The price of Props. 1D and 1E

Has California seen its last honest ballot measure?

Perhaps. One unintended consequence of next month’s special election may be the demise of ballot initiatives that are “self-funding” -- that is, initiatives that include new taxes to pay for the programs they mandate.

The problem lies with Propositions 1D and 1E, two of six measures that legislators placed on the ballot as part of an attempt to close the state budget gap. The two measures are twins: Each asks voters to divert a piece of the tax revenues that previous ballot initiatives had created to fund particular programs and instead put the money toward closing the deficit.

Proposition 1D would permit the seizure of $1.6 billion over the next five years in tobacco taxes that voters imposed, via Proposition 10 in 1998, to fund new health and education programs for young children. Proposition 1E would repurpose more than $500 million over two years from an income tax surcharge on millionaires imposed by Proposition 63 in 2004 to pay for mental health programs.

Commentary and newspaper editorials have generally hailed the raids as necessary because of the state’s fiscal troubles. Some commentators have even celebrated 1D and 1E as blows against “ballot-box budgeting,” the California habit of establishing budget priorities via ballot initiatives.

But such commentary obscures an important truth: There is good ballot-box budgeting and bad. And 1D and 1E target the good. As a result, they will produce more of the bad.

What’s the difference? The two initiatives being raided under 1D and 1E were about as fiscally responsible as initiatives get. Each created new taxes to fund the programs they proposed. Both programs have been run conservatively and run surpluses.

But Propositions 10 and 63 were rare birds. Most initiatives don’t pay for themselves. They require spending without identifying a funding source. (Most tough-on-crime initiatives, including measures on three-strikes sentencing and sexual predators, work this way.) Or they create new programs through general obligation bonds (as was the case with initiatives on construction of children’s hospitals and stem cell research). In effect, most initiatives, by making claims on the treasury without providing funds, take away money that would be spent on existing programs, or add to the state’s deficit. In politics, this irresponsibility is smart. It’s easier to sell the public on a new program or law if there’s no new tax attached.

But there have been a few initiative sponsors who have chosen the fiscally responsible path. Their rationale? If they could somehow manage to win despite the political costs of backing taxes, their programs would have a steady source of funding. Most self-funding initiatives -- most recently, the 2006 oil tax Proposition 87 -- go down to defeat. But Propositions 10 and 63 claimed notable, if narrow, victories.

Unfortunately, the very thing that makes these initiatives fiscally responsible -- the revenue streams they created -- has made them targets of lawmakers desperate to balance California’s budget.

Given the state’s persistent budget deficits and cuts to other health programs, there’s a strong argument for backing the 1D and 1E raids. But there’s a hidden, long-term cost to punishing responsible behavior. Now that the Legislature has proposed to grab Proposition 10 and Proposition 63 tax revenues, it’s a safe bet that initiative sponsors will think twice before being so responsible again.

Election lawyers and political consultants say they are likely to advise their clients that including a revenue stream in their initiatives may only make them a bigger target for lawmakers seeking to balance budgets. Bonds may provide more protection against the Legislature, they say.

In the long run, this trend may cost the state more money than 1D and 1E save. Interest costs on bonds are high in California. And rising debt repayment and interest costs are significant contributors to the state’s deficit.

What to do? The governor and lawmakers could have added a seventh measure to the special election ballot that would have addressed this problem. Senate Constitutional Amendment 4, co-written by Democratic and Republican state senators, would have required all future initiatives to be self-funding.

But in the final hours of the February budget battle that produced the special election ballot, SCA 4’s contents were deleted and replaced with an open primary measure that state Sen. Abel Maldonado demanded in exchange for his vote on the package.

Perhaps the self-funding requirement, now reintroduced as SCA 14, will rise again. If not, California voters can say goodbye to initiatives that pay their own way.