Earlier this week, I made the case that Proposition 1A would achieve what no predecessor spending limit had: a sustainable, enforceable spending limit and mandatory rainy-day reserve that actually work. But wait … there’s more.
Approval of Proposition 1A would also trigger new powers for the Governor to reduce state spending without legislative sanction. This would be the first time a Governor could wield this common sense management prerogative since Governor Deukmejian was forced into surrendering similar powers in 1983.
The authority is limited, but significant. If the director of the Department of Finance determines that revenues will dip "substantially" below – or spending will rise substantially above – budget estimates, then he or she may:
- Reduce General Fund appropriations for state operations or capital outlay by up to seven percent. Excluded are appropriations for the Legislature and constitutional officers, transportation, debt service, emergencies, collective bargaining agreements and local assistance.
- Suspend for up to four months certain cost-of-living adjustments and rate increases identified in the annual budget. Excluded from this authority are schools and state collective bargaining agreements.
This new authority is more LIBERAL than fiscal conservatives may like; but is likely anathema to the traditional spending lobby that prefers legislative veto over any attempt to slow the state’s spending trajectory. Proposition 1A presents another chance to add to a Governor’s management toolbox – in this case, a brand, new chopping block.
One of the commenters on the earlier piece stated that Proposition 1A has a "loophole that renders it ineffective," that being a limit based on revenues that would "allow the State Legislature to merely raise taxes to raise the spending cap." My basic argument is that while a hard cap may be theoretically preferable since it is a back-door prohibition on tax increases, it has proven ineffective (in the case of the Gann Limit, which was repealed) or unachievable (see the history since the Gann Limit). And with a two-thirds vote requirement remaining in place, the State Legislature will never be able to "merely" increase taxes.
Also, Bill Leonard commented that the Gann Limit was successful for a decade, and was "undone by the Legislature, the Governor, and the voters." He says that if Prop 1A works too well, it will meet the same fate. But the drafters of Prop 1A have learned from history: they are presenting to voters a limit that can pass and that can work, but also one that can resist a campaign to repeal it. Remember, the Gann Limit’s tax rebate was gutted by Proposition 98 – which nobody was motivated to oppose – and then was finished off by Proposition 111, which transportation advocates and educators were motivated to support. On the contrary, since Proposition 1A will work in tandem with the two-thirds vote requirement for legislative tax increases to hold down spending, it will always have a built-in constituency to defend it.