Proposition 1A: "Rainy Day" Budget Stabilization Fund. - recommend No
This is a bad time to be trying to operate an American state. According to this helpful overview from the National Conference of State Legislatures, the majority of states are looking at significant budget shortfalls for Fiscal Year 2009. Interestingly, as much as California is looking like a train wreck for the coming year, it's still in the "Less than 10% of state's general fund" budget gap category, whereas Alaska, Colorado, Illinois, Tennessee, Mississippi, and Alabama are all in the 10-15% shortfall bracket (one wonders how this fits into that good old frontier independence in Alaska).
NCSL is also tracking states' efforts to overcome their financial deficits here. States are exploring saving money by any number of measures, including shutting down parks, reducing aid to local governments or industries, reducing employee salaries, closing prisons, and so forth. Among the states, California is looking at by far the most severe cut in education funding for FY 2010, with a reduction in $7.3 billion (that said, I don't know how this will influence per-student spending, which is a better metric for this kind of comparison). Moving over to tax increases, most states that are monkeying with general taxes have chosen to play with the sales tax. I suspect this is because people find this the most conceptually inoffensive, as it's just "a little more" skimming off the top rather than a direct debit from your paycheck. In California, this was an increase in the sales tax; in other states it's involved repealing certain sales tax exemptions (e.g. on bottled water in Florida). Some of the states have proposed corporate income tax increases as well (for example, Illinois could potentially raise its corporate income tax rate from 4.8% to 7.2%). There are also proposed increases in selective taxes, such as taxes on liquor.
Proposition 1A is a package of changes in how the state collects and spends money. It would increase the size of the state's "rainy day" fund, would require excess money to be funneled back into state needs in a prioritized order (with education first), and would extend the sales and income tax increases that were enacted for the 2009 and 2010 fiscal years out to 2013. More specifically, it would build the "rainy day" fund up from 5% to 12.5% of the general fund - in other words, in good years, we'd have to funnel money we gained above the historic trend (for the prior ten years) into the rainy day fund first, with the fund to be tapped in years where revenues fall below the trend amount. Some of this money would then go to specific states needs. If Prop 1B passes, $9.3 billion would go to counterbalance current education budget reductions, with another 1.5% of state revenues to go to debt service and infrastructure afterwards.
I am not in principle opposed to many of the concepts undergirding this proposition. It would be better to put more money into "rainy day" funds during times of economic waxing, so that we don't find that we suddenly have a raft of unfundable programs when we go into economic wane. Similarly, the idea of putting funding first into gaps in education and infrastructure seems quite reasonable. I'm not as fond of the raise in sales tax, as that is particularly brutal for everyone in the lower ranges of our economy.
Fundamentally, however, proposition 1A represents an attempt to budget via proposition rather than via legislature. The state of California has seen a series of this propositions, meant to "fix" spending in certain areas (e.g. education) via proposition mandate, rather than relying on the legislature to take care of proper spending. This is heavily rooted in the common belief that politicians are a different species who cannot be relied upon to make proper spending decisions, rather than our legally elected representatives who try to promote the interests of their constituencies. This is best reflected in this quote from the rebuttal to the argument against (that is, an argument for Prop 1A):
"Politicians commit the state to spending it cannot sustain."
Honestly, we as voters like to commit the state to spending it cannot sustain. For example, in the last election, Californians passed Proposition 1A and Proposition 3, both of which added significantly to our state's debt burden. The proposition system is often used to push spending or debt accrual the state cannot sustain which we might expect to find quashed in the legislature.
Most of these measures are workarounds to deal with bloat and delay in the California budget process. However, it seems likely that the fundamental issue here is the supermajority vote requirement for passing our state budget. California is only one of three states (Arkansas and Rhode Island being the other two) that requires more than a simple majority to pass the state's non-educational budget. The upshot of this is that the minority party in one of these states can stall a budget indefinitely and ask for unreasonable compromises. The easy solution to pass a California budget in the current setup, then, is to just give everyone what they want. Consider the following bit from NCSL's evaluation of supermajority budget vote requirements:
There is little empirical evidence identifying the effects of supermajority vote requirements on the budget process. Anecdotal evidence suggests that they may cause states to miss or bump up against their budget deadlines, making it even harder to pass a budget on time. And, according to a new report released by the California Citizens Budget Commission, instead of slowing the growth in state spending, California's two-thirds vote requirement may have the opposite effect, allowing the legislative minority to frustrate the process of reaching compromise by withholding votes for spending in other areas. Ultimately, however, it is important to note that difficult budget decisions are probably more likely to be an obstacle to getting the budget passed on time than the number of votes required.
As they say, there's a dearth of empirical evidence to work with here, so it's hard to say if that final line is anything other than a nicety to say that it's not the fault of the supermajority setup. That said, the simple lateness of the budget each year, which is often pointed to as some sign that the dreaded "politicians" are defective, is more than likely the direct result of requiring a supermajority. This, alone, is disruptive enough to warrant a change.
Notably, there are two propositions in the petition stage right now that would revoke the supermajority requirement for passing a budget and replace it with a 55% majority requirement (one of the two would maintain the supermajority requirement for raising of property taxes). I hope that some version of this makes it onto the ballot, but I am concerned that people will see this as a license to raise taxes rather than as a license to not have to bribe the minority to get a budget passed on time. It's important to recall that no representative is fond of raising taxes on their own constituents - that makes you vulnerable to being voted out of office, and no one likes to lose their job.
In the meantime, I am unwilling to support more proposition-based mandated spending directions, and prefer to hold out until we can remove this particular stumbling block from the path of our state government.
Significant opposition to this proposition comes from various faculty, nurse, public employee, and service employee organizations. Major financial support for it comes from a mix of businesses, including (intriguingly) some cigarette companies. The major business push appears to be from California-oriented businesses, however, including Disney, Universal, and other media companies. Outside of businesses, there have also been significant contributions from school-associated groups. Presumably these groups are interested in the mandate to repay cuts in education funding; I'm not sure about the business interest, but suspect there's some appreciation for the mandated rebuilding of infrastructure, as well as finding a way to get more money into the state via personal income taxes and sales taxes rather than increased corporate income taxes.
You can look at the people spending money for or against this proposition by clicking here.
You can read the full text of the proposition and the legislative analyst's summary here.