Prop. 53: Paying for Infrastructure

Both opponents and supporters agree that the goal of Proposition 53 is worthy: to modernize, strengthen and expand the stuff that makes California work, such as roads, bridges, hospitals, aqueducts and courthouses.

They just don’t agree that Prop. 53 is a smart way to do it.

Drafted by Democratic Assemblyman Joe Canciamilla of Pittsburg and Republican Keith Richman of Northridge, Prop. 53 would direct as much as 3% of the state’s main pool of tax revenue into a special fund to pay for improvements to infrastructure.

The ballot measure wouldn’t raise any new revenue. Instead, it would do what Canciamilla and Richman say the Legislature lately has failed to do: Make infrastructure a spending priority.

Starting with 1% of the general fund in 2006-07, or roughly $850 million, Prop. 53 would gradually transfer cash into an infrastructure account. If state revenue grows steadily, that account could total several billion dollars in several years. Half of it would be dedicated to state projects and half to local projects.

There are so many powerful interests demanding state revenue for other purposes, said Canciamilla, that lawmakers tend to neglect the state’s infrastructure. Barring a requirement that legislators invest in such projects, he said, “I just don’t see it happening.”

Opponents say Proposition 53 is another budget straitjacket like Proposition 98, the 1988 voter-approved initiative that dedicates roughly 40 cents of every general fund dollar to K-12 schools. They say that the measure will strip the Legislature and governor of flexibility and reduce funding for health care and other government services.

“We oppose earmarking that doesn’t let the Legislature make hard choices,” said Trudy Schafer, program director for the League of Women Voters of California. “There is a benefit to funding infrastructure, but there are a number of other critical programs that are also a benefit and they may not get funding if this does.”

State Treasurer Phil Angelides also urges voters to reject Proposition 53.

He warned that it could increase the state’s borrowing costs, because Wall Street lenders are wary of new, permanent budget obligations.

Other opponents include the California Teachers Assn., the Service Employees International Union, the Federation of Teachers and the Sierra Club. The “No on Proposition 53” campaign headquartered at the California Tax Reform Assn. has raised no money.

Those who want voters to pass Prop. 53 have been more generous. Engineering consulting businesses, real estate agents, home builders and gravel companies have donated more than $243,000 to the “Yes on Proposition 53” campaign. Other supporters include the California Manufacturers & Technology Assn. and the Business Roundtable, whose members are the top executives of 60 large corporations.

“California has failed in its obligation to invest in the future and the Legislature can’t be counted on to have the discipline to make those investments,” said the “Yes on Proposition 53” campaign manager, Dan Pellissier.

Other supporters include the Howard Jarvis Taxpayers Assn., which argues that it is cheaper for California to make yearly investments in roads, flood control, prisons, state office buildings and other government projects than to float bonds and pay interest to lenders.

Richman and Canciamilla, who have teamed up before to offer bipartisan solutions to budget matters, insist that Proposition 53 would not divert money from health care or other services because they have written the measure so that no transfers of money from the general fund take place in years in which state revenues languish or fall. For example, the initial transfer in 2006-07 would happen only if the general fund that year increased by at least 4%.

“There’s almost no risk, except that it does limit a very small amount of money that could be available to be spent on other things,” Canciamilla said.

The California Budget Project, a nonprofit group that analyzes how state polices affect low-income Californians, said the Proposition 53 budget protections are not foolproof. They analyzed what would have happened in the 1990s had Proposition 53 been in place and found that $285 million would have been transferred from the general fund in 1991-92, when the state faced a severe shortfall of $14.3 billion. That’s because Proposition 53 does not completely suspend the transfer of money when revenue falls sharply from what budget writers expected within a single year, according to the Budget Project.

Critics of Proposition 53 are also troubled by the lack of control on spending of the fund. The ballot measure offers few details. Canciamilla and Richman say the Legislature must create a formula for disbursing the money.

Lenny Goldberg, executive director of the California Tax Reform Assn., called that “a guarantee of more pork in the budget.”

But Canciamilla called his critics inconsistent.

“You can’t argue that this measure is tying the hands of the Legislature,” he said, “and in the next breath say, but we want to tie your hands because we don’t trust where the money’s going to go.”