August 29, 2003

Editorial:

Proposition 53 the Forgotten Initiative on the October 7th Ballot

Amidst the hoopla over the recall, Cruz Bustamante vs. Arnold Schwarzenegger, et al, and to a lesser extent Proposition 54, the Racial Privacy Initiative, squeezed in-between is Proposition 53 that has been virtually ignored.

What is Proposition 53?

Proposition 53: California Twenty-First Century Infrastructure Investment Fund is a California Constitution amendment that would require specified percentages of the General Fund revenues to be committed to pay-as-you-go infrastructure projects for state and local governments. In California the major areas of infrastructure include highways, universities, parks, office buildings, water resources, and prisons. In addition, the state provides funds for local infrastructure in the areas of K-12 schools, community colleges, local streets and roads, local parks, wastewater treatment, flood control, and jails.

Prop. 53 would transfer an increasing share of General Fund revenues each year to a Twenty-First Century Infrastructure Investment Fund (IIF), created by this measure. The transfers would begin in 2006-07, or the first year thereafter in which revenues increase by at least 4 percent over the prior year, after adjusting for inflation.

Proposition 53 outlines a specific schedule for transfers from the General Fund to the IIF. The transfers would initially equal one percent of General Fund revenues as estimated by the Department of Finance, gradually increasing (by 0.3 percent per year) to 3 percent in 2013-14 and thereafter. Half of the IIF would be earmarked for state infrastructure projects and half for local projects. The local share cannot be spent on schools or community colleges.

The fiscal effect is difficult to determine. The Legislative Analyst’s estimate for 2006-07 is $850 million, increasing to several billion dollars when transfers reach the 3 percent maximum rate.

Let us make no mistake about it, infrastructure is a great need in the state, this is demonstrated every time a water main breaks, beaches are closed to sewer overflows, and daily we have to fight the gridlock on our freeways. But Proposition 53 is the wrong way to go about fixing these problems.

Prop. 53 is badly designed and worded, rift with problems, and ambiguous enough to open it up for misuse, abuse, and politicians’ favorite, pork barrel politics.

This proposition sets up a rather substantial fund that has very few controls and places the spending decisions in the hands of the Legislature with no language as to requirements or oversight as to how they spend these monies, thus creating another pig-trough for the politicians to use as they see fit and/or for political payback. And while 50% percent of the monies collected go to local governments there is no language in the proposition that requires either a plan for local infrastructure needs or coordination of planning for local and state infrastructure needs. On top of this the funds can be loaned back to the general fund to shore up the budget, but there is no language as to paying back these so called loans, again an open check for abuse.

For contractors and construction companies, major supporters of this proposition; they view this fund as permanent job security. The major sticking pointing in this regard is that minority contractors are excluded from the benefit. Least we forget that Prop. 187 did away with affirmative action and closer to home, as an example, the General Contractors had the City’s affirmative action overturned and contracts to minorities dramatically dropped off to next to nothing.

While Prop. 53 talks about trigger clauses to limit the impact on the state’s budget during difficult times there is no language that suspends the transfer of funds during particularly bad economic times. For example if Prop. 53 had been in effect during the 90s, when the state was facing and is still facing particularly bad times the transfer of funds would have still occurred. According to the California Budget Project in 1991-92 and 1995-96, for example, the state faced an estimated $14.3 billion gap between spending and revenues in May. Yet, a Proposition 53 transfer of $285 million would still have been required.

While this fund transfer draws down on the General Fund there is no mechanism that will provide new funds to be raised to replace the depletion of the General Fund. Again, this means that in times of economic hard times with this proposition and all the other initiatives prioritized (seven initiatives were passed last year, alone) as a constitutional initiative is taking funds from a State that has less than 30% of budget in discretionary spending, meaning that other programs will have to be cut to balance the budget, programs such as education, health care and public safety.

While the primary methods of financing for infrastructure, Pay-As-You Go, General Obligation Bonds, Lease Payment Bonds, and Federal Funds, may not be the best form of financing or planning for the future, they are a better alternative to Prop. 53.

To finance and plan for the future for infrastructure it takes the politicians to make a commitment and to prioritize these as needs. In San Diego sewer problems and broken water mains are not something new and are issues that have been on the table for years, yet our politicians and the communities have not made rebuilding, retrofitting, future growth a priority. Instead we have made projects such as building a baseball field or a football stadium our main goals while the infrastructure suffers. And least we forget we have already passed another initiative that dedicates monies taken from the sale of gasoline to pay for road construction.

Proposition 53 is a badly written piece of legislation that needs to be sent back for a major overhaul. Vote No on Proposition 53 October 7th.

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