Most of the measures on the May 19 special election ballot would help California begin to climb out of its current budget mess while laying a foundation for later, more thoughtful and more far-reaching reform. The Times recommends a yes vote on Propositions 1A, 1C, 1D, 1E and 1F.
Each has negative aspects, and we cannot be as cheerful as the campaign ads that began running last week ("Short-term revenue, long-term stability"). But except for 1B, as explained below, the good outweighs the bad. More details about each of the measures will follow on this page over the coming week, but here's our thinking on the overall package.
Proposition 1A is the heart of this special election and comes in three key parts: It would create a new, larger "rainy day" reserve that would lock up some state revenue in good years so that there would be enough to help the state weather bad years, like this one, without having to once again jack up taxes or slash programs that Californians don't want to slash; it would impose a soft spending cap to block lawmakers from launching expensive, ongoing programs with one-time revenue windfalls; and it would extend by up to two years the temporary tax increases that lawmakers adopted in February as part of their long-delayed budget deal.
Holding more money in reserve makes sense. The Legislature has demonstrated its inability to steward revenue that exceeds expectations; lawmakers spend it on new programs that can't be sustained, or they distribute tax cuts among special interests and find that those cuts too are unsustainable in future years. A larger reserve, with restrictions on when money could be released to pay for new programs, would help protect California from the kind of budgeting disaster that hit last year and will linger at least into next year.
The reserve fund is closely linked to the spending cap, and that gives us pause, because The Times has long objected to hands-free budgeting -- decision-making that removes human thinking from the fiscal planning process. But after several decades' worth of ballot measures that impose formulas to grab cash for education and other favored programs, California finds itself so far down the robo-budgeting road that it may need a bit more automation just to regain its bearings.
Extending the recent sales, vehicle license and income tax increases for a year past their current 2011-2012 sunset date provides revenue crucial to moving the state forward. The benefits outweigh the pain.
Proposition 1B is a different story. Unlike 1A, 1C, 1D and 1E, it brings nothing to the table -- no spending reform, no revenue. Most of the propositions are part of a solution, however imperfect. 1B is part of the problem.
It's ostensibly intended to restore $9.3 billion in funding that public schools and community colleges would get in better economic times under Proposition 98 (the granddaddy of ballot-box budgeting measures, passed in 1988 as an attempt to ensure adequate school funding). But in doing so, it could ratchet up the autopilot spending that Gov. Arnold Schwarzenegger says he's trying to stop. We support better funding for schools, but not by imposing more inflexible formulas.
1B isn't needed for the rest of the package to work as intended. It's there to persuade the California Teachers Assn. not to campaign against the package. That's not a good enough reason to pass it.
Proposition 1C would revamp the state lottery, allowing it to be "modernized" through new games, prizes and marketing, while raising $5 billion upfront by allowing investors to buy the rights to future lottery profits. Schools would lose their existing claim on one-third of lottery revenues but would come out ahead, with a new guarantee of $1.1 billion from the general fund.
If borrowing for today against future revenues sounds like a desperate move, well, it is. It's gambling on gambling. But the investors take most of the risk. Also, unlike 1B, 1C brings in money and does so without additional tax increases. Without the $5 billion it brings, California would have to make up the difference by again raising taxes or by making deeper, and ultimately more expensive, cuts. 1C is a decent bet.
Proposition 1D asks voters to modify a ballot measure they adopted in 1998 that imposes a tobacco tax, including 50 cents on every pack of cigarettes, to fund the successful "First 5" preschool and child services programs. It's on the ballot because, to be blunt, the tobacco tax fund has some money, the general fund needs it, and Sacramento deal-makers found it useful to go after it.
The tax has protected children's programsfrom the revenue roller coaster, and it delivers good results. But without 1D, the state would have to cut other programs that children and their families rely on -- foster care, in-home care, health and hospitalization. That means First 5 children and their families may actually be better off with 1D than without it, even though the people who administer the programs may not. First 5 programs would regain complete control of the tobacco tax funds in five years. It's not an ideal solution, but it's a useful and pragmatic one.
Proposition 1E is different only in that the fund from which it diverts money is the Proposition 63 "millionaire's tax," used for mental health programs. It's a shame to see money taken from successful programs. But it's temporary -- in this case, only two years -- and it's needed.
Proposition 1F may embody the most frustrating twist of this special election. In polling, Californians say they like this proposition the best, but we suspect that's because of their mistaken belief that the measure would deprive lawmakers of their pay when the budget is late or out of balance. It wouldn't. It would merely block their pay raises when a deficit is predicted. This measure is, well, OK. It won't help much. But it won't hurt much either.
If 1A, 1C, 1D, 1E and 1F pass, California will still face difficult times. But if they fail, our options will be fewer and more difficult.