Voters Hold the Levers of Budget Power

Congratulations, California voters. You are now the only non-term-limited members of the Legislature. You are the state’s real lawmakers.

OK, there are only four propositions on the March 2 ballot, and three of them have been placed there by the Legislature; the other is the product of the initiative process.

But there have been few proposals as critical to the future of California politics and government as those on the ballot. As with Proposition 13, the 1978 property tax reform initiative, and Proposition 98, the 1988 initiative that guaranteed approximately 40% of the general fund to public schools, the decisions on Propositions 56, 57 and 58 may do more than the governor and Legislature ever could do to shape taxing and spending policies.

Propositions 57 and 58 are essentially one measure because the former can’t take effect unless the latter is approved. Proposition 57 is the product of a deal cut by Democratic legislators and GOP Gov. Arnold Schwarzenegger to close the state’s short-term budget gap without severe program cuts and tax hikes. It would authorize the sale of up to $15 billion in bonds to close the shortfall. Proposition 58 would require all future budgets signed by the governor to be balanced. Currently, only the spending plan submitted by the governor at the beginning of the state’s budget dance must be balanced. The measure would also ban future deficit spending and mandate a “rainy-day fund” for fiscal emergencies.

A survey completed last week by the Public Policy Institute of California showed that only 38% of likely voters supported Proposition 57 and 41% opposed it; 21% were undecided. Forty-four percent of the Democrats surveyed and 47% of independents said they opposed the measure; 45% of Republicans supported it. Thanks to the governor’s high visibility, 65% of likely California voters said they knew Schwarzenegger supported Proposition 57. These voters are roughly divided on its merits.

The survey indicated that Proposition 58 was in better shape. Likely voters support it by a 29-point margin (52% to 23%), with 25% undecided. Majorities of Republicans and independents support it.

Schwarzenegger clearly has a lot of work to do, because turnout will be key. How these propositions fare will signify Californians’ willingness to manage the short-term budget deficit. If they pass, Wall Street might just treat the state more kindly.

The election results will also provide a gauge of Schwarzenegger’s ability to convert his resounding recall victory -- and his Hollywood magic -- into sustained political clout. If his recovery formula is rejected, Schwarzenegger’s reputation as a political Terminator will be sullied. Whatever the outcome at the polls, economic disaster is not inevitable. The $11-billion bond issue passed by the Legislature and signed by former Gov. Gray Davis remains alive, although it has been challenged in the courts. It could serve as a backup.

Proposition 58 is already under attack by conservatives because it contains no strict spending limits and doesn’t end Sacramento’s fiscal shell games. In any case, it’s highly probable that an initiative tying spending increases to the rate of population growth and inflation -- a tighter cap than Proposition 58 requires -- will appear on the November ballot.

The measure that could have the most significant effect on state politics and fiscal policy has been overshadowed by Schwarzenegger’s budget-related proposals.

Proposition 56, which Schwarzenegger quietly opposes, is the brainchild of public employees and teachers unions. It would mandate a rainy-day budget reserve, dock the pay of legislators and the governor for every day the budget is late, and require the Legislature to stay in session until its work is done. Most important, it would lower to 55% the two-thirds vote requirement to pass a budget or increase taxes. The Public Policy Institute survey showed that 41% of likely voters supported the initiative, 40% were opposed and 19% were still undecided.

The proposition’s supporters argue that it would alleviate chronic budget deadlock, but they downplay the chief reason this would happen -- the 55% vote requirement. Is this because Democrats, holding about 60% of the membership of each house, could pass a spending plan without any Republican votes? How might voters react to that? According to the institute survey, 49% of Democrats supported Proposition 56 and 51% of Republicans opposed it.

If the measure passes, GOP legislators could lose the considerable leverage they have over spending -- the ability to deny Democrats a two-thirds budget vote.

The budget would still be vulnerable to a gubernatorial veto, but Schwarzenegger too could see his bargaining power weakened. Even if he lined up every Republican, he’d need to peel off 19 Democratic votes to pass his budget. That would give more clout to moderate Democrats, who could team up with Republicans to influence budget matters.

Proposition 56 could also make it easier for Schwarzenegger to deal directly with Democrats on tax increases. That worries conservative Republicans and business interests, which contend that if a more tax-friendly governor is elected and Democratic legislative majorities remain in place, Sacramento would have a blank check to hike taxes.

Some GOP strategists say, however, that Democrats could lose seats in the Assembly over the next few elections despite the status quo reapportionment brokered in 2001.

They point to declining Democratic registration, the recall of Davis and Schwarzenegger’s election as governor. Cautious GOP analysts see a two- or three-seat gain this year. Although Republicans have a way to go to gain control, the Democratic majority could slip below 55% and bring budget gridlock into play again.

Asked by the Public Policy Institute which approach Californians would prefer to achieve long-term budget reform, 62% of likely voters said they preferred to have California voters decide these issues at the ballot box; 31% preferred having the governor and Legislature pass new laws.

Californians like their role as legislators. And legislators, ducking the political risk of making tough decisions, apparently like it that way too.

Schwarzenegger appears to be counting on that. He’s indicated he will use the initiative process to move his agenda, either to circumvent the Legislature or to pressure lawmakers to see it his way. Whether that strategy works will turn on Schwarzenegger’s ability to persuade voter-lawmakers to accept his March recommendations.