May 1, 2009


California Special Election Recommendations

The State of California finds itself in a fiscal quagmire and has had neither the political will nor the means to effectively deal with the $40 billion dollar debt that this state is facing. State legislators at first delayed passage of the budget for the 2009-10 fiscal year, reaching a record number of days beyond the constitutional deadline for passage. Then, to add insult to injury, the legislature passed a weak budget that did little to resolve the mess.

Shortly thereafter, Governor Arnold Schwarzenegger called a special session to address the State’s fiscal deficit. In the meantime, state legislators did not have the will power to share the pain of the recession. They failed to close tax loop-holes for the rich, allowing such issues as the yacht tax loop to stay in place, the tax loop-hole for oil companies who drill for oil, and corporate tax loop-holes. They decided that the only legislation they wanted to pass were increases in the State Sales Tax, Personal Income Taxes, and an increase of the Vehicle License Fee, along with a special election.

The tax increases are only temporary, two years, and do not come close to closing the debt facing the State. To get the budget passed, the state legislatures called for a special election to further address the $40 billion dollar debt. Six of the ballot measures look to extend the taxes, rewrite several previously passed measures, and funnel more money into the general fund between them.

If the intent of these five bills was to overwhelm, confuse, and confound the voters then they have succeed with these bills. Many of the explanations and rationale that we have read either in support or in opposition are lengthy and often times difficult to read.

This week we will take a look at Proposition 1A, 1B, and 1C, all three have one thing in common: they all deal with education in one form or another:

Proposition 1A. State Budget. Changes California Budget Process. Limits State Spending. Increases “Rainy Day” Budget Stabilization Fund (Legislative Constitutional Amendment - Majority Approval Required)

In effect, Prop. 1A will extend The Sales and Use Tax increase of 1 cent for one year, from fiscal 2010-11 through fiscal 2011-12. The Vehicle License Fee tax increase would be extended for two years, from fiscal 2010-11 through fiscal 2012-13. The Personal Income Tax-related tax increases would be extended for two more years, from fiscal 2009-10 through the fiscal 2011-12 tax year.

The proposition would also increase the amount of state reserves to 12.5 percent of state revenues (currently about $12 billion) from the existing 5 percent of revenues with restrictions on transfers to the general fund. This is the “Rainy Day” portion of the bill to force savings in the good times to help smooth out the rough patches during the lean years. And if Prop. B passes, would increase the amount of money spent on Education.

The problem with this proposition is that according to the State Legislative Analysts, they don’t know what the effects of Prop. 1A will be from year to year. Further, the income from these extra taxes won’t do anything for this year’s budget. In fact, it will be a couple of years before Prop. 1A will have any impact. Lastly in order to fund the reserve and provide the money for education, Prop. 1A will cap and limit monies for other vital services.

Instead of looking for the easy way out by adding more taxes onto the working man, our State Legislatures need to go back to work and close obvious corporate and rich tax loop-holes. They need to cut wasteful spending, and stop continuing to doing business as usual.

A No Vote is Recommend on Prop. 1A.

Proposition 1B. Education Funding. Payment Plan

Requires supplemental payments to local school districts and community colleges to address recent budget cuts.

The State of California owes K-12 education and community colleges about $9.3 billion dollars. These are the monies guaranteed under previously passed Prop. 98. Governor Schwarzenegger suspended Prop. 98 and used the money instead to balance the budget.

Prop 1B is dependent on Prop. 1A, and Prop. 1A is reliant on 1B. That creates a web of mistrust. You are either for both or against both. What better way to get a tax passed than to promise money for education? Who can be against that? Well, all of the other viable and humanitarian services that meet the needs of the poor and underserved such as mental health and health care should also be considered. These props have pitted unions against unions (primarily the teachers union).

There is nothing wrong with the State’s education funding. The problem is that the Governor keeps using education money to balance a budget that the State Legislators don’t want to deal with. They should close tax loop-holes and cut out excess spending which robs the state of billions of dollars of income. Fix Prop. 98 and take away the Governor’s ability to suspend education payments to the school districts and there won’t be a need for Prop. 1B.

We Recommend a No Vote on Prop. 1B

Proposition 1C. Lottery Modernization Act (Legislative Constitutional Amendment and Statute - Majority Approval Required)

Allows the state lottery to be modernized to improve its performance with increased payouts, improved marketing, and effective management. Requires the state to maintain ownership of the lottery and authorizes additional accountability measures. Protects funding levels for schools currently provided by lottery revenues. Increased lottery revenues will be used to address current budget deficit and reduce the need for additional tax increases and cuts to state programs.

Prop. 1C is about using profits from the lottery to funnel money into the State’s general fund. How will they do this? By borrowing money from the lottery based on future earnings and by suspending the portion of the lottery that was the selling point of the lottery in the first place: funding education from the profits. The money that would have been used to fund education will be used to pay back the loans if Prop. 1C passes.

To increase lottery profit, Prop. 1C would modernize the lottery and increase the payout to winners.

The problem with this proposition is that as a state we are becoming more and more dependent on the vices of gambling to solve our problems, not only the lottery but the casino businesses. The lottery is sustained by the poor of our community! They spend a disproportionate amount of their money on lotto tickets with the hope that this may put them on easy street. In essence we are asking the poor, those who can least afford it, to balance our state budget!

Instead of asking our low income people to save the state let us go back to the table and, once again, fix the tax loop-holes for the rich and for corporations to bring everybody on board in paying their fair share in order to have a sustainable government.

We Recommend a No Vote on Prop. 1C

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