The Malibu Times Special Election endorsements
Proposition 1A (Rainy Day Fund): Yes
Proposition 1B (Education supplement): Yes
Proposition 1C (State Lottery): Yes
Proposition 1D (Early Childhood Funds): Yes
Proposition 1E (Mental Health Funds): Yes
Proposition 1F (Blocking pay increases): Yes
Although in the past we would make our ballot endorsements in the last few weeks of the campaign, we now make them earlier because almost one half of the electorate now votes absentee, and votes early.
The Special Election on May 19 is a result of the large budget shortfall of this past year, caused mainly by the recession and also the expectation that another shortfall will occur in 2010.
Background
Proposition 1A establishes a “rainy day” reserve fund. On the upside, it increases the state’s fund to try and create a reasonable reserve for the bad economic years so we don’t end up with large deficits, which have been a major problem, because, by law, legislators are required to balance the state budget. In the 2008-2009 and 2009-2010 fiscal years, we will face about a $40 billion shortfall combined over the two years. The sad fact is that California’s income is volatile, probably more volatile than most states, because it relies heavily on personal income tax, which tends to go up and down with the economy and puts the state into a kind of continual boom/bust cycle. Many states rely more on property taxes, which tend to be much more stable, so in bad economic years their income doesn’t fluctuate the way California’s does. As a result of our past political decisions, like Proposition 13 (property tax) and Proposition 98 (designated education funding), we have the lowest property tax rates and the highest income tax rates in the nation (on upper income earners). We may have not intended it that way, but that has been the result of our decisions.
The Legislature’s solution to this crisis was to raise taxes (about $12.5 billion, primarily through increasing sales and use taxes, the vehicle license fee and personal income tax) and cut costs (about $15 billion primarily from the big ticket program items like education, and select welfare and medical type programs). They also decided to borrow some money from a few existing programs-Education (Proposition 1B), the Lottery (Proposition 1C), the Early Childhood Development Program (Proposition 1D) and Mental Health Program Funds (Proposition 1E)-to help get us through this year. The problem is that it’s only a partial solution and not enough money to get us through the next few years. The Legislature can’t craft a multiyear solution because they’re in gridlock. The Republicans won’t vote for any tax increases and the Democrats won’t vote for more program cuts, so essentially they’ve left it up to the voters to approve a multiyear solution.
There are no good guys or bad guys in this picture. Profligate spending didn’t cause the problem. California’s budgets are, overall, sort of in the middle of all the industrial states. The increases over the years have pretty much been similar to what most of the other big industrial states have experienced. Overall, despite propaganda to the contrary, we are not a particularly high tax state.
So, we the voters have to make a few tough choices.
Essentially Propositions 1A, 1B, 1C, 1D and 1F are all part of a package.
If you vote Yes on all, you’re agreeing to keep both the cuts and the somewhat higher taxes for a couple of more years, which should produce surplus for the rainy day fund. That’s what the governor and the majority of the Legislature wants us to do because they believe it’s a solution.
If you vote No on all, you’re saying you’re not willing to extend the cuts or the higher taxes, and you understand that we’re back into crises mode. We will immediately have a deficit of probably at least $13 billion for this fiscal year and another, maybe more, whopping deficit for the next fiscal year. I know that the deficit will be worse next year because if this is a bad year for the economy, which we all know it is, that means next year’s state income tax collections are going to be even lower, and the financial crisis is going to grow.
I’m going to vote Yes. Why? Because although I’m not crazy about some of the solutions, they are at least an attempt at solving the problem. We can’t keep saying no because we don’t think the solution is perfect.
The solution of increasing taxes and cutting expenses in about equal amounts is the time-honored way of handling bad economic years. Two former governors, Ronald Reagan and Pete Wilson, both Republicans, were faced with recessions and both essentially came up with the same solution, that is, raise taxes and cut expenses. You can’t do one without the other because you need the votes of both sides to craft a solution.
The problem we have today is that the political atmosphere has worsened, and there are some people who are willing to drive the state over the financial cliff because they believe somehow, some fix will come out of the crash. I believe it’s a pipe dream. All it will do is make it tougher for the state to adapt to a bad economy. Additionally, most of the Republican-elected state representatives, who in the main tend to be fiscal conservatives, have taken a “No tax” pledge.
On the other side, many of the unions and many in medical industries and services are against the propositions because it’s their special programs that are being cut, and they feel the cuts are not fair.
No one is particularly wrong in this debate, but the way I see it, to vote No is to vote for a non-solution and a return to square one.