Arguments For and Against Propositions Are Based on Myths

California is a backwater in the presidential primaries. And the Republican Senate race seems a runaway. So the hottest items on Tuesday’s statewide ballot are three proposition questions.

I say three because two ballot propositions -- 57 and 58 -- are really one question: Do we trust Gov. Arnold Schwarzenegger and his budget borrowing-and-balancing scheme? Or tell him to look at other options?

Another question is whether to make it easier for the Legislature to pass budgets and tax increases. Prop. 56 would lower the vote requirement to 55% from the current two-thirds majority. Do we move closer to the rest of America? Only three states require more than a simple majority vote for budget passage; just 11 for a tax hike.

The other question is whether to issue $12.3 billion in school construction bonds through Prop. 55. Do we relieve classroom overcrowding, patch leaking roofs and fix inoperable bathrooms? Or stiff school kids?

Many myths -- some based on misinformation -- have evolved around the props. Here are three:

* Myth 1: There’s no alternative to Schwarzenegger’s $15-billion bond -- Prop. 57 -- even if everybody does have to hold their noses to vote for it.

In truth, there are alternatives that are more fiscally prudent. They’re just deemed more politically painful by the governor and most lawmakers.

The governor’s plan -- negotiated with Democrats -- is to borrow $15 billion and pay it back over a nine-to-14 year period at a financing cost of from $4 billion to $6 billion. That would pay for current deficit spending, including the car tax cut.

It does seem fiscally irresponsible to, in effect, take out a mortgage to buy groceries, fill the gas tank and pay the gardener. And very un-Republican.

One option Schwarzenegger never mentions is tucked away in his Finance Department. This “Plan B” involves using a smaller, $10.7-billion deficit-financing bond authorized last year by the Legislature, but not sold. It has only a five-year payback with a much smaller financing cost. But there’d be more immediate pain because the annual loan payment would be $2.4 billion, twice that of Prop. 57.

This old bond is under a legal cloud, however, because voters weren’t asked to approve it. If it were ruled illegal, there’s a Plan C, described this way by Finance Department spokesman H. D. Palmer: “Give the car keys and the checkbooks to Wall Street.”

There’d be heavy short-term borrowing -- months rather than years -- with lenders holding a tight rein on the state. Also, there’d be deep, painful cuts.

Democratic State Treasurer Phil Angelides has been touting an alternative plan painful to Republicans -- like Schwarzenegger -- who have backed themselves into a no-tax corner.

Angelides would cut spending and borrow short-term. But his main focus would be to reimpose the same upper income tax rates used by Govs. Pete Wilson and Ronald Reagan in crunch times. He’d tap “the richest 1%” -- individuals making over $140,000, couples over $280,000.

That would net $2.4 billion from people who are benefiting this year from a $12.7-billion federal tax cut, Angelides says. And they could deduct the state tax hike on their federal taxes.

Conservative Sen. Tom McClintock (R-Thousand Oaks) wants to move the opposite way. His alternative is to cut spending by 13.5%, contracting out many state services to private enterprise. “If you can find it in the yellow pages,” he asserts, “government shouldn’t be doing it.”

Raise taxes or whack services? “That’s a legitimate debate,” McClintock says. “What’s not legitimate is to add $6 billion in interest to the problem and dump it in our children’s laps.”

* Myth 2: Prop. 56 threatens our low property taxes by making it easier to raise them.

That’s a distortion. The measure specifically declares that “no new ad valorem taxes on real property ... may be imposed.” So Prop. 13 still would hold down taxes based on property value.

Opponents counter there could be higher parcel taxes. But this always has been a local tax, not a state tax.

The Legislature did last year impose a token fire-suppression fee on rural parcels serviced by state firefighters. This is the weak reed opponents are clinging to while yelping about property taxes. Fees already can be increased by a majority vote.

* Myth 3: California can’t afford both the school and deficit bonds.

Numbers-crunchers have an unofficial, abstract “debt-service ratio” limit (6%) -- loan payments as a percentage of state revenue -- that Props. 55 and 57 combined would bust (6.4% to 6.9%). OK, so?

California’s finances are so fouled up already, why start taking it out on school kids? If the debt ratio worries people, generate more revenue.

Some say delay the school bonds until November. Punt. But a delay alone wouldn’t help the sacrosanct debt-service ratio.

In fact, Prop. 55 would prime the economy by generating 200,000 jobs, says state schools chief Jack O’Connell.

California has an estimated $16 billion in school construction needs. “We can’t afford to wait,” O’Connell says. “The kids are here now.”

It would be bad enough to make our children and grandkids someday help pay for our current deficit spending. It would be doubly shameful to make them kick in before they even grow up, by enduring overcrowded, dilapidated schools.

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George Skelton writes Monday and Thursday.