Tuesday, April 28, 2009

May 19th Special Election: Vote NO on Props1A-1F

After weeks of stalemate, and several consecutive all-night sessions, on February 19th the California Legislature reached a two-part budget agreement. It closed the state's $41 billion deficit through a combination of temporary tax increases, painful permanent service cuts, and $5.4 billion in new borrowing. However, to reach accord with a handful of Republican legislators to get the two-thirds majority required to pass the budget, Democrats were forced to agree to six budget-related propositions, including Proposition 1A that mandates a permanent spending cap and creates a "rainy day" fund.

The rainy day fund is a good idea. We should have done it in 1998 or so instead of rolling back the Vehicle License Fee. The legislature has the power to do this without an initiative... if they chose. They cannot choose, it seems.

I want to feel confident that I can vote for these measures and our long decade of budget nightmares will be over. I want to feel that if I vote Yes that our schools will get their money back to hire back all the good people they've laid off. I want to feel that voting yes would put us on the right track again.

But it won't. Prop 1A through 1F collectively is Prop 13 all over again, a weird and ineffective set of measures that will forever limit the legislature and the people even more than today, and will be impossible to repeal. Our schools might be slightly better off next year, but we'll pay for it - with interest - for the next ten.

Proposition 1A - Vote NO

Proposition 1A is a modified version of a spending cap, but no one seems to agree upon what it does. It creates a "rainy day fund" that the legislature must put money into even during a bad budget year, even if doing so means cuts to schools and health care. Any revenue that is above the average of revenues over the last ten years must be put into the rainy day fund and cannot be spent on other programs. Because of that clause it will be extremely difficult to reverse the existing cuts to public services, and will force cuts to be made for many years into the future.

Prop 1A amends the constitution, so its effects would be permanent.

Because of that, every service that our government provides - schools, health care, police, fire, courts - will eventually be cut. Prop 1A never expires, and will be very difficult to remove from the constitution once it is in place.

The California Budget Project argues that Prop 1A sets up a system that guarantees deficits to at least 2013: $16 billion in deficit in 2010-11, $17 billion in 2011-12, and $21 billion in 2012-13, and potentially well beyond that.

Prop 1A is the worst kind of budget "solution" - something designed for short-term gain that creates truly massive long-term problems.

Proposition 1B - Vote NO

Prop 1B is designed to give $9.3 billion to K-12 schools that they are owed this year, but are being denied by Governor Arnold Schwarzenegger and the state Legislature because of the current budget mess.

There are three key things to know about Prop 1B. First, the money does not go to schools until 2011, and only then for several years after that until the $9.3 billion is repaid. This does not provide an increase in the overall amount of money schools will get in the long- term, but may well be useful in the near term.

Second, the $9.3 billion will be repaid by the tax extensions included in Prop 1A. If Prop 1A fails but Prop 1B passes, Prop 1B will be unfunded.

Third, by tying school funding to the success of Prop 1A, Schwarzenegger and the legislative Republicans have cynically and effectively scared off the largest and most effective unions, who would normally have campaigned against the spending cap.

Proposition 1C - Vote NO

Prop 1C allows the state to sells bonds to be repaid with lottery revenues. The state hopes that $5 billion in bonds can be sold, but there has been skepticism from the bond markets about whether this is even possible.

Given the current bad market conditions, the state will likely have to offer high rates of interest to sell the bonds which further mortgages our future and gives us a questionable amount in return. More importantly, the lottery currently does not generate enough money to repay $5 billion in bonds. The lottery made $3 billion in revenue in the last fiscal year - a decline of $600 million from the peak of lottery revenues, which occurred in 2005. If lottery sales do not increase, then the money to repay the bonds has to come from the general fund -- meaning the state would have to cut funding from other programs in order to pay the Wall Street bondholders.

Worse, lottery tickets are most frequently bought by low-income Californians, meaning that Prop 1C is an indirect and regressive method of balancing the budget on the backs of the poor.

Proposition 1D - Vote NO

In 1998 California voters approved Proposition 10, taxing tobacco sales to pay for educational and health care programs for children under age 5 whose families are otherwise unable to afford those services. The program has been a dramatic success, and is especially valuable during these recessionary times.

In fact, the First Five program has been able to build up a budget surplus, which it is using as a reserve - one might even call it a "rainy day fund" - to protect against potential future problems.

Unfortunately for California's children, the success of First Five has now made it a target. Republicans proposed, and Democrats agreed, to put Prop 1D on the ballot to redirect $1.7 billion from First Five to the general fund over the next five years. This was done (along with Prop 1E) in order to fund nearly $600 million in corporate tax cuts that were part of the budget deal.

Further, Prop 1D would narrow the range of services provided by First Five, and as would likely result in cuts in programs and services. It would literally rob Peter's children to pay for Paul's expense account.

Proposition 1E - Vote NO

In 2004 voters approved Proposition 63, levying a 1% surcharge on incomes over $1 million to finally reverse decades of deliberate underfunding of mental health services. Like the First Five program, the mental health programs funded by Prop 63 have surplus funds.

Prop 1E would redirect $500 million over the next two years away from the Prop 63 programs to the general fund. This is not a large amount of money - about 0.8% of the overall state budget - and does not seem worth the risk to mental health programs.

Proposition 1F - Vote NO

Prop 1F would deny legislators a pay raise during years with a budget deficit. It would save barely any money for the state. This proposition is popular because it plays into the mantra of "punish anyone in Sacramento."

The only reason this is on the ballot is because Republican Senator Abel Maldonado demanded it in exchange for his vote for the February budget deal - so Maldonado could look good to his base by claiming to have made legislators pay for the budget deficit. On that basis alone the proposition should be rejected - California voters should not even have to vote on a proposition that is on the ballot solely as a result of one man's blackmail.

* many thanks to the Courage campaign for summarizing most of the information used here. To learn more, go to the Courage Campaign website.

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