There are five fiscal measures on the May 19 ballot. I’ve received a fair number of questions about my positions on them.
Here is how I am planning to vote:
1A – YES: This creates a real rainy day fund, and constrains the growth of state spending. Any increases above inflation and population growth have to go into the rainy day fund, until it totals 12.5% of the state budget. A minimum of 3% of the state’s revenues has to go into the fund until the 12.5% is met, once the growth in population and inflation from the previous year has been covered. This is almost as good as Prop. 76, the legislative version of which I authored, that cut spending across-the-board when revenue fell. The public employee unions defeated Prop. 76, but the Governor negotiated with them to hold off criticizing 1A; so this has a real chance of passage.
The negative: when the Legislature passed the temporary increases in sales and income taxes, they said if real budget reform were adopted by referendum or initiative, the increases would last until 2012, instead of 2010. So, it’s a trade-off: short-term pain for long-term reform. I’d take the long-term reform, particularly mindful of the fact that Prop. 76 was defeated. This is our best hope for getting structural budget reform.
One other point: a rainy-day fund is meaningless if it has no money in it. The continuation of the tax increases funds the rainy-day fund; otherwise, it will accumulate much more slowly. Remember, anything above the previous year’s expenditures, adjusted for inflation and population, goes into the rainy day fund; so that includes the money from the continued two years of tax increases.
1B – NO: This allows the schools to get the first 9 billion in the rainy-day fund, essentially putting them above all the other programs of the state that had to be cut in the present recession. No one wants to see fewer resources for schools, but more money does not guarantee better performance either. The key to my recommending NO is that in a tough economic environment, all state spending should be on the block. Indeed, in Prop. 76, of which I was the chair, automatic across-the-board cuts went into effect when revenue dropped by as little as 1% in any given quarter. We’re all in this together, schools too.
1C – NO: This borrows $5 billion against future lottery proceeds. It’s essentially the sale of a one-time asset, being used to fund an on-going structural deficit. Further, it’s premised on the hope that Wall Street will buy bonds backed by improved lottery revenues. In all likelihood, that means the state will run even more advertisements in favor of buying lottery tickets, in low-income neighborhoods. Admittedly, a lottery is a voluntary purchase not a tax; but I have serious reservations about the state pushing the lottery, since those who buy tickets are overwhelmingly poor and less educated. Note that I recognize if this is defeated, there is another 5 billion dollars to be made up in the state budget. Those negotiations will commence immediately.
1D – YES: This sends about a quarter billion dollars from the tobacco tax to the general fund. We need the money now in the general fund; it will revert to school programs when our fiscal crisis is past.
1E – YES: This sends about a third of a billion dollars from the millionaires’ income tax surtax to the general fund. Presently, it’s used for mental health programs. Like the tobacco tax, it will revert once the state’s crisis is past.