2 California propositions could undo budget patch

Reporting from Sacramento

Two propositions on the November ballot could create a $1-billion hole in California’s already beleaguered budget by undoing one of the few agreements that lawmakers and Gov. Arnold Schwarzenegger have struck this year to shrink the deficit.

Tucked into both measures, written before the budget agreement, are provisions that apply retroactively to all of 2010. Opponents are now accusing the special interests behind the initiatives of pressing their agendas at the expense of the state.

“These two initiatives are Exhibits A and B as to why the initiative process needs to be reformed,” said Senate President Pro Tem Darrell Steinberg (D-Sacramento).

Proposition 22 would put local government and transportation funds off-limits to Sacramento, and Proposition 26 would make it harder for state lawmakers and local governments to raise fees. Either initiative, if approved by voters, could repeal a $1-billion budget patch signed into law earlier this year that gave lawmakers flexibility in the use of certain gasoline tax money without changing what drivers pay at the pump.

Both initiatives were drafted in late 2009, months before Schwarzenegger proposed the complex budget maneuver that swaps fuel sales taxes for excise taxes, which have fewer restrictions on how they can be used. Last month, the state’s nonpartisan Legislative Analyst’s Office reported the probable effect of the ballot measures in its official review of them.

The analyst’s office said Proposition 26 would repeal the gas-tax exchange as of November 2011 and Proposition 22 left the swap with a “not certain” future that could include an immediate rollback.

“Our assessment is it would prevent the benefits of the gas-tax swap going forward,” said Michael Cohen, a deputy analyst, referring to Proposition 22 — though he predicted that the final outcome would be determined in court if the measure passes.

Steinberg said he opposed both measures, because they would tie the hands of lawmakers, even before he learned that they could also undo the budget savings. But that fact, he said, makes them “horribly irresponsible.”

“I hope that the people of California, when they go to the polls in November, will ask one simple question: Will the passage of these initiatives make the already significant state budget problem better or worse?” Steinberg said. “The answer is obvious, and they ought to vote no.”

Schwarzenegger has not taken a position on either ballot measure.

Backers of both measures are standing by them.

Josh Shaw, an author of Proposition 22, which has been funded primarily by the League of California Cities and transportation advocates, said the measure is needed to protect local government, transit and transportation funds from Sacramento raids. He said lawmakers should have considered his initiative when drafting the gas-tax swap.

“I’m not sure why they would specifically … write that into their budget, if they thought that was going to be a problem for them,” said Shaw, who as executive director of the California Transit Assn. was also involved in the gas-tax negotiations.

Shaw disagreed with the analyst’s office conclusion that the initiative would unravel the budget savings. He said the interactions between the measure and budget maneuver remain unclear. “It’s really difficult to answer the question: Does Prop. 22 blow up the gas-tax swap?”

Susan Shafer, a spokeswoman for Yes on 26, said the value of that measure is that it would clarify “that politicians need a two-thirds vote to raise taxes.” The proposition also would prohibit the substitution of one equal-sized tax for another without a two-thirds vote.

The gas-tax swap could be redone with such a vote, but a supermajority is tough to achieve in hyper-partisan Sacramento. California is already in the second month of the fiscal year without a spending plan, in part because of the difficulty of getting two-thirds of lawmakers to agree on anything. The state faces an estimated $19.1-billion deficit.

The business lobby has long wanted to make it harder for the government to charge fees on their products and services; oil, tobacco and alcohol interests have largely funded the Proposition 26 campaign thus far.

“The proponents are trying to protect themselves, but what they’ve done is hit schools, local governments and other programs” by potentially wiping out the $1-billion savings. said Lenny Goldberg, executive director of the California Tax Reform Assn. He called Proposition 26 “fatally flawed.”

If either measure passes, it could become tied up in lawsuits, with a resolution on its effect likely only after years of court battles.

Steinberg, the Senate leader, said that is part of what plagues the initiative process. “It is just too easy to put together the money and put anything on the ballot,” he said.