WRS Survey: Fox and Hounds Daily Readers Oppose Tax Hikes, Support Spending Cap

Chief Executive Officer of Wilson Research Strategies

On behalf of Fox and Hounds Daily, Wilson Research Strategies conducted an online poll of Fox and Hounds subscribers.

The bottom line of the poll is that Fox and Hounds subscribers don’t like the budget compromise.  Seven-in-ten (70%) subscribers oppose the compromise and a majority said they strongly oppose it.  From the responses, it is clear that Fox and Hounds subscribers wanted to see the line held on tax increases and see the fact that the final budget includes substantial tax hikes as a major drawback.  Two-thirds or more of subscribers oppose the sales tax (67% oppose), income tax (80% oppose), and car tax (75% oppose) hikes included in the final budget.

A number of Fox and Hounds subscribers are so angry about the tax increases that they think Republicans who voted for the increases should be punished (42% say so) or even recalled (33%).  These aren’t majority sentiments but they do show how upset some subscribers are about the tax hikes.

While subscribers dislike the budget because of its tax component, they do like the fact that it imposes some much-needed spending discipline.  Two-thirds (67%) of subscribers support the spending cap included in the budget compromise.  

We also asked subscribers about the budget procedure itself.  Despite the difficulty encountered in passing this budget, subscribers do not want any major changes to the process.  More than four-in-five subscribers want to keep the two-thirds requirements for passing a budget (82%) and for raising taxes (88%).

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The Trouble with Ballot Titles and Summaries

Joe Mathews
Connecting California Columnist and Editor, Zócalo Public Square, Fellow at the Center for Social Cohesion at Arizona State University and co-author of California Crackup: How Reform Broke the Golden State and How We Can Fix It (UC Press, 2010)

It’s bad enough that California law permits the attorney general — an elected, partisan official — to write the official titles and summaries for ballot initiatives that qualify from the ballot. Most of the time, at least, the a.g. is independent of the initiative sponsor. But when it comes to measures that are placed on the ballot by the legislature itself, lawmakers themselves get to write the official summaries. And they don’t have a good record of being honest with the public.

The latest example is Prop 1A, the spending limit measure that was part of last week’s budget deal and will appear on the May 19 special election ballot. The legislature’s official description of the measure omits the very important fact that if the measure passes, temporary tax increases in the budget deal will last longer.
California needs an independent title board that would draft titles and summaries for ballot initiatives and legislative measures — anything that goes to the people. Such a board should be balanced between Democrats and Republicans and independents. The board’s only mission would be to give voters an accurate description of the measure. An honest board likely would reduce the number of court challenges to titles and summaries under the current, politicized process.

California wouldn’t be the first state with a title board. Colorado has a Ballot Title Setting Board with three members: the secretary of state, the attorney general, and director of the legislature’s legal services office. That’s not ideal-I’d rather the board was made up of non-politicians. But even Colorado’s board is an improvement on California’s current set-up, which gives the attorney general virtually unchecked power over initiative titles and summaries – and the legislature too much power over legislative measures.

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Return of the Chopping Block

Loren Kaye
President of the California Foundation for Commerce and Education

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.

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More Solar Companies Producing Elsewhere to Sell to California

Jack Stewart
Board Member, National Alliance for Environmental Reform and former President of the California Manufacturers and Technology Association

It looks like Tennessee just attracted a $1 billion solar manufacturing facility and 500 accompanying jobs from a German solar firm, Wacker Chemie, and an Associated Press story hints that the volunteer state put up a $50 million incentive package to recruit the high wage company.  

This news adds to a previously announced $1.2 billion investment from another solar firm, Hemlock Semiconductor, looking to produce solar products in Clarksville, Tennessee.  Why is it that little old unsophisticated Tennessee can attract $2.2 billion in solar power investments and the home of solar and other green power mandates can sit and watch its unemployment numbers skyrocket to the country’s third worst rate – 10.1 percent – and leave behind an economy-altering number of manufacturing jobs?  

Didn’t Gov. Arnold Schwarzenegger and then-Assembly Speaker Nunez promise that California’s global warming mandate would create tens of thousands of new green jobs in the Golden State?

And didn’t the California Air Resources Board in its economic analysis of AB 32 say "implementing the recommended measures will have an overall positive impact on economic growth in California"?  

Peer reviews shot many holes in the analysis and disputed AB 32’s "riskless free-lunch" and now we’ve seen states such as Tennessee, Oregon and Nevada begin to attract these very high wage manufacturing jobs and create hundreds of green careers for their working families.??

Could one of the main answers be that business costs are so high in California that we will never see significant green investments; that workers in other states will be the chief beneficiaries of California’s environmental mandates and that California’s brightest and best are fleeing to states that put a high priority on economic growth.  The latest cost of doing business survey by the Milken Institute finds that operating costs for California manufacturers are 38 percent higher than for their competitors in Tennessee.  Is it any wonder that investments in industries that create high wage jobs routinely bypass California? ??

Just look at California’s record of job destruction over the past eight years.  Since January 2001, California has eliminated 730,000 private sector jobs with an average salary of $69,000.  During that same period, California created 763,000 new private sector jobs that average only $43,200 per year.   

It’s time to wake up and take a whiff of the smelling salts.  This isn’t working.  While we may want to gloss over theses disadvantages, bury our heads in the sand and believe that new business will come to California because of our sunny skies, beautiful scenery and a green commitment, the fact is that unless the Governor and Legislature deem improving the business climate to be as important as fixing the state budget and reducing greenhouse gas emissions, they should stop fantasizing about California leading the nation in new technology jobs and send Tennessee Governor Bredesen our congratulations and best wishes.

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Short Term Pain Versus Long Term Gain

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

Proposition 1A on the May 19 special election ballot will create a spending limit and a rainy day fund to even out the ups and downs of the budget and restrain spending. But, it is important to note, if the measure passes, the temporary tax increases approved by the legislature and signed by the governor will remain in effect for four years instead of two years.

A difficult choice is presented to the electorate. Is establishing a long term spending limit worth accepting the temporary taxes for an additional two years? I believe the answer is yes.

I do not reach this conclusion casually. The decision is the product of both analysis and history.

First, the history.

I was co-chairman of the reform campaign on the 2005 special election ballot. We worked hard to both establish a spending limit and curb the influence of public employee unions by giving more power to the rank and file members of the unions. While the defeat of these measures was frustrating, one particular disappointment was that expected allies criticized the spending limit, feeling it was not good enough. To use a cliché, they allowed the perfect to be the enemy of the good and gave the measure little support. So, in the end, we got no spending limit, spending increased and we continued to hear criticism about out-of-control spending.

Because we were unsuccessful in changing business-as-usual in Sacramento, the spending lobby pushed the state to the brink of insolvency. To deal with the fiscal crisis, tax increases were included in the budget package along with another chance to establish a spending limit.

To determine if this spending limit works over the long term for the taxpayers we have to look backward since we do not know what the future holds.

The spending limit takes away the surges in good years and puts money aside for rainy days. For example, the 1998-99 general fund spending budget was $57.8 billion. In 1999-2000 it increased to $66.5 billion, a 15% increase. If this spending limit were in place $5 billion would have been set aside in ’98-’99 (and another $13 billion the next year) for the rainy day reserve fund, rebates, bond repayments or other one-time uses instead of being spent on on-going appropriations.

Under the limit, when revenue falls off, a hard cap comes into play for that budget year. If the state can’t meet the current service level in the budget it can take from the reserve only enough to cover the current service level plus population and CPI growth.

California is in the bottom of the recession, which is a good time to put a limit in place. We will undoubtedly have high growth years in the future, but setting a cap that includes the recession year means that we will have a tighter limit in place in high growth years. The cap will even be tighter if the taxes increased in the budget deal do not bring in all the revenue projected, which I believe will be the case.

If this spending limit were in place over the last ten years we would now have a $9 billion reserve and would have had $33.4 billion in excess revenue above the reserve over the ten year period, which could be used for tax rebates or bond payment or other one time payments. Reducing the state’s debt will bring further advantages such as a better credit rating for the state and more money in the general fund to spend on government services negating a need to raise taxes.

This year’s deficit of $39.1 billion would have been $14.4 billion instead if this limit plan were in place. With a reserve of $9 billion to apply to that deficit, the shortfall would have been $5.4 billion, which unlikely would have led to tax increases.

Speaking of tax increases; it is true that the limit can be lifted to accommodate any tax increase that passes. But the historical truth is that major tax increases have occurred at times of budget distress. Such times will be less likely if this spending cap is in place. The rainy day fund will offset deficits meaning there will be much less pressure for tax increases.

Across the board tax increases have occurred rarely. The last one was 17 years ago. If a spending limit is in place it will work to the benefit of the taxpayers over the many years between tax increases, and as stated above, will likely prevent the need for tax increases.

While continuing the tax increases for an extra two years is a troubling proposition, at least these taxes established during the fiscal crisis are temporary. I took a similar position on temporary taxes during a previous budget crisis. In a 1991 Los Angeles Times opinion piece, I wrote: "When the budget emergency ends, any tax increase passed to deal with the problem must also expire."

The general fund budget would have been $95 billion in 2007-08 under this limit instead of $103.3 billion.  When the first budget affected by the spending limit is written in 2011-12, the revenue trend line used as a cap likely will be about 3%. Compare that to the yearly spending increase from the decade of 1997-98 to 2007-08 of 6.9%.

When taxes are reduced, that action will boost the economy and eventually bring in more revenue. It will be wise to have a spending limit in place when that occurs.

If Prop 1A is defeated there is no spending control in place and the new taxes we will pay over the next two years will have bought us nothing in major reform. For all these reasons I think Proposition1A should pass.

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High Theatre in Courtrooms Large and Small

Tom Hiltachk
Managing partner at Bell, McAndrews & Hiltachk, LLP

Tomorrow, the California Supreme Court will hear arguments on the constitutionality of Proposition 8, while a trial judge in Sacramento will hear arguments that the Legislature has tried to "rig" the upcoming election on Proposition 1A by drafting the ballot statements in, shall we say, a less than fair and impartial way.  Both decisions will have far-reaching and long-term impacts, regardless of the outcome.

Proposition 8, one of the shortest initiatives in recent memory, added just 13 words to the State Constitution: "Only marriage between a man and woman is valid or recognized in California." Since Prop. 8 amended the Constitution, it must be constitutional, right?  Maybe, maybe not. The question at issue is whether the voters had the power to enact Prop. 8 at all.

Remember that prior to the voter’s adoption of Proposition 8, a bare majority of the Supreme Court had concluded that our Constitution provides a right to marry and that our Constitution’s equal protection clause prohibits discrimination on the basis of sexual preference.  Neither of these concepts is actually written in the Constitution.  Thus, the argument goes that the voters can only amend the constitution by initiative – the change proposed by Prop. 8 is more fundamental, akin to a revision of the Constitution that can only be proposed by the Legislature, if at all.

We may have a good idea what the Court thinks by the end of the day tomorrow.

Off Broadway, in a Sacramento Superior Court, strange bedfellows, the Howard Jarvis Taxpayers Association and Health Access will be arguing that the ballot materials written by the Legislature in the dead of the night for Proposition 1A, and in particular the ballot label printed on each ballot, is so biased, misleading and incomplete that the court should reject it and rewrite it.  If successful the lawsuit might very well change the outcome of the election.  

Normally the ballot materials are prepared by the Attorney General who is charged with the duty of preparing a fair and impartial summary of the purposes and effects of a proposed measure.  If the Attorney General is the measure’s proponent, the job is transferred to the Secretary of State.  However, when the Legislature proposes a measure, it frequently chooses to ignore the Elections Code procedures and prepares its own ballot label.  The Legislature did just that for all of the measures proposed for the statewide special election.

In the case of Prop. 1A, the Legislature wrote the following:

‘RAINY DAY’ BUDGET STABILIZATION FUND.  Reforms the budget process.  Limits future deficits and overspending by increasing the size of the state ‘rainy day’ fund and requiring above-average revenue to be deposited into it for use during economic downturns.  

The ballot label makes no mention of the extension of the temporary tax for two plus years if Prop. 1A passes.  This week’s Field Poll shows that little tidbit of information is pretty important to the voters.  

Thus, at issue tomorrow in a Sacramento courtroom is the power of the Legislature to place its own constitutional amendment on the ballot and how much deference should be afforded to it in describing its proposal.  The trial court decision in Sacramento may affect the outcome of the special election, but it might also tend to curb legislative abuse in the future or give the Legislature carte blanche.

It’s a good day to go to the theater.  

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The Ballot Argument That Wasn’t

Jon Coupal
President of the Howard Jarvis Taxpayers Association

All those who favor putting the breaks on Sacramento’s ability to overspend, please raise your hands.

I see that is most of you. Those against? I see a couple of public employee union bosses over in the corner are opposed.

Well those Sacramento politicians who made a "deal" last month to resolve the budget process with a tax increase that will cost the typical California family over $1,100, are offering another deal they hope will appeal to the majority of you.

What they are offering is Proposition 1A on the May 19 Special Election ballot. 1A is being promoted as a spending limit that will compel those under the Capitol dome to behave responsibly.

If taxpayers are wary of any offer of reform coming from those who have behaved so irresponsibly that they have run up a $42 billion deficit, their suspicions are justified.

Masked behind a weak spending limit – the limit goes up with each and every tax increase – is a two year extension of the massive tax increase that was supposed to expire in two years, doubling the damage to California taxpayers.

So anxious is Senate leader, and number one tax cheerleader, Darrell Steinberg to see that this measure passes, he selected a pro-tax colleague, Sen. Loni Hancock to draft the official ballot argument against a measure that extends taxes. What’s wrong with this picture?

To select Hancock, Steinberg rejected an argument submitted by anti-tax lawmakers, Senator Bob Dutton and Assemblyman Chuck DeVore along with the president of the Howard Jarvis Taxpayers Association, Jon Coupal (that’s me).

Here is what makes this process a farce, and a scary one at that.  As a result of Steinberg’s selection of Hancock as the author of the argument against, the word "taxes" will not appear anywhere in the official arguments for or against Proposition 1A.

So in the interest of full disclosure, and to confound those who would like to keep adult citizens in the dark, like mushrooms, and feed them fertilizer, here is the accurate ballot argument against Proposition 1A that was submitted by Senator Dutton, Assemblyman DeVore and me:


A two-thirds vote of the Legislature and the signature of the governor have made California the highest taxed state in the nation — at least for the next two years.

Proposition 1A will extend these taxes for an additional two years costing taxpayers another $20 billion.

The already approved tax increase will cost a typical California family more than $1,100 annually.

We will be paying higher sales taxes, which hits low-income residents the hardest.

We will be paying a higher car tax, which hits everyone who must drive to work.

We will be paying higher income taxes that hurt everyone.

We will see a reduction in the tax credit for dependents, costing California families $200 per child.

Proposition 1A extends all these taxes well into the future in return for meaningless "budget reform." Meaningless? Yes, Meaningless. Under Proposition 1A, every time taxes are raised, the so-called spending cap can be adjusted upward. Where’s the spending discipline in that?

Proposition 1A is not budget reform; it is a massive $20 billion tax increase!

Vote NO!

Senator Bob Dutton
31st Senate District

Assembly Member Chuck DeVore
70th Assembly District

Jon Coupal, President
Howard Jarvis Taxpayers Association.

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Reading the Tea Leaves of the Los Angeles City Election

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

Prognosticators will be out in force combing over the results of the Los Angeles City election held yesterday. Most of the chatter, of course, will be about the mayor’s race looking toward the Antonio Villaraigosa’s potential run for governor.

With another low municipal turnout of 15% of registered voters, city voters returned Mayor Villaraigosa to office for a second term.  The mayor faced little opposition and captured 55% of the vote. That’s enough to avoid a run-off election but not enough to put a scare into potential rivals for the Democratic nomination for governor should Villaraigosa choose to run. If the mayor is interested in statewide office, his base in Los Angeles must be strong. With weak and barely funded opposition, a 55% vote will not impress the pundits.

Los Angeles is a strong union town. Mixing an environmental cause, the greater use of solar energy, backed by the influential International Brotherhood of Electrical Workers, and running TV ads featuring the mayor, Proposition B looked like a sure winner. Surprise! Still too close to call, Proposition B is actually losing as of this writing 49.7% to 50.3%.  There was opposition to this measure because the DWP union members would gain the work by securing no bid contracts. The measures possible downfall was cutting out other union laborers from potential jobs.

Voters took a shot at business by defeating a measure backed by all the major business support groups in the city to provide incentives to businesses that would encourage economic development. Once again the City of Los Angeles sent a message that it is not business friendly.

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Why We Keep Saving AIG: The Loose Thread

David S. White
Principal of the Law Firm of David S. White & Associates, West Los Angeles, specializing in litigation, arbitration and mediation of real-estate-related disputes and litigation since 1977; www.dswlawyers.com

Wrap your bad-news-weary brain around this one:  AIG’s reported earnings for the 4th Quarter of 2008, the Year that Will Live On in Financial Infamy, were far, far worse than a Giant Goose Egg – AIG lost, I repeat, LOST, $61.7 Billion in three months’ time – the single biggest quarterly loss in history, according to the NYT!  This, despite three heaping helpings of your tax dollars and mine.  Now, despite this, AIG lined up for a fourth helping of Federal BailOut dollars.  What gives?  Why do we keep giving blood transfusions when we already stand hip deep in AIG’s blood?

Well, the story is not a pretty one.  The great Federal Economic Gurus – the Bernankes and Geithners, and a legion of others behind the scenes, are scared right out of their minds right now.  What are they scared of, you might ask?  They are scared of the downside of Globalization.

People like Tom Friedman and so many others have been telling us for some years now that Globalization has wired our whole world together.  This has given us the wonderful benefit of instantly knowing early this morning (amid the 5 AM sound of newspapers being thrown from newspaper deliverers’ cars, driving up and down my hill, hitting some 2 miles of driveways) that the Asian stock markets were massacred while we slept Sunday night.   Sure enough, Monday, the Dow dropped 299 points (3%) leaving us mired in the 6,000’s for the first time in 12 years – so much for the "Dow 20,000" crowd (or, 50,000 – they’re just numbers now) of just a few years ago.

Well, Globalization has a dark, scary side and AIG is living proof.  The great fear is that AIG’s global business impact and financial tentacles reach so far, and into so many countries, clear around the world, and that AIG has so many trading partners, insureds and even municipalities tied in to its products, that, if the 90-some-year old company were allowed to fail – if unbridled Capitalism was finally simply allowed to do its Darwinian Thing and kill off this giant, like the dinosaurs some 65 million years ago ("MYA" as the paleontologists say) – that all holy hell would break loose in worldwide economics.

What’s that you say – that’s what we’ve been watching since last Fall anyway; what more horribles could be coming down the pike, after all?  Well, methinks that the Federal Economic Gurus have had enough time to study this and there is a reason why AIG has now received more Federal largesse than anybody else at this point.
For those keeping count, the Feds have already blessed AIG with: "a $60 billion loan, a $40 billion purchase of preferred shares and $50 billion to soak up the company’s toxic assets." (NYT, March 2, 2009).  The latest will involve a loosening of the strings tied to some earlier BailOut dollars and handing over another $30 Billion in your tax dollars and mine.  That’s a total of $180 Billion, nearly a third of the original $750 Billion in BailOutBucks, just for AIG’s woes.

The WSJ reported Monday that the ratings agencies, including some of those folks who made all the toxic debt possible in the first place by rating those baskets-full of junky mortgage paper with A’s and A+’s instead of telling the truth when it mattered, were about to take AIG’s rating down by a single notch – that notch would require AIG to put up more collateral for its trades, loans and other financial positions – some $8 Billion more!  And, according to AIG’s Chief, Edward Liddy, serving since September 2008, that would have been the straw that broke the camel’s back.  Liddy is quoted by the NYT piece referenced above as making the following truly brilliant observations:  that A.I.G. "was in much worse condition than I thought," and also that: "The economy is worse. The financial markets are worse."  This searing insight could have come from an Eighth Grader, but, never mind, AIG is truly scaring the daylights out of the Fed’s Economic Gurus.  The same NYT article paraphrased their statements (without attribution) that: "they had no choice but to prop up A.I.G., because its business and trading activities are so intricately woven through the world’s banking system."  

So, there you have it.  AIG is now the living superlative of the Too-Big-to-Fail flavor of stumbling economic giant – the Globally "intricately interwoven" variety.  Once more, they have gone to the well for yet another, 4th helping, of your and my tax dollars.  Wall Street again hemorrhaged out its opinion of this latest development in the twisted story of AIG, and we still do not know where and when there will be a bottom – or an end to AIG’s deathbed dollar transfusions.

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After 30 Years, A Budget Reform That Will Work

Loren Kaye
President of the California Foundation for Commerce and Education

The most important difference between Proposition 1A – the budget reform measure on May’s special election ballot – and the numerous attempts to control spending or enforce balanced budgets that have preceded it: Proposition 1A might actually work.

California ballots and, indeed, the Constitution itself, are strewn with well-intentioned efforts to impose discipline on state elected officials. But each of these measures has failed because it either frustrated public demands to provide more resources for priority needs, such as transportation or education, or was never designed to work as advertised in the first place.

This is no small thing. It makes no sense to propose or adopt a tough measure to impose fiscal discipline if it won’t be adopted, doesn’t work, or cannot pass the test of time. But that’s been the track record over the past thirty years:
Proposition 4 (1979), A.K.A. the "Gann Limit," constrained state government growth to population plus inflation, with any excess revenues returned to taxpayers. But when more than a billion dollars was rebated to taxpayers in 1987, interest groups and politicians made short work of the measure, amending it – and gutting it – twice in the next three years.
– The first change was Proposition 98 (1988), sponsored by the California Teachers Association, which required that any surpluses above the spending limit be allocated to schools and community colleges.
– Passage of Prop 98 and the inability to raise gas taxes to pay for more highways and transit motivated the Legislature to draft a new, improved "limit," Proposition 111 (1990). This version changed the Gann Limit formulas and added exemptions so that surplus revenues never again threatened to be an issue for state policy makers. And so it came to pass.
– After gaining office after the recall election, Governor Schwarzenegger and the Legislature proposed Proposition 58 (2004), which purported to require the Legislature to enact a balanced budget. That worked out well.

Other spending limit and budget balancing measures have reached the ballot only to be turned down by the voters: Proposition 76 (2005) proposed by Governor Schwarzenegger; Proposition 165 (1992) proposed by Governor Wilson, and initiatives in 1988 (Propositions 71 and 72).

Proposition 1A is different because it can deliver on what it is designed to achieve: stabilizing the state’s fiscal situation, preventing the spending of one-time revenues, paying off debts, and minimizing future tax increases. All this while maintaining the political consensus that resulted in Legislative approvaltwice.

  • Stabilize the budget. Money would be added to a special budget reserve every year except when revenues dip below the growth in the economy. This budget reserve could only be used to shore up finances during economic downturns or – once the reserve is built to a substantial level – to pay for one-time expenses such as deficit reduction, infrastructure, or tax relief.
  • Stop spending one-time revenues. California is in a fiscal mess because the Legislature spent one-time revenues from economic bubbles on ongoing programs. Proposition 1A would prohibit spending money above the historic revenue trend, saving them – again – for the budget reserve or one-time uses.
  • Pay off debt. California’s operating deficit has persisted because our debt keeps getting rolled over. Proposition 1A would require half of new deposits into the budget reserve be first dedicated to erasing that debt. This would make "cutting up the credit cards" a reality.
  • Minimize future tax increases. Californians obviously have strong protections against new taxes with the requirement for a two-thirds legislative vote. That’s the main reason this latest budget solution was so hard fought. But tax increases were only even considered because the state’s budget was thrown so far out of balance by past fiscal irresponsibility, compounded by a deep recession. According to the Department of Finance, had Proposition 1A been in effect for the past decade, the revenue shortfall from the recession would have been only $5 billion, which would have been easily covered with spending cuts. Fiscal responsibility plus a two-thirds legislative vote equals solid taxpayer protection. This measure completes the puzzle.

Undermining Proposition 1A because it does not turn back the clock to reinstate the Gann Limit is a false choice. The California political desert is littered with the bones of fiscal hawks whose good efforts came up dry. Rather than erecting a new monument to good intentions, policy makers have placed on the ballot a prudent, achievable path to fiscal responsibility.

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