What If They Held An Election And Nobody Participated?
I guess we will see how low voter turnout will be for one of the most underwhelming, under publicized, and just plain boring elections in recent memory.
Following last November’s year long, high-visibility, over-opined, over analyzed, over exposed, overwhelming, historically significant, and most highly participatory election in almost 50 years, I think voters are exhausted. I certainly am, having started in the early fall of 2007 to run campaigns in February, March, June, September, and November 2008 elections, not to mention March and April elections of this year as well.
Now, here we are, just 2 ½ weeks out from an election that will determine how California’s state budget will be shaped, funded, and (hopefully) approved. After waiting 15 weeks beyond the so-called deadline for what is laughingly referred to as a “balanced” state budget last year, the Governor and the Democratically-led legislature have placed before us a package of misleading, confusing, and in many cases flat-out ridiculous budget “reform” initiatives to help them with priority-setting (and money shifting) for future budget battles.
As always, this voter guide is an opportunity to learn the (almost) untarnished truth (as I determine “truth”) for your consideration and determination while making an informed decision prior to voting. Of course, many of you don’t take the opportunity to wade through the almost 30 pages (I don’t recall, but I don’t believe it has ever been this brief) of discussion, dissection, and dissertation, but simply jump to the end, see what I recommend, then vote similarly (or otherwise).
Once again, please be advised that all of the information herein was not written entirely by yours truly. Some material was excerpted from other publications (the California Secretary of State, League of Women Voters, Courage Campaign, Red County (for a sobering realization of where my recommendations fall on the political spectrum), and some miscellaneous blogs).
In addition, many of you will not find this year’s comments and asides quite as humorous as most of you have come to expect (and dread). My only response is that the measures we will be discussing are, in and of themselves, a joke (albeit not that funny). Be that as it may … let’s be on our way.
PROPOSITION 1A
CHANGES CALIFORNIA BUDGET PROCESS. INCREASES “RAINY DAY” BUDGET STABILIZATION FUND.
OVERVIEW
This measure would make major changes to the way in which the state sets aside money in one of its “rainy day” reserve accounts and how this money is spent. As a result, Proposition 1A could have significant impacts on the state’s budgeting practices in the future. The measure would tend to increase the amount of money set aside in the state’s rainy day account by increasing how much money is put into this account and restricting the withdrawal of these funds. If this measure were approved, several tax increases passed as part of the February 2009 budget package would be extended by one to two years. State tax revenues would increase by about $16 billion from 2010–11 through 2012–13.
BACKGROUND
Currently, the State Constitution has two main provisions related to the state’s overall level of spending:
1. There is a limit on the amount of tax revenues that the state can spend each year. In recent years, however, the limit has been well above the state’s level of spending and has not been a factor in budgeting decisions.
2. In March 2004, the state’s voters passed Proposition 58. Among other changes, the measure requires that the Legislature pass a balanced budget each year.
Outside of these requirements, the Legislature and Governor are generally able to decide how much General Fund money to spend in any given year.
Rainy Day Reserve Funds
When the state passes its annual budget, it estimates the amount of revenues that it expects to receive in the upcoming year. Typically, the state sets aside a portion of these revenues into one of two rainy day reserve funds. Money in these reserves is set aside to pay for unexpected expenses, cover any drops in tax receipts, or save for future years.
The two funds are:
1. Special Fund for Economic Uncertainties (SFEU): The SFEU is the state’s traditional reserve fund. Funds can be spent for any purpose with approval by the Legislature. Any unexpected monies received during a year are automatically deposited into the SFEU.
2. Budget Stabilization Account/Budget Stabilization Fund (BSA/BSF): The state’s voters created the BSA/BSF through the passage of Proposition 58 in 2004. (Under current law, this reserve is known as the BSA. Proposition 1A would rename it the BSF.) Each year, 3 percent of estimated General Fund state revenues are transferred into the BSF.
In addition, the annual transfers stop once the balance of the BSF reaches a specified “target”—the higher amount of $8 billion or 5 percent of revenues (currently about $5 billion).
By passing a law (by a majority), the state can transfer funds out of the BSF and use the funds for any purpose. (Currently, this is accomplished through the annual budget act, which allows transfers out of the BSF each year.)
FISCAL EFFECTS
The fiscal effects of Prop 1A are particularly difficult to assess because it screws with Constitutional amendments approved by voters to direct certain funds to certain areas in order to limit discretionary spending by the legislature to only the state’s general fund.
PROPOSAL
Prop 1A establishes a new process to determine which revenues are “unanticipated.” The measure generally defines unanticipated revenues to mean those that exceed the amount expected based on the revenues received by the state over the past ten years. In other cases, unanticipated revenues could be defined as any revenues above the amount needed to pay for spending equal to the prior year’s level of spending grown for changes in population and inflation.
Proposition 1A would require the state to make annual “contributions” to a budget reserve until the balance in the reserve reaches 12.5 percent of General Fund revenues, impose limits on the use of the reserve in “bad budget” years, and limit the state’s ability to spend existing revenues.
Although Proposition 1A was passed as part of the package to balance the 2009–10 budget, it would not significantly affect this year’s budget. Most of its provisions go into effect starting with the 2010–11 budget or later, as described below.
If Proposition 1A is approved, tax increases adopted as part of the 2009–10 budget package would be extended by one to two years. In total, this extension of higher taxes is projected to increase revenues by a total of roughly $16 billion from 2010–11 through 2012–13. (This total would be about $2.5 billion lower if a certain level of federal stimulus funds were available to the state.)
Increases the Governor’s Authority to Reduce Spending
If Proposition 1A passes, the Governor would be given new authority to reduce certain types of spending during a fiscal year without additional legislative approval. (This authority is included in a part of a new law that will only go into effect if Proposition 1A passes.) Specifically, the Governor could reduce:
1. Many types of spending for general state operations (such as equipment purchases) or capital outlay by up to 7 percent.
2. Cost-of-living adjustments (COLAs)— provided to account for inflation—for any programs specified in the annual budget. This would not apply to any increases for most state employees’ salaries.
Allows Adjustments for New Taxes, But Not Fees
Proposition 1A’s limits on spending adjust the “revenue forecast” amount to reflect increases (or decreases) in state taxes that have been in effect for less than 10 years. The result of this adjustment is to allow the state to spend revenues from tax increases that exceed the limit that otherwise would apply in years when state spending is determined by the 10-year trend line. Proposition 1A does not, however, make a similar adjustment for changes in state fees.
The failure to provide similar treatment for fees would limit the Legislature’s ability to raise fees to close a budget gap to the extent the increase raised General Fund revenues above the amount determined by the 10-year trend line.
Spending Out Of The BSF
Funds in the BSF currently can be transferred out of the fund to the General Fund for spending for any purpose through the passage of a law. Under this measure, some revenues in the BSF would be required to be spent on particular purposes, including:
1. If both Proposition 1A and Proposition 1B on this ballot pass, the state would be required to pay K–12 schools and community colleges $9.3 billion in supplemental funds to address recent funding reductions. This measure establishes the way in which these payments would be made.
2. Each year beginning in 2011–12, 1.5 percent of state revenues (currently about $1.5 billion) would be taken from the BSF and paid to schools and colleges until the entire $9.3 billion was paid.
3. Regardless of the state’s financial situation, the Governor could not suspend these payments. As a result, at least 1.5 percent of General Fund revenues would be transferred into the BSF every year until the entire amount was paid.
4. After the $9.3 billion in educational payments were made (or if Proposition 1B does not pass), 1.5 percent of state revenues each year would be dedicated to paying for infrastructure or state bond debt. These payments could be used to reduce obligations that would otherwise fall on the General Fund.
i. Under current law, one-half of transfers into the BSF—up to $5 billion total—is used to make extra ERB payments. This measure excludes the supplemental education funding transfers from this calculation. In years when transfers are made into the BSF (assuming Proposition 1B passes), therefore, the extra ERB payments would be smaller than otherwise.
ii. The ability of the state to transfer funds out of the BSF for other purposes would be significantly limited under the measure. Specifically, transfers out of the BSF would be limited to the following two situations:
a. Funds in the BSF could be used to cover any costs associated with an emergency, such as a fire, earthquake, or flood.
b. If revenues were not high enough to cover state spending equal to the prior year’s level of expenses (grown for population and inflation), then BSF funds could be used to meet that level of spending.
Will Give Governors The Authority To Make Mid-Year Spending Reductions Without Legislative Input
SB 8 (Ducheny), passed as part of the recent budget agreement, gives governors the unilateral authority to cut spending if available resources decline or expenditures increase “substantially” mid-way through a budget year. This provision would only take effect if Proposition 1A is approved by the voters.
The new authority would allow an appointee of the governor, the Director of Finance, to reduce appropriations that support the operations of the state by up to 7 percent, except for amounts appropriated for the support of the Legislature and constitutional officers, the transfer of the sales tax paid on gasoline from the General Fund to transportation, debt service, health and dental benefits for state retirees, and limited other expenditures.
SB 8 also allows the Director of Finance to suspend cost-of-living adjustments or rate increases for up to 120 days and, if the governor declares a fiscal emergency, cost-of-living adjustments would not be made until the Legislature sends the governor one or more bills addressing the emergency.
SB 8 does not define the term “substantially” and would thus allow directors of finance to make significant reductions – of up to 7 percent of an appropriation – in response to a relatively modest budget shortfall.
Moreover, Finance Directors would gain this authority based on estimated, rather than actual, revenue shortfalls or expenditure increases, including estimates made early in a fiscal year when forecasts may differ significantly from final collections or spending levels.
Is Incompatible With Existing Constitutional Guarantees, “Earmarks,” and Set-Asides
Prop 1A would be layered on top of the state’s existing and complex array of constitutional funding guarantees, funding restrictions, and revenue set-asides. In some instances, the interaction of Proposition 1A with these existing provisions could result in unintended consequences and could limit the state’s ability to fund programs and services that lack constitutional protection, such as health, human services, resources, and higher education.
For example, Proposition 1A would require “unanticipated revenues” to be transferred out of the General Fund and used for limited purposes, while at the same time leaving intact the requirement that all of these moneys be transferred to transportation. In essence, the interaction of Proposition 1A of 2009 with the existing transfer would be to spend the same dollars twice – requiring both transfers to transportation and a set-aside of the portion of revenues deemed to be “unanticipated” for a limited set of purposes. The result would be a reduction in the resources available to support programs and services lacking constitutional protection.
Is Based on Estimated, Not Actual, Revenues and Expenditures
Many of the calculations used in Proposition 1A are based on estimated, not actual, revenues and expenditures. The annual contribution, for example, would be 3 percent of the amount estimated in the Budget Bill for a given fiscal year, an estimate generally prepared in May for the fiscal year that begins on July 1. This would inevitably result in contributions that are larger or smaller than would be required by a calculation based on actual collections.
In years when revenues fall below forecast, it could result in contributions that are much larger than 3 percent of final revenues and/or transfers being made in years when the state experiences a significant mid-year budget shortfall. While the calculations used to determine whether there are “unanticipated revenues” are made in late May, near the end of the fiscal year, they are based on estimates made by the Director of Finance.
Proposition 1A does not provide a procedure for legislative oversight or appeal of an estimate that it believes is in error.
Proponents (Legislators, the Governor & the California Teacher’s Assoc. (CTA)) Say:
Proposition 1A argue that it is needed to force “politicians to set aside money every year into a special “’rainy day’ fund” and to put “restrictions on the amount the state can spend each year.” It’s always interesting when politicians put measures such as Prop 1A before the voters and argue – generally with a straight face – that the measure will “force politicians” (themselves) to either do the right thing or “keep politicians” (themselves) from taking action that would contravene doing the right thing. I thought they were elected to do the right thing whether forced or otherwise.
Opponents (Practically everyone except Legislators, the Governor & CTA) Say:
Opponents of Proposition 1A argue that “its complex formulas and fine print will invite unintended consequences and behind the scenes manipulation” and that as a result, “the effects of Proposition 1A will be far different than its supporters promise.”
ANALYSIS
Proposition 1A will not address California’s existing structural shortfall – the gap between revenues and expenditures – that exists in all but the best budget years. The state’s two long-term budget forecasts, issued by the Legislative Analyst’s Office (LAO) and the Department of Finance, both identify an ongoing gap between revenues and expenditures. Moreover, the Department of Finance’s forecast projects a significant ongoing gap even taking into account the continuation of the spending reductions outlined by the Governor in his proposed 2009-10 budget.
The revenue forecast amount established by Proposition 1A, which limits spending from the state’s existing tax base, would be significantly below the Governor’s “baseline” spending forecast, a forecast that assumes that the cuts proposed by the Governor in his New Year’s Eve budget release continue.
For example, in 2010-11, the first year when the Director of Finance would be required to calculate whether the state has received “unanticipated revenues,” the revenue cap would be an estimated $16 billion lower than the Governor’s “baseline” spending estimate for the same year. The gap would widen in 2011-12 and 2012-13 to $17 billion and $21 billion, respectively.
By basing the new cap on a level of revenues that is insufficient to pay for the current level of programs and services, Proposition 1A would limit the state’s ability to restore reductions made during the current downturn out of existing revenues.
For example, had Proposition 1A been in effect during the late 1990s, it would have diverted “unanticipated” revenues from the General Fund in 1995-96 and 1996-97, years when the “expenditure forecast” amount, the test used to trigger the shift of monies out of the General Fund under 1A, was below the LAO’s 1995 “current services” forecast for the same fiscal year.
Unfortunately, if we look beyond the current budget debacle (and, thus beyond the current office holder’s term limits), Prop 1A is an obvious short-term, stop-gap effort to make it seem like something’s being done to fix the budget mess as we head into an election year, and it’s proponents have no regard for what it will would mean for the state’s ability to address future policy, demographic, and economic challenges.
Prop 1A is touted by its proponents as the way to bring stability to the state budget process. Sure. How long has it been since California legislators passed a budget on time? During the Gold Rush, right?
A balanced budget?
Have you seen the new “revenue neutral” trick? Raise taxes and cut programs so this year’s total budget amount does not exceed last year’s total budget amount. Therefore, the tax increases really aren’t tax increases and the service cuts really aren’t service cuts – the budget is the same as last year (except for the new taxes and new service cuts).
Prop 1A would lock the state into allocating certain amounts to certain specific areas without the flexibility to correct budgetary problems as they occur.
Prop 1A will 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 will 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.
RECOMMENDATION
California needs budget reform. Unfortunately, Prop 1A will only make things worse.
I’ve given up hope that the state legislature will put forward a real budget reform package.
VOTE NO.
PROPOSITION 1B
EDUCATION FUNDING. PAYMENT PLAN.
· Requires supplemental payments to local school districts and community colleges to address recent budget cuts.
· Annual payments begin in 2011–12.
· Payments are funded from the state’s Budget Stabilization Fund until the total amount has been paid.
· Payments to local school districts will be allocated in proportion to average daily attendance and may be used for classroom instruction, textbooks and other local educational programs.
How Proposition 1B Relates to Proposition 1A:
Proposition 1B is tied to the passage of Proposition 1A. Proposition 1B was also placed on the ballot by the Legislature as part of the February budget agreement. Proposition 1B establishes a mechanism for increasing funding subject to the Proposition 98 guarantee in future years to make up for the reductions in the 2007-08 and 2008-09 budgets.
Proposition 1B will only take effect if voters also approve Proposition 1A. That’s why CTA supports 1A – it will permit 1B under which they would get more money – in the short term.
Summary of Legislative Analyst’s Estimate of Fiscal Impact:
Good News: Potential savings of up to several billion dollars in 2009–10 and 2010–11
Bad News: Potential costs of billions of dollars annually thereafter.
BACKGROUND
Proposition 98 Establishes a Minimum Funding Level
Proposition 98, passed by voters in 1988 and modified in 1990, requires the state to provide a minimum level of funding each year for kindergarten through twelfth grade (K–12) education and community colleges. Together, these schools and colleges are commonly referred to as K–14 education. The Proposition 98 requirement is met using both state General Fund and local property tax revenues. In 2008—09, the state budget includes $51 billion in Proposition 98 funding. Of this total, about $35 billion is from the state’s General Fund, with the other $16 billion from local property tax revenues.
“Minimum Guarantee” Determined by One of Three Tests (Stick with me, this is pretty confusing and ultimately doesn’t really matter, but it’s good to know.)
Proposition 1B responds to a technical, unresolved issue related to the calculation of the Proposition 98 school-funding guarantee. The Governor’s Proposed Budget assumes that the minimum required 2008-09 funding level for education would be determined by Proposition 98’s “test 1.” The Governor then asserts that under “test 1,” no maintenance factor obligation is created and the state would not be required to restore funding to the level at which it would have been if 2008-09 funding had been determined on Proposition 98’s “test 2.”
The Governor’s interpretation of Proposition 98 is flat out wrong and more wishful thinking than anything else. A maintenance factor should be created in 2008-09. While the dollar difference between the guarantee calculated under “test 1” and “test 3” is small, the difference of interpretation has a major impact on future years’ school funding.
Proposition 1B, along with Proposition 1A, would sidestep this issue by creating the Supplemental Education Payment Account (SEPA), linked to the Budget Stabilization Fund (BSF), which would be used to restore the Proposition 98 “base” by allocating half of the amount contributed to the BSF each year – an amount equal to 1.5 percent of General Fund revenues – to Proposition 98-supported programs beginning in 2011-12. This allocation would continue until $9.3 billion in payments, which would count toward the Proposition 98 guarantee for purposes of calculating subsequent years’ guarantees, are made.
Legislature Can Override Tests (This is where the “test” thing doesn’t matter)
The test that applies in any particular year depends upon a number of factors. The Legislature and the Governor, however, can override these tests and provide less than otherwise required. They can do so by suspending Proposition 98, which requires a two-thirds vote of each house of the Legislature and the approval of the Governor.
Revenue Limits Provide Per-Pupil Funding for General Education Purposes
Approximately two-thirds of Proposition 98 funding for school districts is used for K–12 revenue limits. Revenue limits provide funding for general education purposes—that is, few requirements are attached to this funding. Districts decide how specifically to use the funds. School districts receive a funding amount per student (as measured by average daily attendance).
Revenue limit amounts were initially based on each district’s per-pupil funding level in the 1970s, which varied significantly among districts. Since then, the Legislature has provided additional revenue limit funding specifically for the purpose of “equalization.” This funding has gone to those districts with the lowest per–pupil revenue limit amounts in order to reduce funding differences among school districts.
PROPOSAL
Proposition 1B amends Proposition 98 and Creates $9.3 Billion “Supplemental Education” Obligation
This measure requires the state to make a total of $9.3 billion in supplemental payments to K–14 education. The payments would be made in annual installments, beginning in 2011–12. They would become part of the base budget when calculating the following year’s Proposition 98 minimum guarantee.
Supplemental Payments in Place of Maintenance Factor Payments
These payments would replace any payments that the state would otherwise be required to make under current law for maintenance factor obligations created in 2007–08 and 2008–09.
Distribution of Funds
The measure gives discretion to the Legislature and the Governor regarding how these payments would be distributed between K–12 education and community colleges.
Well, it sounded pretty good until it came to the “discretion,” “legislature,” and “Governor” parts. Is it just me, or should “discretion” and “legislature” or “Governor” never appear in the same sentence?
ANALYSIS
If the voters approve both Proposition 1A and Proposition 1B, Proposition 1B would:
• Allocate 1.5 percent of estimated General Fund revenues to the SEPA each year beginning on October 1, 2011 until a total of $9.3 billion of payments have been made.
• State that contributions to the SEPA are in lieu of any maintenance factor obligation that otherwise may apply as a result of the level of funding provided under Proposition 98 in 2007-08 and 2008-09.
• Count any payments made from the SEPA toward the calculation of subsequent years’ Proposition 98 school funding guarantee.
• Allocate up to $200 million of each year’s SEPA payment to certain school districts that receive relatively low “revenue limit” allocations from the state. Payments to these districts are generally referred to as “equalization” payments.
• Allocate the remainder of the annual contribution to school and community college districts. Payments to K-12 education would be based on school districts’ per pupil “revenue limits.”
The Impact Proposition 1B Would Have on the Budget
The impact of Proposition 1B on the budget depends on the interpretation of Proposition 98 and, in particular, resolution of the question of whether “test 1” or “test 3” should apply in 2008-09 and whether or not a maintenance factor obligation is created in 2008-09. Passage of Proposition 1B would likely avert further controversy over, or resolution of, this issue by providing future payments in an amount similar to what would be owed had a maintenance factor obligation been created. If a maintenance factor were created at the 2008-09 funding level, the balance of the outstanding obligation for 2007-08 and 2008-09 would be $9.3 billion.
Proposition 1B either increases the state’s school funding obligation or provides payments similar to those that would be required under current law. The Legislative Analyst’s Office (LAO) notes that Proposition 1B “could postpone maintenance factor payments that otherwise would have been made” in 2009-10 and 2010-11, but that under alternative interpretations, no savings would occur.
Similarly, the LAO notes that the long-term impact of payments mandated by Proposition 1B is “subject to considerable uncertainty…however, costs for K-14 education likely would be higher than under current law – potentially by billions of dollars each year.”
RECOMMENDATION
When revenues tanked last year, the state (i.e., Governor and legislature) paid schools less than the amount that they were required under Proposition 98, the constitutional requirement governing state education funding. The budget agreement allocates $7.9 billion less than schools should have received.
CTA and other education groups believe the state is required to pay that money back to them in later years under Proposition 98. However, the Governor said that he believes the state can avoid repayment under Proposition 98.
CTA and school groups threatened to sue the state for that money. Legislative leaders bought CTA off by agreeing to pay education a total of $9.3 billion (including $1.4 billion the state owes schools from 2007-08) starting in 2011 if voters approve Proposition 1B.
Lawmakers included the mechanism for paying back schools in Proposition 1A, so schools cannot get the $9.3 billion unless both Propositions 1A and 1B pass.
The Legislative Analyst's Office estimates it could take the state five to six years to repay that total amount. The money is of crucial importance to schools because it gets factored into future calculations for education funding.
So, the CTA (and the California Federation of Teachers), agreed to support Proposition 1B, though only the CTA supports Proposition 1A. If either measure fails, CTA will go to court to recover the $9.3 billion. If forced to take the legal route, it will likely take more than the 5 or 6 years under Prop 1B to regain the money.
So far, CTA has raised more than $7 million to fuel an ad campaign promoting Propositions 1A and 1B, which is probably less than it would cost to sue and go through appeals all the way up to the state Supreme Court and possibly the U.S. Supremes.
Unfortunately, it’s a short-term fix that the CTA believes can be addressed through future budget negotiations. If CTA sues and the courts uphold Prop 98 (which they will), the legislature will never be able to touch that money again. I prefer the slow, steady, and ultimately permanent solution. Sue the Governor!
VOTE NO.
PROPOSITION 1C
LOTTERY MODERNIZATION ACT.
· Allows the state lottery to be modernized to improve its performance with increased payouts, improved marketing, and effective management.
· Requires the state to maintain ownership of the lottery and authorizes additional accountability measures.
· Protects funding levels for schools currently provided by lottery revenues.
· Increased lottery revenues will be used to address current budget deficit and reduce the need for additional tax increases and cuts to state programs.
Summary of Legislative Analyst’s Estimate of Fiscal Impact:
· Impact on 2009–10 State Budget: Allows $5 billion of borrowing from future lottery profits to help balance the 2009–10 state budget.
· Impact on Future State Budgets: Debt-service payments on the lottery borrowing and higher payments to education would likely make it more difficult to balance future state budgets. Additional lottery borrowing would be allowed.
OVERVIEW
Measure Allows State to “Borrow” From Lottery Profits
This measure is one of the major components of the plan approved by the Legislature and the Governor in February 2009 to balance the state budget. The measure makes major changes to the 1984 voter initiative that created the California Lottery. These changes could increase lottery ticket sales and allow the state to borrow $5 billion in the 2009–10 fiscal year from future lottery profits. In addition to borrowing this $5 billion, the state also could borrow more from lottery profits in future years. Under the measure, lottery profits now dedicated to schools and colleges would be used to pay back the borrowing.
Excuse me. Did they say that they (the legislature and the Governor) would make changes to what voters approved in 1984 (ironic year) so they could steal, “borrow” money from the lottery that is supposed to go to schools? They have the gall to call that lottery “modernization?” They certainly can’t think we are all that stupid, can they?
Laws Governing Use of Lottery Funds
Proposition 37, approved by state voters in 1984, directs the use of funds generated from sales of lottery tickets. It requires that 50 percent of these funds be returned to lottery players as prizes. Currently, the lottery may spend no more than 16 percent of its ticket sales on lottery operating expenses. The law dedicates lottery profits—the funds remaining after payment of prizes and lottery operating expenses—to educational institutions. These payments to educational institutions must equal at least 34 percent of the funds generated from lottery ticket sales each year.
Under Current Law, Lottery Funds Benefit Education Only
Lottery profits currently benefit educational institutions and are paid directly to schools, community colleges, and universities.
PROPOSAL
This measure modifies both the State Constitution and other state laws. It makes major changes in lottery operations and the allowed uses of lottery funds. These changes would allow the state to borrow from future lottery profits. These changes also would affect both the funding of educational institutions and the state General Fund.
Profits Would No Longer Be Dedicated to Education
Under Proposition 1C, lottery profits no longer would be paid to educational institutions beginning in 2009–10. Instead, payments to educational institutions from the state General Fund would increase to make up for the loss of the lottery payments.
ANALYSIS
Basically, Prop 1C would borrow $5 billion of future lottery profits to help pay for current cuts in the state budget. It would enact major changes in lottery operations and spending and would allow the state to borrow from future lottery profits. It would also change how profits are used in regards to educational institutions. General Fund would be required to make up for the loss to education of lottery funds.
In light of California’s poor credit rating and the state of the economy, these bonds may have to be sold at interest rates very unfavorable to the state, if they can be sold at all.
The nonpartisan Legislative Analyst’s Office says that in the long term, lottery profits probably would not cover the higher payments to education required by Prop 1C.
RECOMMENDATION
They do think we’re that stupid, they really do!
No more teachers, no more schools, no more education tools (I toyed with “legislative fools,” but it seemed redundant).
VOTE NO.
I see a trend developing …
PROPOSITION 1D
PROTECTS CHILDREN’S SERVICES FUNDING. HELPS BALANCE STATE BUDGET.
· Provides more than $600 million to protect children’s programs in difficult economic times.
· Redirects existing tobacco tax money to protect health and human services for children, including services for at-risk families, services for children with disabilities, and services for foster children.
· Temporarily allows the redirection of existing money to fund health and human service programs for children 5 years old and under.
Oh, good! We like children. We like services for children. We really like when those services have funds so children may benefit from them. And, we really, really like balanced budgets!
Summary of Legislative Analyst’s Estimate of Fiscal Impact:
· State General Fund savings of up to $608 million in 2009–10 and $268 million annually from 2010–11 through 2013–14, from temporarily redirecting a portion of funds from the California Children and Families Program in place of state General Fund support of health and human services programs for children up to age five.
· Corresponding reductions in funding for early childhood development programs provided by the California Children and Families Program.
I thought they said they would INCREASE funding for children’s services? I’m confused …
Unspent Fund Balances
Proposition 10 provides that any revenues to the state and local commissions not spent during a fiscal year are carried over for use in subsequent fiscal years. As of June 30, 2008, the local commissions had a total of about $2.1 billion in unspent funds, and the state commission had about $400 million in unspent funds.
Other State Health And Human Services Programs For Children
The state currently administers a variety of health and human services programs that serve children, many of whom are age five or younger. Examples of these state-supported health and human services programs include foster care, health coverage services like Medi-Cal and Healthy Families, state preschool, and child care. These programs currently are largely operated separately from the First 5 programs and are supported by the state General Fund.
PROPOSAL
In 1998, voters approved Proposition 10, which imposed additional taxes on cigarettes and other tobacco products, with revenues used to pay for early childhood development programs. The initiative created the California Children and Families Program (now commonly known as the First 5 program) to expand early development programs for children up to age five.
Proposition 1D would temporarily allow Proposition 10 revenues to be used to fund other state health and human services programs for children up to age five. It would also make permanent changes to the operations of state and local commissions that manage First 5 funds.
Permanent Changes (They just said TEMPORARY and in the following sentence they said PERMANENT! What’s going on here?)
New Requirements for Distribution of Audits and Reports
Prop 1D requires that the county commissions also submit their annual audits and reports of their expenditures to the county board of supervisors and the county auditor. In addition, it requires that each county auditor serve on the local First 5 commission.
Changes in Allocation of State Commission Funds
The measure also amends the allocation requirements for the state commission’s 20 percent of Proposition 10 revenues. Specifically, it deletes the allocation now provided for mass media communications (now 6 percent) and increases the allocation for general program purposes (from 2 percent to 8 percent). Under the measure, the state commission must also ensure that every county commission receives at least $400,000 each year.
County Borrowing of First 5 Funds
Finally, Prop 1D allows a county controller to borrow local commission funds for that county’s general fund, unless the transfer would interfere with local commission activities.
FISCAL EFFECTS
Reduction in Funding Available for Existing State and Local Commission Programs
This measure would reduce state commission funding by up to $340 million on a one-time basis in 2009–10 by redirecting the state commission’s reserve funds. In addition, it would reduce funding for the state and local commissions by $268 million annually from 2009–10 through 2013–14.
ANALYSIS
What Is First 5?
Proposition 10, approved by voters in 1998, established the California Children and Families Program with the aim of “promoting, supporting, and improving the early development of children” through age 5. Funding for the program – commonly known as “First 5” – comes from a 50-cent-per-pack state tax on cigarettes.
Twenty percent of revenues raised by Proposition 10 are allocated to the state First 5 California Children and Families Commission; the remaining 80 percent of revenues are distributed to the 58 county First 5 commissions based on each county’s share of the total number of children born in California each year.
First 5 funds support a wide range of statewide and local programs and services – including preschool, school readiness programs, health coverage for children who would otherwise be uninsured, immunizations, and screenings for developmental delays – that assist more than 850,000 California children age 5 and younger.
First 5 funds must be used to “supplement existing levels of service” and cannot be used to “supplant state or local General Fund money for any purpose.”
County First 5 commissions received $438.9 million in 2007-08, while the state commission received $109.7 million during the same period.
Proposition 1D would divert – for five years – a portion of tobacco tax revenues intended for state and county First 5 activities to the state’s General Fund to help balance the state’s budget. Proposition 1D also would make a number of other programmatic changes to First 5.
Specifically, Proposition 1D would:
• Divert more than $1.6 billion of First 5 funds to help balance the state’s budget
Proposition 1D would annually divert $268.0 million of state and county First 5 funds to the General Fund between 2009-10 and 2013-14.
In addition, this measure would shift between $275.0 million and $340.0 million from the state First 5 Commission’s balances “that are not encumbered or expended by July 1, 2009” to the state’s General Fund. These funds – totaling between $1.62 million and $1.68 billion over five years – would replace General Fund dollars that currently support state health and human services programs for children up to age 5, generating more than $1.6 billion in state General Fund savings.
This five-year fund shift requires voter approval because it is inconsistent with Proposition 10’s intent to use tobacco tax revenues raised by the measure exclusively to expand child development programs and services.
Programs that could be funded with First 5 funds under Proposition 1D include child welfare services, foster care, adoption assistance, and services for infants and toddlers with developmental disabilities.
• Narrow the range of services that could receive First 5 funds
Currently, the state and county First 5 commissions can use First 5 funds for the broad purpose of promoting, supporting, and improving early childhood development. Proposition 1D would limit the use of First 5 funds to the provision of direct health care services; direct early education services, including preschool and child care; and human services, including services for families who are involved with the child welfare system.
However, the measure does not define what is meant by “direct” services.
• Eliminate dedicated funding for statewide public information campaigns and redirect a portion of the funds to small counties
Currently, funds in the state First 5 Commission’s mass media communications account support public information campaigns related to childcare, school readiness, effective parenting, and other child development issues. Proposition 1D would eliminate the mass media communications account and redirect the funds to the state commission’s unallocated account.
Proposition 1D also would require every county commission to receive a “base level of funding” of at least $400,000 per year regardless of the number of children born in the county – a change that would primarily benefit counties with relatively small populations. Funds in the state commission’s unallocated account would be used to bring small counties up to the $400,000 threshold. Any funds remaining in the unallocated account could be used 0to support public information campaigns and other purposes.
• Make additional changes
In addition to allowing counties to “borrow” First 5 funds, Prop 1D requires County First 5 Commissions to submit audits and reports to the County Board of Supervisors and the County Auditor, and put the County Auditor as an ex officio member of First 5 commission.
Proponents Argue
Proponents argue that Proposition 1D “will help solve California’s current budget crisis” and that “the state must use all of its available resources to protect and sustain existing programs,” such as the child welfare and foster care programs.
Opponents Argue
Opponents argue that Proposition 1D “will take $1.6 billion away from critical local health and education programs for young children and give it to Sacramento politicians” and “is the kind of short-term Sacramento gimmick that created our state budget crisis in the first place.”
Recommendation
· First 5 funds were never meant to generate state budget savings.
· Proposition 1D would divert a more tobacco tax revenues to non-First 5 programs every year the fund shift remains in effect.
· Proposition 1D would likely result in cuts to First 5 programs and services.
· Proposition 1D would permanently restrict the types of services funded through First 5
It says, “provides more than $600 million to protect children’s programs in difficult economic times.” Up top. In black and white. $600 million. Protect children’s programs.
Oh, I get it! These must not be “difficult economic times.” Now, it all makes sense.
VOTE NO!
PROPOSITION 1E
MENTAL HEALTH SERVICES FUNDING. TEMPORARY REALLOCATION.
· Amends Mental Health Services Act (Proposition 63 of 2004) to transfer funds, for a two-year period, from mental health programs under that act to pay for mental health services for children and young adults provided through the Early and Periodic Screening, Diagnosis, and Treatment Program.
· Provides more than $225 million in flexible funding for mental health programs.
Summary of Legislative Analyst’s Estimate of Fiscal Impact:
· State General Fund savings of about $230 million annually for two years (2009–10 and 2010–11) from redirecting a portion of Proposition 63 funds to an existing state program in place of state General Fund support.
· Corresponding reduction in funding available for Proposition 63 community mental health programs.
BACKGROUND
Proposition 1E would amend the Mental Health Services Act by transferring funds designated for mental health programs into the state's General Fund for a two-year period. The Mental Health Services Act, established in 2004 with the passage of Proposition 63, imposed a state income tax surcharge of 1% on personal income exceeding $1 million. This revenue has been used to fund mental health programs implemented by the state Department of Mental Health.
County Mental Health Services
Counties are the primary providers of mental health care in California communities for persons who lack private coverage for such care. Both children and adults are eligible to receive such assistance. Counties provide a range of psychiatric, counseling, hospitalization, and other treatment services to patients. These services are intended to help improve the health and functionality of individuals with mental illness while also minimizing their potential for disability, homelessness, criminal activity, and hospitalization.
County mental health programs are paid for with a mix of state, local, and federal funds.
Counties spend about $5 billion annually from these sources on these programs. Some support for county mental health programs is provided through the state budget act and thus is subject to annual actions by the Legislature and Governor. Some state revenues, however, are automatically set aside for the support of these programs.
Proposition 63: Mental Health Programs Funded With Personal Income Tax Surcharge
In November 2004, California voters approved Proposition 63, also known as the Mental Health Services Act. Proposition 63 provides state funding for certain new or expanded mental health programs through a personal income tax surcharge of 1 percent on the portion of a taxpayer’s taxable income in excess of $1 million.
Revenues generated by the surcharge are dedicated to the support of specified mental health programs and, with some exceptions, are not appropriated by the Legislature through the annual budget act.
Full-year annual Proposition 63 revenues to date have ranged from about $900 million to $1.5 billion, and could vary significantly in the future.
Program Activities Supported From Proposition 63 Funds
Proposition 63 funding is generally provided for five major purposes:
1. Expanding community services,
2. Providing workforce education and training,
3. Building capital facilities and addressing technological needs,
4. Expanding prevention and early intervention programs; and,
5. Establishing innovative programs.
How Proposition 63 Programs Are Administered
The state Department of Mental Health (DMH), in coordination with certain other agencies, has the lead role at the state level in implementing most of the programs specified in the measure—generally through contracts with the counties. Counties draft and submit for state review and approval their plans for the delivery of certain mental health services funded under Proposition 63. Some Proposition 63 funds are used in combination with matching federal funding to provide mental health services for persons eligible under the Medi-Cal health care program. (Medi-Cal provides health care services to qualified low-income persons, primarily consisting of families with children and the aged or disabled.)
Restrictions on Use of Proposition 63 Funds
Proposition 63 imposes various restrictions on the state and counties regarding spending on mental health programs. For example, Proposition 63 revenues must be used to expand mental health services and cannot be used for other purposes. The state is specifically barred from reducing General Fund support for mental health services below the levels provided in 2003–04.
The Early and Periodic Screening, Diagnosis, and Treatment (EPSDT) Program
The EPSDT is a federally mandated program that requires states to provide a broad range of screening, diagnosis, and medically necessary treatment services—including mental health services—to Medi-Cal beneficiaries under age 21. The DMH administers the mental health services required under the EPSDT program generally through county contracts. These services include group and individual counseling and assistance in stabilizing children and young adults who experience a mental health crisis.
Total expenditures for EPSDT specialty mental health services now exceed $1 billion annually. The federal government provides about one-half of the funding, with most of the remaining cost borne by the state and a small portion borne by the counties.
FISCAL EFFECTS
Funding Redirection From Proposition 63 Programs to EPSDT
This measure would result in state General Fund savings of about $230 million a year for two years (2009–10 and 2010–11) from redirecting a portion of Proposition 63 funds to state-supported EPSDT mental health services. It would result in an equivalent reduction in Proposition 63 funding.
Additional Potential Fiscal Effects Due to Redirection of Proposition 63 Funds
The proposed “temporary” redirection in Proposition 63 funding would make less money available for mental health programs. To the extent that such programs are reduced, state and local governments could incur added costs for homeless shelters, social services programs, medical care, law enforcement, and county jail and state prison operations.
The extent of these potential costs is unknown and would depend upon the specific programmatic changes that resulted from the redirection of Proposition 63 funding.
Potential Decrease in Federal Funds
Some Proposition 63 funds are used to draw down federal matching funds through the Medi-Cal Program. Thus, the redirection of Proposition 63 funds proposed in this measure could result in a decrease in federal financial support.
PROPOSAL
Prop 1E would use a portion of the revenues raised by Proposition 63 to offset costs that would otherwise be paid for out of the General Fund. Specifically, Proposition 1E would shift $226.7 million in 2009-10 and up to $234.0 million in 2010-11 from the Mental Health Services Fund (MHSF) to the General Fund, resulting in equivalent General Fund savings.
Prop 1E specifies that the diverted Proposition 63 funds would be used to support the Early and Periodic Screening, Diagnosis and Treatment (EPSDT) Program – a federally mandated program that requires the state to provide certain screening, diagnostic, and treatment services to Medi-Cal recipients under age 21.
In effect, these Proposition 63 revenues would be used to offset state costs that would otherwise be borne by the General Fund.
ANALYSIS
Most of the Revenues Raised by Proposition 63 Have Not Been Spent
The majority of the revenues raised by Proposition 63 have not been spent due to implementation delays. A recent audit found that the Department of Mental Health (DMH) had developed an inefficient process for implementing Proposition 63 and had deviated from some of the measure’s requirements, both of which contributed to delays. As a result the distribution of funds to counties was “untimely” and “not in compliance” with Proposition 63. The most recent report documenting expenditures from revenues raised by Proposition 63 shows that as of the end of 2007-08, just under $2 billion of the more than $4.1 billion raised by Proposition 63 had been distributed by the DMH to county programs.
Thus, a substantial amount of the total revenues collected remained unspent.
Proposition 1E Would Shift Funds From a Revenue Source that Will Increase Over Time
Unlike Proposition 1D, which would divert funds from tobacco tax revenues – a revenue source that is declining as tobacco consumption falls – Proposition 1E would shift funds from a revenue source that is likely to increase over time as Californians’ incomes rise and more taxpayers – and larger shares of their incomes – are subject to Proposition 63’s tax.
Since Proposition 63 took effect, the number of “millionaire” taxpayers – those with incomes of more than $1 million – has increased considerably. Between 2004 and 2007, the number of millionaire taxpayers rose by 48.6 percent, while the total number of personal income taxpayers increased by 8.6 percent. During this period, the total adjusted gross income (AGI) – income reported for tax purposes – of millionaire taxpayers increased by 65.0 percent, compared to a 26.4 percent increase in the total AGI of all personal income taxpayers.
Proponents Argue
Proponents of Prop 1E argue that it is needed to “help reduce the magnitude of cuts that would otherwise have occurred in other state funded programs.” In addition, proponents claim that the amount of Prop 63 funding “sitting in state coffers … is more than is needed to fund current services” and that even though “in the long run this money is probably best spent on Prop 63 programs, we cannot afford to only do that right now.”
Opponents Argue
Opponents of Proposition 1E argue that “even in this difficult time, we ought to respect the will of the people” who approved Proposition 63. In addition, opponents claim that Proposition 63 programs “are working and save the state money” and that diverting a portion of Proposition 63 funding “will impede us from serving even more people.”
Recommendation
[Mini-Rant – Taking money from our children’s education. Taking money from programs that assure our most vulnerable young children’s health needs are met. Taking funds from programs that benefit the mentally ill.
Why? By putting these measures on the ballot, the Governor and legislators, after being deadlocked for fifteen weeks past the Constitutionally mandated deadline for a balanced budget to be approved, punted.
They can’t make these cuts themselves because the voters of California approved these programs for specific reasons as constitutional amendments over the past ten or twenty years because the legislature had failed to address these issues on their own.
Now, under the guise of “budget reform,” they are raiding funds that voters specifically said that legislators can’t touch because voters knew that the legislature is like Midas reversed – anything gold (worth value) turns to stone (I actually have a more vulgar word in mind) when they touch it.
Why can’t just one of California’s elected officials simply say: “The free ride is over, and we are taking money from those who can’t vote so you don’t have to pay (much) higher taxes. ”
Californians have received so much for so little for so long that they have come to believe services are a right, not a privilege. Being asked to pay for those services is the way it generally works. And, I could go on for another 28 pages just on Prop 13 alone.
Hell, here in San Diego, I’ve been trying to repeal the so-called “Peoples Ordinance” of 1919 that doesn’t allow the City to charge for residential garbage collection since 1986! I have the plan and the strategy to do it, but no politician will touch it.
End of mini-rant.]
VOTE NO ON PROP E AS WELL, DAMN IT.
PROPOSITION 1F
ELECTED OFFICIALS’ SALARIES. PREVENTS PAY INCREASES DURING BUDGET DEFICIT YEARS.
Prop 1F is supposed to encourage balanced state budgets by preventing elected Members of the Legislature and statewide constitutional officers, including the Governor, from receiving pay raises in years when the state is running a deficit.
Prevents the Citizens Compensation Commission from increasing elected officials’ salaries in years when the state Special Fund for Economic Uncertainties is in the negative by an amount equal to or greater than one percent of the General Fund.
BACKGROUND
Voter-Created Commission Sets State Official Pay and Benefits
Proposition 112—approved by voters in June 1990—amended the State Constitution to create the California Citizens Compensation Commission. The commission includes seven members appointed by the Governor, none of whom can be a current or former state officer or state employee. The commission establishes the annual salary, as well as medical insurance and other benefits, for the legislature, the Governor, and other elected state officials.
While the commission has control over most pay and benefits received by these state officials, members of the Legislature receive “per diem” payments to cover lodging, meals, and other expenses for every day there is a legislative session. In addition, the commission has no control over elected official’s retirement benefits.
Current Salaries of Elected State Officials
Elected state officials are currently eligible to receive annual salaries ranging from $116,000 (for legislators) to $212,000 (for the Governor).
PROPOSAL
This proposition would amend the state Constitution to prevent the commission from approving increases in the annual salary of elected state officials in certain cases when the state General Fund is expected to end the year with a deficit, as certified by the state Director of Finance (who is appointed by the Governor).
Cost Savings From State Officials’ Salaries During Certain Deficit Years
This measure would prevent the commission from approving pay increases for state officials in certain cases when the state General Fund is expected to end the year with a deficit.
ANALYSIS
Prop 1F is one of several things (that are publically known) state Senator Able Maldonado (R-Santa Maria) extracted from the Governor and Democratic lawmakers in February 2009 in exchange for casting the deciding vote to approve a massive budget package of tax increases, spending cuts, and borrowing to close a $42 billion deficit after the legislature had gone a record 15 weeks without a budget agreement.
Maldonado provided the crucial 27th vote in the state Senate for the state budget in exchange for statewide elections to approve constitutional amendments banning legislative pay increases during deficit years and establishing an open primary system (which we will see in 2010). Able wanted to eliminate legislative pay altogether when the budget is late, but legislative leaders refused.
However, they did agree to Maldonado’s demand to eliminate the 12-cent additional gas tax, which was estimated to bring in $2.1 billion through June 2010.
Maldonado also was given the opportunity the screw popular Democratic state Controller John Chiang by having $1 million in funding to pay for new workstations eliminated. Why? It seems that Able and John simply don’t get along.
Yes, it was that petty.
Recommendation
It is largely symbolic, but at least there is one thing on the May 19 ballot that will not harm children, education, or the mentally ill.
