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During the budget week from hell, we mildly cheered on the progress of the budget process. We were concerned about the short-term budget issues, but were also dismayed by the rapid rightward shift of the negotiations.  Unfortunately, as an Editorial Board we simply cannot support the measures as they have been brought to the May 19 Special Elections Ballot. We share the concerns of the League of Women Voters that this package was poorly designed and poorly executed, resulting in a plan that will ultimately create more harm than good. And since none of these measures address the structural revenue gap, adding another layer to an already suffocating fiscal straightjacket makes no sense whatsoever.

We do not appreciate the fearmongering message from supporters of the initiatives, who obviously can’t find anything to recommend in these solutions and thusly must warn of impending doom in order to get them passed.  We remind voters the words of Bill Clinton: “If one candidate’s trying to scare you, and the other one’s trying to get you to think… if one candidate’s appealing to your fears, and the other one’s appealing to your hopes, you’d better vote for the one who wants you to think and hope.”

Prop 1A – State Spending Cap. NO

Beginning with Prop 1A, the heart of this package, we cannot do better than the LWV in briefly describing the flaws:

[Prop 1A] would actually make it more difficult for future governors and legislatures to enact budgets that meet California’s needs and address state priorities. It would amend the state Constitution to dictate restrictions on the use of funds put into the reserve and limit how “unanticipated” revenues can be used in good years. It could lock in a reduced level of public services by not taking proper account of the state’s changing demographics and actual growth in costs. Prop 1A would also give future governors new power to make budget cuts without legislative oversight. Like the other propositions opposed by the League on this ballot, Prop 1A came from a deeply flawed process that resulted in measures written in haste and without public input or analysis. The League would support real budget reform, but we regretfully conclude that this measure would only make things worse. (League of Women Voters)

And there’s actually much more.  We don’t have to guess about the impact of spending caps.  In 1992, Colorado instituted a spending cap as part of TABOR, and within a few years spending on education, health care, and practically all other measures of government dropped from the middle of the pack relative to other states to almost dead last in every category.  Considering that California ALREADY ranks near the bottom in these categories, the result would be even more disastrous.  The California Budget Project estimates that the cap would force the state to reduce expenditures $16 billion dollars below the Governor’s baseline spending projections by 2010, $17 billion by 2011 and $21 billion by 2012.  That’s a FAR BIGGER gap than the two years of tax revenues that would be lost by voting down 1A.  These revenues are highly unlikely to ever be recovered, because of the faulty indexing of the cap and the fact that it’s based on a level of revenues made during the worst economic crisis since the Great Depression.  And Democrats claiming that there’s an ingenious “out” of the spending cap because it could be raised if taxes are raised neglect to mention that this doesn’t apply to fees, which would essentially end any efforts to work around the conservative veto by raising revenues through fees to fill a budget gap.  In fact, the way the spending cap is structured, it would force contributions into the rainy day fund EVEN IN DOWN BUDGET YEARS.

Failure of Prop 1A would indeed reduce funding to our government in 2011-2013.  Yet this assumes that legislators could never deal with revenues in the intervening two years. Further, the increased revenues we would receive from Prop 1A are simply not worth the long-term damage to our government that this measure would create.  That’s why the CTA and the Democratic establishment worked so hard to defeat a similar spending cap plan in 2005.

Prop 1B – Education Funding. Payment Plan. NO

Prop 1B isn’t really inherently bad.  It is simply made irrelevant by our position on Prop 1A through a clause that takes 1B down if Prop 1A fails. It provides a workaround to a disputed technical question in Proposition 98 by setting up a one-time $9.3 Billion fund for education.  If this didn’t come with the baggage of Prop 1A, it would be worth considering. But as it stands, we simply cannot accept the pair.  That being said, if Prop 1A passes, it is important that Prop 1B passes. If we were to vote strategically, we would vote No on 1A and Yes on 1B, but we leave that decision to you.

It is worth noting that Prop 1B would not provide a solution to the catastrophic financial crisis facing public education in this state, and would do little if anything to help the 26,000+ teachers who received a layoff notice last month keep their jobs in the fall. Since Prop 1B’s effects are not permanent, it would not exempt public education from the likelihood of funding shortfalls that Prop 1A would produce. Education has already suffered enough from one-time short-term budget deals that produced long-term problems.

Proposition 1C – Securitization of the lottery. NO

Prop 1C would allow the Treasurer to sell bonds backed by the lottery revenues. The budget deal assumes that we will get $5 billion for this deal, but that number remains highly speculative. However, our opposition does not stem chiefly from any quibble with the amount of money it would bring in, but rather from our overall sense of failed governance that emanates from the entire package and this  proposition specifically.  George Skelton calls this proposition a “payday loan” and no better words could describe this.

The fact is that we have done this before and it failed. Back in 2004 after Arnold wiped out the dreaded “car tax” he came to the voters of this state complaining about how we are going to fix this budget. So, he told us that if we just passed props 57 and 58 to sell some bonds and tweak the budget process, he’d handle it from there.  Needless to say, the problem was exacerbated rather than ameliorated, in particular because the state NEVER SOLD THE BONDS.  If this package represented real reform that would allow the state to move forward with an honest and democratic budget process, this would be more palatable.  If we knew that we wouldn’t just be back in the exact same situation 18 months from now, this might even be a reasonable idea to dig ourselves out of a very deep hole.

As it is, we’d prefer to wait for something real.

Prop 1D – Diverts $600 Million from Prop 10 First Five funds to other childhood programs. – NO

The First Five Program was created in 1998 by the passage of Proposition 10.  By raising the cigarette tax by 50 cents per pack, California was able to create a sustainable program with its own source of revenue.  But that has always been a thorn in the craw of the right-wing Republicans.  It is spending they cannot touch for programs they would rather not fund.  But the First 5 commission has been successful in providing funding for innovative and successful programs.  And the commission’s own prudence has led it to the chopping block.  They planned for the inevitable decrease in cigarette taxes by building up a cash reserve, and that money has grown too tempting for the Legislature. It is a pot of money, and they cannot resist.

Rather than raiding First 5, we should have provided a sustainable revenue for the state. We should not abide by these budget gimmicks and ploys, and First 5 should not be their victim.

Prop 1E – Diverting Mental Health Services Funding – NO

This initiative would cut into the Prop 63 (2005) money for mental health services from the 1% surcharge on income over a million dollars.  Although this slash job wasn’t as bad as what was suffered by First 5, as it has a prominent defender, it is still unacceptable.  Mental health services are financially prudent spending. It saves money that will end up being spent elsewhere, whether for homeless services or prisons.  Diverting this revenue is penny wise and pound foolish. Both Prop 1D and 1E come from the “rob Peter to pay Paul” school of budgeting, although in this case “Peter” is young children and Californians with mental health needs who have few defenders or other resources to fall back on.

Prop 1F – Wasting Your Time. An Initiative. – NO

Prop 1F would block any pay raise for legislators when the budget is showing a deficit.  It is an infinitesimally small amount of money in the grand scheme of things and accomplishes remarkably little for something on a statewide ballot.   First, not getting a raise in deficit years is not a sufficient incentive for anyone to actually do anything, nor is it really meaningful shared suffering.  The implicit assumption that the trivial penalty of Proposition 1F could be a meaningful incentive to not run a deficit treats elected officers as greedy sociopathic children who need petty personal financial incentives to deal with the state’s budget.  Building this assumption into the California Constitution is unnecessary and further entrenches in the state constitution far-right market fundamentalism and contempt for the role of government.

Second, if we’re going to constitutionally impose shared suffering or financial penalties on elected officials, why is it a balanced budget that’s the trigger?  Why not base it on the number of California’s children in poverty, the condition of our infrastructure, the state of our parks, the number of homeless, the funding levels of our schools?  Instead, Proposition 1F privileges a morally blind view of the world — balanced budgets are the only measure of legislative accomplishment for which elected officers can be penalized financially.  Why this needs to be on the ballot can be answered only by Abel Maldonado, but it’s a nothing more than an ill-conceived placebo designed to placate angry voters — and so will no doubt pass. However, we don’t need to countenance Abel’s temper tantrums.

This morning, New York Times columnist David Brooks criticized his GOP allies on Capitol Hill for pushing a federal spending cap, calling it “insane.”  But here in California, the discredited theory of Reaganomics lives on …

I’ve been on record supporting a special election to get the budget reform California desperately needs – such as scrapping the “two-thirds rule” in the legislature, or helping local governments raise revenue.  But now that a statewide election is set for May 19th, no such measures will be on the ballot.  Instead, the six propositions we will get to vote on are Schwarzenegger gimmicks that would cripple the state’s ability to function, throw us further into debt, and roll back a small handful of fiscal victories.  A campaign must start now to urge a “no on everything” vote, repeating the success that progressives had in 2005 by defeating Arnold’s special election.  The Governor, however, is a lot savvier this time.  Prop 1B (which deals with school funding) is a naked ploy to keep teachers from opposing Prop 1A (an awful spending cap), and there’s a dangerous possibility that organized labor will sit out this whole election.  Democrats are not unified in their opposition, as State Senate President Darrell Steinberg even gave Schwarzenegger cover last week at a press conference when he promoted the “budget reform” package.  Only by exposing this election as another Arnold scam can the state come out winning, helping to map a sane fiscal future for California.

Many observers noted the “parallel universe” that California – a very blue state – experienced when it passed Proposition 8 on the same night we elected Barack Obama.  Today, it’s déjà vu all over again.  Nationally, President Obama’s budget proposal is a sharp repudiation of the Reagan Era – with progressives on the offensive, and optimistic about the future.  But at the state level, right-wing ideologues still dictate our budget policy.  Progressives are on the defensive, allowing a Republican Governor to pit constituencies against each other – while some Democrats reluctantly believe our choices are the bad and the worse.

After a grueling process where Republicans (once again!) abused the state’s two-thirds vote requirement, Arnold and the legislature finally passed the budget by cutting a deal.  In exchange for the necessary GOP votes and the Governor’s signature, a special election was called for May 19th to pass some budget “reform.”  It was a Faustian bargain that cries out the need to scrap the two-thirds rule, and I don’t fault Democrats for using any means necessary to pass a state budget.  But now that Propositions 1A-1F are on the ballot, voters don’t have to approve them – and the Democrats shouldn’t encourage them.

Proposition 1A: Spending Cap to Disaster

As I’ve written before, a spending cap would cripple the state’s ability to provide essential services.  It’s been tried in Colorado, and the results were disastrous.  A spending cap would give California a permanent fiscal straitjacket – which is precisely what the right-wing extremists in the legislature have always wanted.  All of them signed the infamous Grover Norquist pledge – from the same guy who wants to “shrink the size of government so we can drown it in a bathtub.”

Prop 1A creates a spending cap by nearly tripling the amount of revenue that gets locked into the state’s Rainy Day Fund – and bars the flexibility to use that money in times of need.  It also strictly regulates how the state can spend “unanticipated” revenues.  It gives the Governor more power to unilaterally cut certain spending without legislative approval – such as blocking cost-of-living adjustments.  Given that Arnold already killed the renters’ tax credit for seniors and the disabled, why give him the power to terminate more programs?

A spending cap was the only way Republicans in the legislature would support any tax increases to pass a budget.  And it’s true that Prop 1A includes several revenue measures: (a) raise the sales tax from 8 to 9%, (b) up the vehicle license fee that Arnold slashed on his first day in office, and (c) raise the income tax on every bracket by 0.25%.  But a vote against Prop 1A doesn’t stop those tax increases from going into effect; it just means they expire in two years, and there would then be a fight in the legislature to extend them.  What is the “upside” if Prop 1A passes?  Those taxes would instead sunset in four years – 2013.

Selling out the state’s flexibility in exchange for these (mostly regressive) tax increases to stay on the books for an extra two years?  Sounds like an awful deal to me.  As the Legislative Analyst’s Report says, a lot of what Democrats got in Prop 1A is temporary – while the spending cap parts are permanent.  “Once these effects have run their course,” it said, “Prop 1A could continue to have a substantial effect on the state’s budgeting practices.”

Proposition 1B: Attempting to Bribe the Teachers’ Union

It will take resources to defeat Prop 1A, and getting organized labor (the one progressive institution who can deliver) to oppose it will be essential.  Arnold suffered a humiliating blow in 2005 because unions went all out to defeat his special election, but they had good reason to do so: each ballot measure that year was a direct assault on working people.  

Schwarzenegger clearly learned from that mistake, which is why Prop 1B was designed to throw a bone at the California Teachers’ Association – hoping to keep most unions out of defeating Prop 1A.  Prop 1B would guarantee school funding through $9.3 billion in “supplemental payments” – but it only goes into effect if Prop 1A passes.

I’m all for school funding – but at the cost of passing Prop 1A?  So far, Arnold’s ploy is working.  The CTA has offered “interim support” for Prop 1B, while no union has taken a position on Prop 1A.  Given the expense of defeating statewide ballot measures, unions are being understandably cautious about entering the fray – unless there’s a consensus in the labor movement to defeat Prop 1A.  Education advocates should consider that the $9.3 billion in Prop 1B is not an annual appropriation, but doled out over a five to six-year period.

Education is a high budget priority – but so are housing, health care and public transit.  Even if Prop 1B guaranteed additional funds for public schools, the straitjacket of Prop 1A means all other issues we hold dear will be sacrificed.  It’s the classic “divide-and-conquer” strategy Republicans use all the time to keep progressives fighting with each other.  While every group is protecting its budget during these tough times, now is not the moment to take the bait.  Despite the attractive “sweetener” of 1B, Prop 1A must fail.

Proposition 1C: Arnold’s Awful Lottery Idea

This is just the latest in a series of reckless Hollywood gimmicks the Governor has proposed – sinking our state deeper into debt, and strangling our ability to get anything done.  Prop 1C would let the state borrow $5 billion against future lottery sales.  What will Arnold propose next year – borrow against future tax revenues?  Is there any end to our credit card Governor’s nerve when it comes to raiding our fiscal future?

Propositions 1D and 1E: Turning Back the Clock

It’s rare when California voters approve fiscal measures that both (a) create more revenue and (b) fund good projects.  In 1998, voters passed Proposition 10 – a cigarette tax that created a Childrens’ Health Fund.  In 2004, voters passed Proposition 63 – a 1% tax on millionaires to fund mental health programs.  Props 1D and 1E would re-direct these tax revenues – slashing programs voters created for a purpose.  Arnold tried to cut funding for mental health before, but Prop 63 prevented him from doing so.  We can’t let this happen.

Proposition 1F: Do-Nothing Reform

The last measure on the May ballot – Proposition 1F – sounds like a good idea.  It would ban statewide elected officials from receiving pay raises if the budget has a deficit.  But does anyone honestly believe this is the kind of “structural budget reform” the state needs that would justify an expensive, statewide, off-year special election?  Even if it’s good public policy, the budget savings are miniscule.  This is more about Arnold trying to score political points against the legislature than proposing a sensible long-term solution.

Democrats Have to Stop Being Scared

All too often, liberals get spooked by the state’s dire financial situation – agreeing to go along with an awful Republican budget “solution” at the ballot to prevent cuts that affect poor people.  In 2004, for example, Arnold proposed two ballot measures – Propositions 58 and 59 – sold as necessary to solving the state’s $15 billion deficit.  I’m embarrassed to admit I voted for both of them, because I feared what would happen if they failed.

Prop 58 was a $15 billion bond to pay off just one year’s budget deficit – which we are now stuck paying interest on.  Prop 59 was a state “balanced budget amendment” that has placed California in a permanent fiscal straitjacket.  In the long run, was it a good idea to support such a reckless solution?  Conventional wisdom at the time was that a “yes” vote would prevent devastating budget cuts.  But what if we stood up as a matter of principle?

Assembly Speaker Karen Bass (D-Los Angeles) has sent signals that she won’t support the special election measures, and State Senator Loni Hancock (D-Berkeley) has publicly opposed Prop 1A.  Democrats are unified about wanting to scrap the “two-thirds rule,” but that won’t be on the May 19th ballot.  And when Arnold  had a press conference last week to promote his special election measures, one of the leaders who flanked him was State Senate President Darrell Steinberg (D-Sacramento.)

I like Darrell Steinberg.  He’s been a champion for mental health funding, and is a vast improvement over his predecessor, Don Perata.  But standing next to Schwarzenegger to promote a reckless special election with no budget solutions to vote for was disgraceful.  Props 1A-1F must be defeated, because they would wreak long-term havoc on the state.  They are awful Republican solutions, and Schwarzenegger should be left alone to defend them.

Because if Democrats unify to sink these ballot measures (with substantial help from labor), Arnold will have to own these defeats – just like he did in 2005.  And when we have to go back to the drawing board, progressives will have the upper hand.  Unless, of course, too many Democrats went along to support these failed proposals.

Paul Hogarth is the Managing Editor of Beyond Chron, San Francisco’s Alternative Online Daily, where this piece was first published.