PERSPECTIVES ON BOND ISSUES : California Votes No on the Future : State public finance is a mess; we need to challenge our sacred cows, including Poposition 13.

The defeat of every bond measure on the June 7 ballot is the tip of the iceberg for California’s most fundamental weakness: its public-finance system. Since this is a long-term crisis, unlike the riots or the earthquake, it clearly does not register yet on public consciousness.

In the June election, voter preferences were loud and clear: Fiscal concerns override physical concerns; it’s more important to keep taxes low than to improve bridges, highways and schools.

Does it really matter if we continue to postpone public investment?

The earthquake bonds present a good example of what lies ahead, especially for those who were affected by the freeway collapses. We could have saved the $26 million spent to repair the collapsed section of the Santa Monica Freeway if the $3.7 million planned for strengthening it had been spent in the first place.

Other public-investment delays could be equally damaging. Proposition 1B would have authorized $1 billion for construction, reconstruction and modernization, including seismic safety, for public schools. Defeat of 1B shows that we clearly do not believe that public schools warrant investment that could reduce earthquake damage. The defeat of 1C sends the same message with respect to public colleges and universities.

One might infer from these defeats that the vote was simply held at the wrong time. In the midst of the worst recession since the Great Depression, voters are rightly concerned about whether they can afford any new public programs.

But the vote is symptomatic of a much greater crisis--the breakdown of California’s public-finance system. Public finance has always depended on an unwritten contract between voters and the state: that voters will bring a public-regarding spirit when they vote on public expenditures--a concern for the long-term future of their city and state.

When the public fabric begins to shred, and there is plenty of evidence that is happening now, people who can afford private services--schools, police, transportation--do so. Those who can’t suffer or leave.

When people and businesses leave, especially those that contribute more than their fair share to the economy, our ability to pay for public services is cut. It may not be noticeable at first, because the initial cuts are made in maintenance and repair budgets. However, when the deferred maintenance or lack of repair becomes apparent--as it did so dramatically in the Santa Monica Freeway collapse--then the deteriorating condition of public facilities becomes hard to ignore. More and more people, fed up with crime, graffiti, road delays and other manifest signs of the deteriorating urban fabric, move away, causing the public purse to shrink still further. The downward spiral continues.

The public-finance mess creates a double bind for cities, since sales taxes are one of the few sources of revenue for enhancing local budgets. Fiscal zoning leads to absurd planning--cities fall over one another to offer subsidies to car dealers because they bring in sales-tax revenues, while trying to avoid fiscally less-desirable land uses such as manufacturing, which only brings in jobs.

Is there a solution?

It is time to call for a state initiative, sponsored at the highest levels of government, to reform California’s public-finance system--one empowered to challenge our most sacred cows: Proposition 13, the percentage of votes required to pass bond issues and the referendum process, which makes a mockery of democratic grass-roots politics by favoring those interest groups that have the most money and can generate the most publicity or confusion in the minds of voters.

Our leaders also need to be smarter about the way they frame critical public-investment decisions. A fundamental principle of public finance is the “matching principle”--those who benefit from a public investment should pay for it. The seismic-safety propositions on the June ballot were approved by significant margins in Los Angeles County, where memories of the Jan. 17 earthquake were strong. Unfortunately, voters in Northern California disagreed. A mechanism is needed to implement the matching principle. If the bonds had been designated for public improvements in Southern California and voted on by Southern Californians alone, they would have passed.

Of all the public expenditures undertaken by government, the most important are the ones that save us money in the long run. When we have to spend 90 times more than we would otherwise have spent, as in the case of earthquake repairs, then there is little money left to pay for the things that voters obviously do care about--more police on the streets and safer neighborhoods.