OUR VIEW, AND OTHERS, ON THE MAY 19, 2009 BALLOT PROPOSITIONS
And the issue is……TAXES.
A month ago, a $200 item would have cost you $215.50 at the check-out stand. Today, that same item will cost $217.50. Certainly, two dollars doesn’t sound like much……..until you consider how many taxable items you buy each month.
California is faced with a major budget crisis, as you all know. Sacramento has responded with several initiatives in an attempt to correct the situation. You’ll be asked to decide on these in May at a special election (we will not discuss here the cost of said election, the printing of the ballots in several languages, the booklet, etc.). Before doing so, recall the famous quote from Benjamin Franklin, “in this world, nothing is certain but death and taxes”.
There are two things one should contemplate when reading economic initiatives. One, beware of the use of the word “temporary”. It’s particularly jarring to read an initiative which proposes to “extend the temporary tax increases”. Another way to read that is “we promise that we’ll relieve you of this taxation……but we won’t promise you when”. “Temporarily re-directs” is also a red flag because there’s no assurance the funds will EVER be returned to the originally-designated item . Is there a possibility that they’ll be permanently “re-directed” thus necessitating a NEW tax to cover that resulting shortfall?
The second alarm bell sounds when the government asks you to approve “borrowing against future profits”. Spending money we don’t have in hand is precisely how we got into the fiscal mess. In this case, Initiative 1C focuses on lottery income. This will be “borrowing” from the educational system, already hard-pressed. “Re-paid”? When? In fact, wouldn’t it be interesting to see the actual figures of how many lottery dollars have actually trickled down to each of our local schools?
It is also worthwhile mentioning that, once an idea for a proposition is generated, oftentimes it is someone in the public relations game who’s hired to write the descriptive paragraph. This is an effort to convince the voters of the “rightness” of the proposition in the shortest possible space. Therefore, be very wary of words like “could, would or should, probably, possibly, potentially, may be, might be, etc”. They are used to obfuscate. Look for words which actually MEAN something, words which can be used to hold the legislators to task.
If you would like to read specific arguments for and against these six initiatives, there are several other sites including that of the the state (www.voterguide.sos.ca.gov ), California Teachers Association (www.cta.org) and the League of Women Voters (www.lwvc.org) .
In addition, Democratic Women of the Desert have outlined their position on these propositions. Scroll down to view.
May 19th Ballot Propositions
Actions recommended:
Information Provided by The Fiscal Report
volume 29, No.6 – March 20, 2009
Copyright 2009, School Services of California
|
Proposition Number |
Description |
Fiscal Impact |
Consequences of Failure |
|
1A |
Caps state spending based on the ten-year trend in state revenues; increase “rainy day” fund and limits how that money is spent; extend temporary tax increases for 1-2 years. This is linked to 1B; if Proposition 1B passes, a portion of the fund would be transferred to fund payments to K-14 education |
Higher state tax revenues of about $16 bullion from 2010-11 through 1012-13; increased amount of money in the state’s ”rainy day” reserve over time; potentially less ups and downs in state spending |
Loss of about $16 billion from 200-11 through 2012-13 if tax increases are not extended; state would not divert 1.5% of annual General Fund (GF) revenues beginning in 2011-12 to make supplemental payments for education |
|
1B |
Resolves controversy over payment of Proposition 98 “maintenance factor” for fiscal years 2009-10 & 2010-11 by providing $9.3 billion in supplemental education payments over 5-6 years, beginning in 2001-12, in lieu of maintenance factor payments. This is contingent upon passage of Proposition 1A |
Could save the state money by delaying maintenance factor payments |
If voters reject Proposition 1A or 1B, there will be no obligation to make the $9.3 billion in supplemental payments; but refusal to pay would likely be litigated |
|
1C |
Modernizes State Lottery to increase ticket sales; allows state to borrow $5 billion in fiscal year 2009-10 from future Lottery proceeds (securitize Lottery), to be paid back from lottery profits now going to education; increases GF payments to education to replace lost Lottery payments |
Allows $5 billion of borrowing from future Lottery profits; receipt of this funding is assumed in 2009-10 Budget. There would be annual debt-service payments of $350 million-$450 million for 20-30 years from the initial $5 billion in borrowing; any remaining Lottery profits would benefit GF, but would probably be insufficient to cover higher GF payments for education. The initiative also allows for additional future borrowing against future Lottery profits. |
If voters reject 1C, there will be a $5 billion hole in the Budget, and the Legislature and the Governor will probably have to agree to billions of dollars of additional spending cuts, tax increases, and/or other solutions. |
|
Proposition Number |
Description |
Fiscal Impact |
Consequences of Failure |
|
1D |
Temporarily redirects portion of Proposition 10 (First 5 program) funds to offset GF support of health and human services programs for children up to age five; permanently changes state and local First 5 commission operations |
Up to $608 million in 2009-10 from one time redirection of reserves and annual payment; $268 million annually from 2010-11 through 2013-14 |
Loss of $608 million in 2009-10 and $268 million annually from 2010-11 through 2013-14 that would be used to supplant GF expenditures |
|
1E |
Temporarily redirects some Proposition 63 mental health funds to an existing state program in place of state GF support |
$226.7 million in 2009-10; 226.7 million-$234 million in 2110-11 |
Loss of state GF savings of about $230 million annually for two fiscal years |
|
1F |
Prevents approval of salary increase for elected state officials when the state GF is expected to end the year with a deficit |
Minor savings in years when GF is expected to end the year with a deficit |
Loss of minor cost savings in deficit years |
Keithe Bisnett
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