would channel 3 percent of general-fund revenues each year into a new, larger “rainy day” reserve, until the account is equal to 12.5 percent of the total general-fund budget; the money could be tapped only in deficit years or if the governor declares a fiscal emergency. The goal is to smooth out the budgeting process by offsetting the current volatility in revenues generated. Second, it places a soft cap on state spending according to a formula based on average revenue growth over the past 10 years. Third, it extends current two-year temporary tax hikes for up to two years, providing revenues sufficient for the state to ride out the recession.

Proposition 1B: Placed on the ballot to garner the support of the powerful teachers’ union, this measure would require the state to restore, beginning in 2010-11, $9.3 billion in funding that K-12 schools and community colleges would have gotten in 2007-08 and 2008-09 under Proposition 98’s education-funding guarantees. It does not include a means of obtaining those revenues.

Proposition 1C: Would update the state lottery to increase ticket sales by authorizing new games, plus more and larger prizes. It would also allow the state to borrow $5 billion against future lottery profits to help offset the deficit in the 2009-10 budget.

Proposition 1D: Would amend 1998’s Proposition 10, which imposed a surcharge tax on cigarettes to fund the successful First 5 children’s programs. Approval would allow the state to temporarily tap its reserve to fund children’s programs financed by the general fund. First 5 programs would remain largely intact, though somewhat depleted financially.

Proposition 1E: A twin to Proposition 1D, this measure would allow the state to tap into the funds generated by 2004’s Proposition 63, the so-called “millionaires’ tax” designed to fund mental-health programs. It too would help pay for similar programs financed through the general fund. Again, current Prop. 63-funded programs would remain largely intact, though with less in the way of reserves.

Proposition 1F: Would prohibit the state’s elected officials from receiving a pay raise in years when the state is facing a deficit.

If voters fail to approve the revenue generators in this package, the Legislature will be faced with an immediate 2009-10 budget deficit estimated at $14 billion, with other, potentially larger, deficits looming in succeeding years.

Opponents of the package on the Democratic left hope that the package’s failure will compel voters to strike down the two-thirds rule on budgets and tax hikes; opponents on the Republican right hope it will force the Legislature to make even more drastic cuts in public services.