California’s fiscal future looks
positively dire. The budget deficit is
expected to soar to more than 40 billion (more than 1,000 per resident) over
the next year. It is the perfect storm
of falling tax revenues caused by the popping of the equity and real estate
bubbles, and soaring unemployment claims.
But the Legislature and the governor are not the only ones to blame;
just look at the results of the last election.
Voter ignorance is in large part to blame as well.
Admittedly, the state fiscal crunch
was not nearly as bad back in November of 2008, but it was still as bad as it
had ever been and experts knew things were going to get worse.
Yet even during a time of record deficits,
California voters sought fit to approve four propositions that will directly
aggravate the deficit: propositions 1A, 3, 9, and 12. All together, those propositions will cost
the state more than 24 billion in future spending. Of the 12 initiatives (some had negligible
fiscal effects) on the 2008 ballot, only 1 might have had a positive fiscal
impact: Proposition 5 (expanded parole for drug offenders), which failed by a
The ballot initiative system is
wrecking California’s fiscal future. The
average voter does not understand the consequences of passing new spending
through ballot initiative and simultaneously having a constitutionally mandated
balanced budget. What happens when the
unstoppable force behind Props 1, 3, 9, and 12 meet the immovable object of the
state’s balanced budget requirement? The
largest state budget deficit, and soon the largest simultaneous budget cuts and
tax increases in the history of all 50 states.
To make matters worse, the ballot
initiative system is being abused. It
now has devolved into a grab-bag for special interests, and the solution for
any powerful lobby that cannot get its way in Sacramento.
Prop 3, which floated bonds to finance
children’s hospitals, was almost a carbon copy of Proposition 61, another
budgetary end-around, which passed in 2004.
It was the same in virtually every respect, except of course for a more
modest price tag. The beneficiaries of
Proposition 61 saw how easy it was to get their way, and did so again recently
with Prop 3.
Props 3, 9, and 12 were good
example of why the system needs to be reformed.
On the surface, Prop 3 looked like a great cause, and it wasn’t
easy for anyone to vote against money for children’s hospitals. The commercials with Jamie Lee Curtis and
numerous sick children really put a human face on the issue. The sad reality is that there are a million
good causes, and public money can’t be used to support every one of them.
the merits aside, Proposition 9 will cost the state an undetermined amount in extra
prison costs by denying parole. Veteran’s
care, typically a federal responsibility has been shifted to the state with Proposition
12, which will cost 1.8 billion so that veterans can buy farms and homes.
These three propositions all had two things in
common: First, none had budget offsets
or tax increases built in, so they all are guaranteed to make the budget crisis
worse. Jamie Lee Curtis bragged on television that Prop 3 “[didn’t] raise taxes, it saves lives.” This is at best a half-truth. California requires a balanced budget. So by spending 2 billion over the next 30
years on bonds and interest, that’s 2 billion cut from somewhere else, or more
likely 2 billion more that has to be raised in new taxes.
So more accurately, Prop 3 does raise taxes,
it just hasn’t done it quite yet.
Secondly, they benefited very
small constituencies at the expense of the average taxpayer. This reason is exactly how they got onto the
ballot in the first place. To get an
initiative onto the ballot, there is a paltry filing fee and a requirement for
signatures of 5 percent of the people who voted in the last election. That amounts to about 434,000
It seems like a lot, but
take for example Prop 3. Because the
benefits go to such a small segment of the state, it’s easy to get everyone who
stands to benefit to sign. After getting
the signatures everyone involved in the health care field and their families,
you have enough.
Propositions 6, 7, and 10
were other examples of a small group trying to pry open the state’s coffers for
their own private gains. Luckily, those
measures failed, but given the relative ease of getting an initiative on the
ballot, they will certainly be back.
Big fiscal problems like the one we
have today will never be solved by a fickle and uniformed voting populace, only
exacerbated. Our problems can only be
solved by professional legislators. The
California Voter Guide summarizing all the 2008 ballot initiatives took more
than an hour to read. How many voters
actually read through the entire thing?
Unfortunately, most of voters made up their mind based on a 30 second TV
commercial. When the decisions are left
up to professional legislators whose job it is to know the issues, we can
expect to have fewer problems.
To prevent further fiscal damage, either
the threshold of 5 percent should be raised substantially, or ballot measures that are
not revenue neutral should be disallowed.
I prefer the later. If special
interests want to spend money on special projects, let them but make them pay
for it at the same time. In the short
run, it wouldn’t do much, but in the long run, leaving the tough fiscal
decisions for the legislature and not the capricious populace will make the
fiscal process much healthier.
Revenue neutrality is absolutely
critical for future ballot initiatives.
Not too long ago, Proposition 63 (2004) increased taxes on incomes above
1 million to finance state mental health services. Leaving aside merits, that proposal was far
superior to any on the 2008 ballot because it actually paid for itself.
Two years from now, there will be
more spending proposals on the ballot, and California voters will continue to
make life impossible for the Legislature, unless the initiative process itself
is amended. It won’t be easy, but it
needs to be done.