Allies Line Up On Both Sides of Proposition 1A

Part of the budget deal that was reach back in February put a number of propositions on the ballot.  Propositions 1A, 1B, 1C, 1D, and 1E were specifically related to the budget itself and their passage in part will determine whether that particular budget was balanced or not.  Of course, since that time, the state has announced that regardless of whether these items are passed in May, there is an $8 billion budget deficit.  Despite this groups are lining up on both sides of many of these ballot initiatives.  Many argue that they are “hastily written in secret with no public hearings or analysis.”  The consequences of passage of them would outweigh the benefit of a balanced budget.

Absentee ballots are coming out in less than two weeks despite the fact that the analysis of the ballot initiatives will not be sent to the public until well after that point.

The Vanguard today will look at Prop 1A.

Various groups that normally are allies have lined up on opposite sides of Proposition 1A.  Groups that are normally adversaries have become unusual bedfellows in supporting the measure.

Overall the ballot measure has something for people on both sides of the fence to support and things for those on both sides of the fence to oppose.  Where you come down on this depends in part as to what you think is most important.

The major purpose of the proposition is to limit state spending.  Thus it requires a portion of annual deposits into a “rainy day” fund that would be dedicated to savings for future economic downturns.  It increases the size of the “rainy day” fund from 5% to 12.5% of the General Fund.

In addition to limiting the budget, it also extends the tax increases.  Several of the tax increases passed in February would be extended by one to two years.  Thus if this measure passes, they could be extendended through 2012-13 instead of expiring after next year.

“The SUT [sales tax] increase of 1 cent would be extended for one year through 2011–12. The VLF [vehicle license fee] tax increase would be extended for two years through 2012–13. The PIT-related [personal income] tax increases would also be extended for two more years, through the 2012 tax year.”

Thus you can see already the interesting trade off.  Those who like the idea of capping the budget would have to weigh against the extension of tax increases.

The fine print is interesting because it reintroduces the defeated language from one of the 2005 ballot initiatives.  It gives the Governor authority to do midyear cuts in spending without legislative approval.

“If Proposition 1A passes, the Governor would be given new authority to reduce certain types of spending during a fiscal year without additional legislative approval.”

Specifically the governor could cut spending for general state operations or capital outlay by up to 7 percent.

Second the governor could cut COLA for programs specified in the annual budget.  However, this specifically would not apply to increases for state employee’s salaries.

I have often argued that you can tell the nature of legislation by who supports and opposes a ballot initiative.  It is general a good measure.  If you generally agree with a group, this is one way to gauge whether you will support or oppose a ballot measure.  However, I think with Prop 1A you need to throw out that measure, because you will just confuse yourself more.  Prop 1A is going to require people to think for themselves and determine what is most important to them.

On the prop side of Prop 1A are the “big 5” who cut the deal in the first place, that is Governor Arnold Schwarzenegger, Senate Leader Darrell Steinberg, Speaker Karen Bass, Republican leader of the Assembly Mike Villines and former Senate Leader of the Republicans Dave Cogdill.  They are joined by groups such as the building trades, the Farm Bureau, the CTA, the California Taxpayers’ Association, Chamber of Commerce, Business Roundtable, Retailers Association, among others.

On the other side are the Howard Jarvis Taxpayers Association, Jon Fleischman from the Flash Report, and unions such as the California Faculty Association, California Teachers Federation, and SEIU and AFSCME are leaning no but have not taken formal stances yet.  There is belief that Insurance Commissioner Steve Poizner, the only Republican elected to a constitutional office will also oppose it.  The League of Women Voters have come out against it.

The Senate Democratic Caucus is supporting it.  The Assembly Democrats are split. 

Assembly Speaker Karen Bass told Capitol Weekly:

“Our caucus had a very long discussion on this.  There are a number of members who are supportive of 1A, there are several members who are opposed to 1A, and there are many others who are trying to decide.

The Assembly Democrats did vote to support 1B through 1F, in part because if they did not pass it would add five or six billion to the $8 billion budget hole.

Meg Whitman, Republican Governor Candidate for 2010 is again it.  She may or may not pump money into it.  Whitman spokesman Mitch Zak did not rule out the possibility that Whitman would spend money against the measure.

“She’s been very outspoken in her opposition to 1A.  We’ve not made a decision how that opposition manifests at this point. We’re keeping our options open.”

One of the most interesting developments is the split between CTA and CFT.

CTA has come out in favor of all six ballot initiatives including 1F which prohibits legislative pay increases during budget deficits (duh). 

CTA on Prop 1A:

“Prop. 1A provides long-term reform to our broken budget system by stabilizing future state spending and creating an enhanced rainy day reserve fund. Without impacting the state’s minimum school funding guarantee, Prop. 1A requires the state to direct 3% of revenues into a rainy day fund each year, except when the fund is full or during economic downturns. It increases the overall size of the state’s rainy day reserve from 5% to 12.5% of the budget. Part of the money from the Prop. 1A reserve fund is used to repay the $9 billion owed to public schools. If Prop. 1A fails, there will be no mechanism in place to restore the funding to schools and community colleges. Prop. 1A does not downsize government, or give the governor authority to make midyear cuts to education. By stabilizing state spending, Prop. 1A puts the brakes on the state budget roller coaster; prevents wild peaks and valleys in state spending; and helps protect funding for vital programs like education, public safety and health care.”

Here is what the California Federation of Teachers (CFT), the  other teacher’s union, said in a release this week:

“Proposition 1A would create a maze of rules controlling California budgeting that would severely restrict the state from enacting budgets that adequately address the realities that California will be facing in coming years, especially the ability to address the needs of California’s aging population.  Proposition 1A, if approved, would also trigger the ability of the Governor to unilaterally reduce individual program budgets without approval of the legislature.  Says [CFT President Marty] Hittelman, “This ‘power grab’ by the governor is not in keeping with the concept of balanced power among legislative, administrative, and judicial branches of government embedded in the United States Constitution.”

Health Care groups have also come out against Prop 1A.  Anthony Wright from Health Access California, who was in Davis last night, is a strong opponent of Prop 1A.

Health Access California makes four arguments against Prop 1A.

First, they argue that Prop 1A was hastily drafted behind closed doors without a public hearing or independent analysis.  It is a complex and confusing constitutional change that will inact confusing and risky long lasting changes into the Constitution and no one has any idea whether it will work or even how it will work.

Their concern is that it would divert about $12 billion in tax dollars into a rainy fund even during “rainy days.”  That means when we have a $40 billion budget deficit, there would be $12 billion that we cannot use because it is in a rainy day fund.

Third, they argue that Prop 1A would prevent investment in health and other services even during good budget years.  The formulas that it utilizes to determine how much could be spent are based on an inflation measure based on changes in the cost of consumer goods rather than governments.  Thus it may not accurately measure the year-to-year increase in the cost of delivering the same level of public services.  They do not take into account things such as rising health care costs, an aging population, employers dropping coverage, and other needs for the states.  The slush fund does not prioritize health services, higher education, public safety, or other key priorities.

Finally they object to the governor gaining the ability to make budget cuts without legislative consent.  They believe that the governor could cut services such as health care spending in the midyear update.  The Governor could does this without legislative approval up to seven percent from budget appropriations.

So is all of this worth it?  It is obviously why some of the teachers would support it and others would oppose it.  The taxpayers do not like it because it would extend tax increases.  The Democrats are holding their nose because it would extend tax increases without another legislative vote, something they are not likely to get next time around.

One of the key questions at this point is whether SEIU and AFSCME formally come out against the measure.  If they do it likely spells doom for the initiative.  However, there is speculation that Governor will try to induce them one way or another to supporting them.

Back in February we reported that this was a horrible budget, nothing has changed our view in the interim.  The only question at this point is whether there is an overwhelming need to hold the nose and bit the bullet a little longer or whether things need to go back to the drawing board.  That is a very difficult question at this point.  The consequences are severe, another five or six billion to cut in June on top of the minimum $8 billion deficit that has reemerged.

—David M. Greenwald reporting