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| The state ballot measures-- diamonds in the rough? |
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| Political - California |
| BY |
| Tuesday, 31 March 2009 16:00 |
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Last week, I criticized our elected officials in Washington for their inexcusable failure to closely read the legislation they voted on.
This week, I examine several of the budget-related ballot measures that California voters will consider between now and the May special election. In spite of the inability (or unwillingness) of folks we send to office to carefully read legislation--or perhaps because of that failure--we the people must vigilantly scrutinize the initiatives put before us.
(This, by the way, is no easy task. It took me nearly 30 minutes of web searching to find the actual text of the measures; there are not the many summaries floating around. The full texts are on the Secretary of State's website, here.)
Unfortunately, the current menu offers relatively unappetizing fare.
But, of course, in Sacramento there's no such thing as a free lunch. The rainy-day fund would be purchased at a cost of $16 billion in new taxes over two years. Prop. 1A would raise income and sales taxes and the vehicle license fee.
Another major problem lies in the definition--or lack thereof--of "unanticipated revenues", i.e. the only monies that can be diverted to the rainy-day fund. The measure defines "unanticipated" funds as:
(A) Estimated General Fund revenues for the current fiscal year reported pursuant to paragraph (1) of subdivision (a) minus the revenue forecast amount for the current fiscal year.
(B) Estimated General Fund revenues, transfers, and balances available from the prior fiscal year for the current fiscal year reported pursuant to paragraph (1) of subdivision (a) minus the expenditure forecast amount for the current fiscal year determined pursuant to subparagraph (A) of paragraph (2) of subdivision (f) of Section 20.
Make sense? I didn't think so. The non-partisan Legislative Analyst's Office (LAO) translates this pile of Sacramento-speak thusly: Unanticipated revenues are "those that exceed the amount expected based on the revenues received by the state over the past 10 years." However, this "10-year trend would be adjusted to exclude the impact of shorter-term tax changes." And, in some cases, "unanticipated revenues could be defined as any revenues above the amount needed to pay for spending equal to the prior year's level of spending, grown for changes in population and inflation."
So in reality, what's "unanticipated" could mean any number of things, depending on the situation. Or, put differently, the state could essentially apply whatever definition it wishes and keep whatever money it wants. We should applaud the concept behind Prop. 1A, that is; capping spending based on long-term revenue growth, but not their implementation.
Prop. 1B, sadly, isn't much better. It would tap some of the Prop. 1A money to replenish funds taken from the state's education budget. However, as the LAO notes, the measure's "fiscal impact would depend on how current constitutional provisions would otherwise be interpreted."
Do you want to guess whether the folks in Sacramento will interpret these provisions to protect middle-class taxpayers? One clue arrived in this space on Monday, when Assemblywoman Lori Saldaña (D-San Diego)acknowledging that even with the ballot measures, the state may still be up to $8 billion in the red-wrote that "this formula [of tax hikes and spending cuts] may change pending the state's tax receipts."
Then there's Prop. 1C, the creative accounting idea of borrowing against future lottery revenues. Actually, the measure itself authorizes the legislature to "Obtain moneys for the purposes of the California State Lottery through the sale of future revenues of the California State Lottery." It may seem difficult to fathom "selling" future revenues, but our legislators seem to think it's possible.
Either way, I'm with gubernatorial candidate and former eBay CEO Meg Whitman on this one: "In business, borrowing against future revenues, in essence borrowing against what you may make someday, is considered reckless. The same is true in government."
Fortunately, recent polling finds the measures trailing for the most part. Prop. 1A has earned the support of only 39% of voters while 46% oppose it; Prop. 1C: 37% for, 50% against; and Prop. 1B is running about 50-50.
Props 1D, 1E, and 1F, however, are genuinely good ideas. 1D and 1E would channel money from special funds for children's service and mental health programs, respectively. Both programs are currently running a surplus, and the measures would be used "for loans to the local general fund" to be "repaid from the general fund with interest." They will ease our budgetary burden at little cost.
Prop. 1F is especially worthy, as it would bar legislators and statewide elected officials from receiving pay raises when the state runs a deficit. Specifically, the measure dictates that "a resolution shall not be adopted...that increases the annual salary of any state officer if...there will be a negative balance" in the rainy-day fund.
What better way to keep our representatives honest than to deny them a raise when they fail to keep our books in balance?
There is one additional silver lining in this dark cloud: A business-friendly agreement that Assembly Minority Leader Mike Villines (R-Fresno) wrung out of the Democrats during the budget kerfuffle.
Until February, California, like most states, based corporate tax rates on the percentage of a company's sales, payroll and property within the state. So, if a successful business began growing and adding jobs, it would have to pay out more to Sacramento.
As my own assemblyman, Nathan Fletcher (R-San Diego), told the San Jose Mercury News, "[a]s it is now, if you're a business that moves employees out of state, your taxes here go down. It's illogical."
But Villines and other Republican legislators like Fletcher persuaded their colleagues to levy taxes on in-state sales only, such that hiring new employees won't cost the company more money. Supporters estimate the provision, which will take effect in 2011, will save California companies nearly a billion dollars a year and will help forestall further layoffs.
So, not everything coming out of Sacramento is a big-government, job-killing nightmare. But come May, we'll need to look carefully to distinguish the wheat from the chaff.
Michael M. Rosen is an attorney in Carmel Valley and the secretary of the Republican Party of San Diego County. The views expressed are his own. Reach him at
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