California is having a special election next week on a set of budget-related propositions. Turnout is expected to be low, but I will (of course) be voting.
I’m voting yes on 1A, 1D, and 1E; and no on 1B, 1C, and 1F.
The underlying premise behind Proposition 1A is that California’s recurrent budget problems are, in part, caused by the Legislature’s tendency to react to short-term, temporary upsurges in revenue by committing the revenue to long-term continuous spending, which then must be cut when revenue inevitably falters. In order to solve that problem, it proposes diverting “unexpected revnue” – which is to say, revenue that is (a) not the result of a newly imposed tax and (b) above the amount predicted by a ten-year trendline – into a rainy day fund and, once that has filled up, using it to either pay down debt or pay for short-term infrastructure projects that don’t constitute long-term commitments. In addition, it suggests enlarging the rainy day fund and making it harder to divert money out of it.
All of these are eminently reasonable ideas. They’re all eminently reasonable ideas even if you don’t believe in the underlying premise; if the underlying premise is wrong, this is harmless at best, and saving more money for a rainy day seems like a wise move.
Yet, amazingly, conservatives and liberals have banded together to oppose it. Liberals are opposing it because they think it will result in severe cuts to existing programs. If you listen to their rhetoric, they’ve become convinced that the measure embodies a draconian spending cap … but it actually does no such thing; as far as I can tell, the activists are just deluded.
Conservatives seem to be opposing it because the legislature passed a measure which would extend certain taxes for several years if proposition 1A passes. This measure is nothing more than a tax increase in disguise, the reasoning goes, so it should be voted down. But … the tax increases aren’t actually in the measure. And even if they were: they’re a short-term continuation of taxes already enacted … in exchange for a long-term change in the way the state does business which conservatives have been agitating for for years. It doesn’t go as far as conservatives would like (it doesn’t apply to newly enacted taxes, and it doesn’t enact a spending cap), but surely half a loaf is better than none; as far as I can tell, conservative activist opposition to this measure is firmly in “cut off your nose to spite your face” territory.
Proposition 1A isn’t a cure-all; but it’s a rare good idea and deserves our support.
The underlying premise behind Proposition 1B is that an ambiguous provision of Proposition 98 was obviously intended to guarantee money to the schools.
Proposition 98 set up three ways to calculate the amount of money the public schools are required to get. One of them – heretofore only used in the first year after adoption – is a flat percentage of the state budget. The one normally used is the base year’s school funding adjusted for inflation and population growth. The ‘normal exception’, used when revenue is less than expected, is the base year’s funding adjusted for revenue growth and population growth … and the provision allowing that requires that the difference between the two be considered, in effect, a loan from the schools, payable in some future year.
Proposition 98 was silent on whether, in years when the flat percentage is used, the difference between the flat percentage and the normal amount is to be considered a loan from the schools (there’s a lawsuit pending which might answer the question in a year or five). I don’t understand the rules for determining which amount is required to go to the schools in any year; but I know that the flat percentage is the amount required for both 2008-2009 and 2009-2010.
Proposition 1B simply declares that the difference between the amount the schools received in those fiscal years and the amount they would have received under the normal calculations is owed to the schools, and sets up a mechanism for repaying the money using the enlarged rainy day fund established by Proposition 1A. It does not answer the question about whether the schools are owed money if the flat percentage method of calculating school funding is used in the future, and it does <em>not</em> provide a mechanism for paying the owed money if Proposition 1A fails.
This is badly written law. It’s badly written because it can theoretically create a debt that cannot be repaid (if Proposition 1A fails); it’s badly written, also, because it answers a serious legal question just for this instance of the problem without even seeking to resolve the problem in general.
As badly written law, it deserves to be defeated.
The underlying premise behind proposition 1C is that it would be a great thing if we could securitize the lottery revenue stream, and sell it off for some large chunk of money which we could spend this year. I think this is crazy; it’s effectively borrowing against future revenue, spending it on ongoing recurring expenses today. Once the influx of money we expect to come today is spent, how do we pay for those recurring expenses? Worse, since the measure is set up to have a neutral effect on the current recipients of lottery revenue, it increases long-term expenditures out of the general fund without providing any long-term revenue source to pay for them.
It might be reasonable if we were borrowing against future revenue to pay for recovery from a natural disaster, or to invest in something which would increase revenue in the future. But we’re not. This is exactly the kind of borrowing which a wise steward of the public funds does not do.
The problem, of course, is that the legislature is not a wise steward of the public funds, and the 2009-2010 budget assumes that this will pass and depends on it to generate $5 billion which can be spent in that fiscal year. If this fails, the budget deficit automatically increases. Still … that’s not enough of a reason to vote for this bad idea; borrowing to pay for continuing expenses is almost always a dumb move.
Propositions 1D and 1E
The underlying premise behind propositions 1D and 1E is that special tax revenue should be confiscated and directed towards similar programs paid for out of the general fund.
California voters have adopted a plethora of special taxes, the revenue from which goes to programs specified in the initiatives which created the taxes and is excluded from the general fund. Some of these special funds have surpluses of unspent money. Some of them are funding programs which are similar to, but not quite the same as, programs which are paid for out of the general fund. Proposition 1D deals with a tobacco tax that pays for health care programs for children under the age of 5; it confiscates the surplus in the special fund and redirects roughly 1/3 of the tax revenue towards other health care programs for children under the age of 5 which are funded out of the general fund, thereby freeing up general fund revenue to do other things. Proposition 1E deals with a tax on incomes greater than $1 million that pays for mental health programs; it confiscates roughly 1/3 of that tax and directs it towards a different set of mental health programs which are paid for out of the general fund, thereby freeing money from the general fund to go towards other things.
I have a bias here: I think that special taxes are almost always a bad idea; they constrain the legislature and make it impossible for the legislature to make policy choices about what the state should pay for … and thereby make the process of producing a budget much more difficult than it ought to be. So I’m greatly in favor of <em>anything</em> which redirects special tax money into the general fund.
That said, I can understand why people would vote against these if (a) they think the particular programs protected by them are really, really important or (b) they have a philosophical objection to passing a special tax and then converting it to a general tax (as an end-run around the voters); my husband is in the latter category.
The underlying premise behind Proposition 1F is that the legislature are a bunch of venial jerks whose incompetence is the primary cause of the budget crisis. Since their failure caused the problem, and self-interest might cause them to perform better, we should prohibit them from getting pay raises whenever there is a deficit.
This seems silly to me. *I* think the underlying cause of the state’s budget problems is that the voters want both lower taxes and higher services (something which is borne out by poll after poll that show that the majority of voters want the budget problem solved without tax increases *and* object to any specific cuts that anyone proposes); the legislature is simply representing its constituents. The problem is aggravated by the state’s direct democracy system, which encourages the voters to write into the state constitution things which, aggregated together, make the system unworkable. Punishing the legislators might make the voters feel good, but it doesn’t solve the problem; it’s an angry gesture that, at the end of the day, doesn’t help at all.