May 19 election: Prop. 1A would limit spending but keep tax hikes |

May 19 election: Prop. 1A would limit spending but keep tax hikes

Associated Press Writer

SACRAMENTO (AP) ” The centerpiece measure on the May special election ballot would restrict state spending and boost California’s rainy day fund so more money is set aside for tough times.

That sounds straightforward, just like the official title of Proposition 1A, which simply states that it “changes (the) California budget process.”

What the title doesn’t say has become a lightning rod for critics. The flip side of Proposition 1A is that it would trigger extensions of the temporary increases in the sales tax, personal income tax and vehicle license fee lawmakers and Gov. Arnold Schwarzenegger approved in February. Some of the higher taxes would remain in effect through 2013.

The budget deal Schwarzenegger and lawmakers struck to close a $42 billion shortfall through June 2010 relies on voters approving most of the measures on the May 19 special election ballot. The measures also will affect what happens in future budgets.

Proposition 1A alone would generate $16 billion in additional tax revenue, starting in the 2010-11 fiscal year and running through 2013. Its passage would have no affect on this fiscal year or the one that begins in July because the tax increases for those years have already been enacted.

Schwarzenegger and the groups that are backing Proposition 1A say California will face perilous budget shortfalls in the years ahead if it fails. Schwarzenegger also says creating a spending cap is crucial to California’s long-term fiscal stability.

“This is the only option on the table to keep us from having those devastating cuts,” said Jeannine English, president of AARP California. “This may not be perfect, but voters are going to have to ask themselves, ‘Do I want to cut schools, do I want to let felons out, or do I want to eliminate services to older Californians to let them stay in their homes?’

“This is the only option that we have at this time, sadly.”

The measure includes a spending cap that Republicans have long sought but that Democrats and labor unions oppose. In exchange for placing 1A on the ballot, Democrats won an extension of the tax increases that were put in place earlier this year.

The trade-offs didn’t stop there. The passage of Proposition 1B, which would ensure payment of $9.3 billion to public schools, depends on voters approving 1A. That linkage was intended to win the support of state education groups.

The California Teachers Association, which spent millions to defeat Schwarzenegger’s slate of measures in the 2005 special election, has joined forces with the Republican governor this time.

It is supporting both propositions. Some of the state’s other public employee unions have joined anti-tax groups in opposing Proposition 1A because they don’t want a state spending cap.

The cap would limit lawmakers’ ability to spend state revenue that comes in above a 10-year state average. Extra money would go toward the rainy day fund.

Jon Coupal, president of the Howard Jarvis Taxpayers Association, said the spending cap language is weak and questioned whether it would restrain spending. He said it is not worth the billions in tax increases that would result from a “yes” vote.

“The significant loophole is that the limit or the ability to spend can be adjusted whenever the state raises taxes. That is diametrically inconsistent with the notion of spending discipline,” Coupal said.

Recent polls show voters are skeptical that the centerpiece measure will solve the state’s roller coaster budget cycles. A Public Policy Institute of California poll released Thursday found 52 percent of likely voters opposed Proposition 1A, with just 35 percent supporting it.

A week earlier, the Field Poll found 49 percent opposed and 40 percent in favor.

“1A is one of the most complicated propositions I’ve had to deal with,” said Bob Stern, president of the Los Angeles-based Center for Governmental Studies. “On top of that, you don’t have the usual cues. Usually on these props, the liberals are on one side and the conservatives are on the other side. … Voters are going to have to do their homework on 1A.”

Schwarzenegger and lawmakers are trying to sell the proposition at a time when distrust of them is running high. Approval ratings for legislators are in the low teens and are about 33 percent for Schwarzenegger. That’s the same level of support the governor had before the 2005 special election in which voters rejected all eight ballot propositions.

“It’s very hard for the governor and Legislature to be promoting the measures at this point,” said Mark Baldassare, president of the Public Policy Institute of California. “The campaign for these initiatives needs to find spokespersons that enjoy strong popularity and credibility, particularly with Democratic voters, because we have more Democrats than Republicans in this state.”

That’s why television and radio commercials promoting the measures don’t mention the politicians who crafted the deal. Instead, they feature firefighters, police officers and teachers.

Voters can be forgiven if they think they already voted to reform California’s budget process and start a rainy day fund. They did.

In 2004, voters passed another Schwarzenegger-backed measure, Proposition 58, which established a state rainy day fund that was supposed equal 5 percent of the state’s general fund.

“Overspending has led to serious shortfalls which threaten the state’s ability to pay its bills and access financial markets. This proposition is a safeguard against this EVER HAPPENING AGAIN,” read the argument in favor of the 2004 measure, co-signed by Schwarzenegger.

Proposition 1A would boost the existing rainy day fund so it would equal 12.5 percent of the general fund. There’s a catch: Money goes into the rainy day fund when revenues are up, not when the state is running a deficit, as it is now.

Schwarzenegger and other supporters of Proposition 1A say the original rainy day fund was not big enough and had too many loopholes that allowed money to be transferred out.

Jim Earp, executive director of the California Alliance for Jobs, which represents the construction industry, said he is worried that voters are so angry they will reject Proposition 1A without assessing the consequences.

“Voters have kind of tuned this thing out,” he said. “They’ve been so disgruntled about the whole ongoing budget battle and politicians they just really don’t want to do it. But not voting, or worse yet, voting against them because they want to get back at somebody, is just very destructive right now.”

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