potrero view

May 2009

View’s Recommendations on State Propositions

The federal government is spending trillions of dollars to recapitalize financial institutions, and somewhat less than that trying to pump the economic prime with investments in energy, education, job training, water, and transportation infrastructure.  Simultaneously, our city and state governments, grappling with multi-billion dollar deficits, are slashing expenditures on education and other core services, and raising taxes.  More money here, less money there, and higher taxes everywhere.  This headache-inducing fiscal swirl is enough to force any voter indoors to watch old Star Trek re-runs.  Don’t do it.  Now more than ever we need to stay alert and engaged in government.  To that end, the View offers its recommendations on the May ballot.  In making these suggestions we’re guided by a few principles:  in hard times trade-offs between good programs must be made; debt is bad for our children; and nothing we do in this election can’t be undone when the economy resurfaces.

 

Proposition 1A:  Yes.  

This initiative would extend the one cent sales tax increase, an almost doubling of the vehicle license fee, the .25 percent hike in personal income tax rates, and the $210 reduction in the dependent tax credit that the state legislature passed in February by a couple of years, generating an estimated $16 billion in additional revenues from fiscal year (FY) 2010 to FY 2013.  In addition, the proposition would cap future spending by directing unexpected – wouldn’t that be a lovely surprise – state revenues to fund primary and secondary education, increase the savings level – and make it harder to raid these monies – in the state’s rainy day fund, and pay-off state debt.  The Governor would be given new authority to unilaterally reduce expenditures – for such things as equipment purchases and cost-of-living adjustments – without legislative approval.  By raising taxes and capping government expenditures this deal with the devil strikes a necessary political balance.


Proposition 1B:  Yes.  

Under Proposition 98, which was passed and modified in the late-1980s, the state is required to provide a minimum funding level to primary, secondary, and community college schools under a complex formula that no one understands.  This initiative would delay additional education expenditures that might have otherwise been triggered by Proposition 98 until FY 2011, after which the state would be required to provide $9.3 billion in supplemental monies over several years.  Our children deserve every penny we can provide for education.  Unfortunately, pennies are scarce these days, and without an agreement on what Proposition 98 requires there’s little hope that schools will receive additional funds this year or next.  This compromise is the best that can be hoped for during challenging times.  

 

Proposition 1C:  No.  

This roulette wheel of an initiative – which would allow the state to borrow $5 billion, and more in out years, from future lottery profits – is a key component of California’s plan to balance its budget.  Before you vote on it you need to understand the odds.  First, the state would sell future lottery profits, which typically exceed $1 billion a year, to private investors, and use the proceeds to pay-down next year’s budget deficit.  Second, lottery revenues, which are now dedicated to schools and colleges, would be used to pay back the borrowing, as well as other government debt.  According to the Legislative Analyst’s Office, lottery revenues could jump by up to 70 percent if bigger, flashier pay-outs are offered, as allowed under the initiative, thereby picking more out of the typical Californian’s pockets than the current $83 a year.  Third, lottery payments that would have been made to educational institutions would instead be picked-up by the General Fund, which would be responsible for covering steadily increasing expenditures under the initiative.  Got it?  If voters reject the proposition the state will have to immediately find billions of dollars of additional spending cuts, tax increases, and/or other solutions to balance the FY 2009 budget.  But, if the initiative passes the state would still likely have to identify hundreds of millions of dollars a year in revenue increases or spending decreases to pay for the promised education-related expenditures.  This one is too much of a shell game for the View.  Borrowing from the future to pay for the past would undermine Proposition 1A.  If the state needs $5 billion that badly it should raise telecommunications franchise fees, or, as suggested by Assemblyman Tom Ammiano, start taxing marijuana.


Proposition 1D:  Yes.  

Proposition 10, also known as the California Children and Families Act, created the California Children and Families, or First 5, program to provide services to children up to age five. First 5 is funded by a 50 cent per pack cigarette tax, which in FY 2009 will generate an estimated $500 million in revenues.  Proposition 1D would amend Proposition 10 to allow $340 million of unspent reserves, and $268 million annually from FY 2009 to FY 2013, to be diverted to the General Fund to pay for other  health and human services programs for children up to age five.  The initiative would also impose new auditing and reporting requirements on local First 5 commissions; reduce expenditures on mass media communications; and allow counties to borrow, with interest, local commission funds.  Proposition 1D is a prudent measure to help address the state’s budget crises.  

 

Proposition 1E: Yes.  

In 2004, California voters approved Proposition 63, also known as the Mental Health Services Act, which imposed a tax of one percent on personal income in excess of $1 million to fund mental health programs, generating $900 million to $1.5 billion in annual revenues.  Proposition 63 also barred the state from reducing General Fund support for mental health services below levels provided in FY 2003.   Proposition 1E would allow $226.7 million in Proposition 63 funds to be redirected in FY 2009 – and between $226.7 million and $234 million in FY 2010 – to support the Early and Periodic Screening, Diagnosis, and Treatment (EPSDT) program.  EPSDT is a federally mandated program that requires states to provide a range of screening, diagnosis, and medically necessary treatment services – including mental health services – to Medi-Cal beneficiaries under age 21.  Total EPSDT expenditures on mental health services exceed $1 billion annually, with the federal government picking up about half the tab.  No one wants to have to choose between providing a quality education to children, mental health services to adults, and other fundamental services, but in a sour economy hard choices must be made.  


Proposition 1F: Yes.   

This proposition amends the Constitution to prevent increases in elected state officials’ salaries when the state is expected to end the year with a deficit, as determined by the Director of Finance.  Does anybody oppose it?  

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