Initiatives Like Prop. 53 Are the Real Budget Killers

Now that we’ve all agreed that this recall election is all about restoring fiscal responsibility to Sacramento, I would like to place the following question before the leading candidates for governor: What’s your position on Proposition 53?

And I fully expect to hear, from each of them, the following response: Huh?

That wouldn’t be surprising, because this almost invisible initiative, which will share the Oct. 7 ballot with the recall and Proposition 54, the Ward Connerly racial preferences measure, is exactly the sort of thing that gives the lie to the rhetoric we’ve been hearing lately about the cause of the budget mess being the incumbents in Sacramento.

The real cause is initiatives like Proposition 53.

Prop. 53 -- excuse me, I mean the “California Twenty-First Century Infrastructure Investment Fund Resolution” -- would set aside up to 3% of the state general fund every year to finance the construction and upkeep of infrastructure projects such as bridges, roads, parks, school buildings and hospitals, all of which are quite worthy structures to which almost nobody objects.

“This is not an interest-group thing,” R. William Hauck, president of the California Business Roundtable, told me last week. “It’s a priority of all Californians.” The group is among the initiative’s leading proponents.

The worthiness of the goal is not the problem with Prop. 53, which has received almost no press. It’s that it is the latest in a long line of ballot initiatives that have constrained the ability of the governor and Legislature to exercise any flexibility or control over the state budget. Consider the irony of voters deciding on the same day to (a) throw out a sitting governor because he can’t get a grip on state finances and (b) wipe out the governor’s authority over yet another chunk of state finances.

A huge chunk, one might add. The initiative’s mandated allocation for infrastructure from the general fund would start at 1% in 2006, when it could be as much as $850 million, and rise to 3% by 2013 and thereafter. By then the annual transfer would approach, and eventually surpass, $3 billion a year.

That would come on top of the mandatory minimum 40% allocation for K-12 and community college education earmarked by 1988’s Proposition 98. Thanks to an escalator clause, that allocation now is up to about 44% -- so adding Prop. 53 would eventually mean that nearly half the general fund would be spoken for before the Legislature walked through its ornate doors every January.

Add the myriad initiatives through which voters have cut back on certain taxes (Proposition 13 being the winner and all-time champ in this vein) or mandated how to spend other revenues, such as gasoline and tobacco taxes, and it’s a wonder we need a legislative budgeting process at all.

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Lack of Faith

Hauck and some other supporters of Proposition 53 say they are opposed in principle to such ballot-box budgeting. “If I had my way, we would have no mandates, and you’d permit the governor and the Legislature to make these decisions,” he says. But he argues that the legislative process has become so spavined in recent years by term limits and partisan bickering that our elected representatives simply can’t be trusted to do the right thing.

Unfortunately, there are a few holes in this argument. One is that in recent years the governor and Legislature actually have done the right thing by our infrastructure. Complying with a 1999 law, the Department of Finance last year issued the state’s first five-year infrastructure construction plan, encompassing $56 billion in spending through 2007.

Most of that money would come from federal funds and state bonds, which are responsible methods to finance major projects over their useful lives. But $1.5 billion is designated to come from the general fund. It’s true that the five-year plan limits the general-fund allocation to no more than $527 million in any one year, which may not satisfy the engineering and lobbying firms that have fronted money for the Proposition 53 campaign thus far, but there’s no credible argument that Sacramento has been ignoring the issue.

Hauck contends that the current law is flawed because it allows the Legislature to cut back on the general-fund component of this spending when it wishes to (including periods of great budgetary stress, like now). But he also notes reassuringly that Proposition 53 also has a number of checks and triggers that would allow the general-fund transfer to be deferred if the budget failed to grow substantially year after year, or if other needs, such as education, were threatened.

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Long-Term Dangers

Yet these mechanisms scarcely are fail-safe. The state legislative analyst’s office, which did its own math while the initiative proposal worked its way through the Legislature, found that had the initiative been in place through the 1990s, it would have required substantial allocations to the infrastructure fund in several years when the state budget showed a deficit. (This includes 1991-92, when the initiative would have mandated a $285-million transfer even though the budget had sprung a then-record $14-billion leak.)

“The triggers aren’t perfect,” Jean Ross, executive director of the nonpartisan California Budget Project, says dryly.

By the way, under current law and Prop. 53 alike, the choice of which individual projects to fund in any given year still remains in the hands of the governor or Legislature -- but Prop. 53 doesn’t require that the choice reflect the findings of the five-year infrastructure plan.

That leaves us asking what the proposition would accomplish, other than to tie the government’s hands. I will do Mr. Hauck the courtesy of not accusing him of deliberate self-contradiction when, in an interview in Metro Investment Report, a newsletter devoted to public investment, he plumped for Prop. 53’s fiscal straitjacket, then added: “We need to instill in state government something that I would call ‘fiscal discipline.’ We need to do it in a way that has sufficient flexibility yet will not allow the state to get itself so far out of balance in the future.” The truth is that you can’t have fiscal discipline and flexibility when you’re dictating appropriations by remote control.

The Business Roundtable’s support of Prop. 53 amounts to its members’ prescribing for state government a medicine they would never take themselves. Many of its roughly 60 member corporations are public companies of the type that have moved heaven and earth to fight federal proxy resolution reforms on the grounds they would encourage shareholders to meddle in management decision making; yet they think nothing of meddling in their elected representatives’ activities in exactly the same way.

It’s not enough to suggest that the California Legislature needs to be led by the nose because measures such as term limits have reduced it to a sort of brained ox. If that’s so, then how come the Business Roundtable hasn’t mounted a campaign to repeal them? (Hauck says the group might consider supporting a package of reforms to improve the legislative and budgetary system, but it hasn’t proposed one.)

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Riding the Hobbyhorse

The supporters of Proposition 53 believe their cause is buttressed by the grave condition of California’s disintegrating public infrastructure. Without challenging that claim, I will observe that people always see their own pet projects as the most important things in the world.

Once we’ve secured minimum state financing for primary education and infrastructure, what’s next? How about homeland security? Job programs? Environmental protection? Water supply? Each of these has a constituency that can make a credible case for its inclusion in the holy roster of mandated programs. The fiscally conservative gubernatorial candidate Arnold Schwarzenegger persuaded the voters last year that his hobbyhorse, after-school programs, was one of these; to conceal that his initiative represented yet another claim on the general fund, he financed it through a truly rococo budgetary maneuver that makes it a ticking time bomb in state finances to the tune of half a billion dollars a year.

In a perfect world, it would be up to the governor and Legislature to weigh competing claims and allocate resources properly among them through a deliberative process that was called “politics” until that term became a cuss word commonly hurled by politicians at one another. We’re told that today’s world is so imperfect that the political process doesn’t work anymore, but the very effort to circumvent politics is what has made it so ineffectual.

The only thing in worse condition right now than California’s physical infrastructure is its political infrastructure, which crumbles a little bit more every time another well-meaning interest group decides it can’t carry the weight. Before we abandon it entirely by placing 100% of the state budget under fashionable voter mandates, maybe we ought to try to fix it.

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Golden State appears every Monday and Thursday. Michael Hiltzik can be reached at golden.state@latimes.com.