With the state facing a $42 billion budget deficit this year, Californians have the chance to decide how their tax dollars should be used to balance the state budget.
The six propositions of the Tuesday statewide special election aim to reduce the deficit, cap spending limits, provide relief to services facing drastic cuts in funding and increase the size of a “rainy day” fund for use during years of economic downturn. However, a growing list of opponents to these measures argue that they will have little impact on services already facing severe cuts, grant the governor too much power in implementing more cuts and will nearly double the amount of taxes already imposed on taxpayers this year—making Californians the highest taxed people in the country for the next two years.
Last week, Gov. Arnold Schwarzenegger made one last pitch to a frustrated electorate following polls showing waning support for the five budget-related propositions.
“To fix the system, I need the people’s help,” the Republican governor said in a press conference Thursday. “I know that the people are sick and tired of hearing about Sacramento’s dysfunction. … People are angry. People are frustrated.”
He added, “But people need to know how this election will affect you.”
According to the Office of the Secretary of State, Proposition 1A promises to limit state spending and increase the amount of revenues diverted into the Budget Stabilization Fund (BSF), which was approved by voters with passage of Prop.58 in 2004. Prop. 1A will increase the size of total “rainy day” funds from five to 12.5 percent of the General Fund, dedicating these funds to saving for future periods of economic downturn.
Julie Soderland, communications director for Budget Reform Now, the main pro-Prop. 1A-1F coalition led by the governor, said these measures are necessary for balancing the state budget by 2013.
“These measures are crucial for California both in the short and long term,” Soderland said. “Propositions 1A though 1F will provide an immediate $6 billion in much-needed revenue to the state to prevent even deeper cuts to education, health-care, public safety and transportation. In addition, Prop. 1A will put into place long-term reform so that we don’t find ourselves in this type of crisis again.”
Not everyone agrees. Opponents of 1A, including the Howard Jarvis Taxpayers Association, the California Faculty Association and the California Federation of Teachers argue it will lead to approximately $16 billion in higher sales, vehicle and income taxes throughout the next two years, as well as a reduction in tax credits for dependents, costing families an additional $200 per child annually. Opponents also point out that 1A will grant the governor unilateral power in determining which “excessive” spending to cut and/or divert to the “rainy day” fund.
“Nothing could be further from the truth,” Soderland said. “The opponents of these measures are trying to confuse voters with inaccurate information. Proposition 1A gives the governor a practical and very limited amount of power to reduce or stop increases in state spending when we know we’re going to be running a deficit, which is just common sense. In addition, those reductions on increases in spending would have to be approved by the legislature, so it’s not unilateral authority. But it is important authority so we don’t dig ourselves deeper into a hole that we can’t afford to be in when we face a downturn.”
Proposition 1B seeks to address cuts to local school districts and community colleges by requiring supplemental payments be made from the BSF beginning in 2011. Payments would be allocated in proportion to average attendance and used for instruction, supplies and local educational programs. Availability of such funds is dependent upon passage of 1A.
Communications director for the Yes on 1B campaign, Lindsey Shoemaker, said California schools are in dire need for such funding, and that without passage of 1A, hopes for reducing class sizes and providing adequate levels of faculty and materials are “dead in the water.”
“The budgets for local schools are down to dangerous levels of funding,” Shoemaker said. “If this doesn’t pass we’re essentially back to the drawing boards.”
She added, “Prop.1B begins to repay what has been cut from our schools. It provides a constitutional amendment of (1988’s) Prop.98 to repay $9.3 billion and ensure that schools and community colleges are paid back for overcrowding and decreases in teachers’ salaries.”
No organization has officially made a statement in opposition to 1B.
Proposition 1C proposes the “modernization” of the state lottery, borrowing $5 billion from projected lottery profits through the sale of bonds to address the budget deficit and increase the proportion of such profits allocated to education funding approved by voters with 1984’s Proposition 37. In the 2007-08 fiscal year, lottery profits accounted for $1.1 billion, or just over one percent of educational funding, and such payments have only grown at an average rate of 2.8 percent per year—less than the rate of inflation. Under current law, the state has no ability to use lottery funds to balance the General Fund.
Opponents of this measure point out that there is no guarantee that the state lottery will see enough profits to pay off these bonds. Furthermore, they argue 1C would allow additional borrowing from lottery for unspecified purposes.
“The estimate that (1C) could bring $5 billion immediately to the state is a very conservative one,” Soderland said. “Analysts believe it could be even double that amount. The reason for this is that many states across the country have taken this type of modernization to their lotteries and have seen significant results. For example in the state of New York, where the population is roughly half that of California…they have seen an increase in the performance of their lottery and it has performed three times the level of California’s. Our lottery currently operates in the dark ages and 1C is about bringing it to the light.”
Proposition 1D seeks to supplement funding for children’s services originating from 1998’s Prop. 10, which created the California Children and Families Program (now known as the First 5 Program) for promoting, supporting and improving health and early development of children during their first five years of age. The program is currently funded by revenues from state excise taxes on cigarettes, roughly 50 cents a pack. With projected decreases in tobacco sales, about three percent annually, according to the Office of the Secretary of State, 1D reportedly will provide $600 million to fund children’s programs such as school readiness, family functioning, and child development, as allocated by local county commissions.
“Every year when we face a deficit, one of the first areas cut in addition to education is health and human services and this budget crisis is no different,” Soderland said. “By allowing for the use of surplus funding that is sitting in an account not being used this year, we’ll be able to minimize the impact that some of those cuts, not only to health services but also to education and other parts of the budget, and the same would apply to 1E.”
Sheri Novic, communications director for the First 5 Association, a non-state-related organization with unofficial ties to the California First 5 Program, said the language used in the proposition is misleading. According to Novic, 1D will redirect $268 million annually from First 5 commissions, roughly 50 percent of their current annual revenue, and gives the legislature complete control over how to spend the redirected funds. In addition, she said if the proposition passes, combined with the decline in tobacco revenues, by 2013 the commissions could be left with as little as 35 percent of their current funding, with little stopping the legislature from proposing another initiative to take the rest. Even further, Novic asserted that while the commissions are currently running a surplus, the programs should not be penalized for investing funds wisely.
Proposition 1E essentially proposes the same for mental health services as 1D does for children’s services. 1E amends the Mental Health Services Act (Prop. 63) of 2004, allowing for funds to be redirected over the next two years to achieve state General Fund savings and balance the budget. Proponents of the measure claim it is a one-time redirection of funds that will save the General Fund up to $234 million a year by 2011. Opponents, however, argue that the proportion of revenues this will provide the state budget is but a small fraction compared to the major role Prop.63 funds play in directly providing mental health services to Californians.
Perhaps the only initiative on the special election ballot enjoying wide support is 1F, which was introduced by State Senator Abel Maldonado (R-Calif.) and included on the ballot by the legislature in exchange for his endorsement of 1A-1E. The proposition is an attempt to encourage a balanced state budget by prohibiting the California Citizens Compensation Commission, the body responsible for adjusting salaries and benefits for members of the legislature and certain other state officials, from adopting any resolution for the increase of these officials’ salaries if the Director of Finance determines there will a deficit in the General Fund at the end of the fiscal year.
Opponents of this measure argue that this is an unnecessary addition to the ballot that feeds off the emotions of an electorate frustrated by the inabilities of the legislature to balance the budget on its own. Opponents contend the measure only provides the illusion of making a difference and that potential state savings are minimal at best.
For a complete listing of organizations in support of the propositions on the ballot, visit the Budget Reform Now website at http://www.cabudgetreformnow.com. While there is no list of all opponents of the entire ballot, information on organizations in opposition to particular propositions are available at http://ballotpedia.org/wiki/index.php/California_2009_ballot_propositions.
Regardless of whether the propositions pass, the state will continue to experience a deficit in 2010, at $15.4 billion if they pass and $22 billion if they fail, according to the governor’s revised budget released last Thursday. San Luis Obispo County is already bracing itself for further cuts of $8 to $10 million to school districts and health services.
The special election is the result of a week-long special legislative session in Sacramento during the week of Feb. 16, a negotiated effort between the governor’s office, the California Democratic legislative majority and a small group of Republican legislators.
Locally, polls will open from 7 a.m. to 5 p.m.