These forces and Republican legislators who refused to accept any tax increases (despite the fact that no reasonable solution was possible without them) combined to produce a weeks-long stalemate to begin 2009. The deadlock continued as the State's budget deficit crept beyond $40 billion. The impasse was barely bridged by a few Republicans in each house who broke ranks to support the compromise that included budget cuts and the voters deciding on Measures 1A-1F.
The propositions are:
1A - Sends a portion of state revenues to a "rainy day" fund for use in lean years. The percentage set aside for economic downturns increases from 5 to 12-1/2 percent of the State's General Fund. Spending is capped at a 10-year average of state revenue, adjusted for population growth and inflation. Revenue above that average goes into reserves, requiring the State in most years to put a projected 3 percent of its general fund revenues in the reserve fund, which could only be used for budget shortfalls, bond repayments and emergencies such as natural disasters or if the Governor declares a fiscal emergency. Extends 1 percent state sales tax increase for one year, and extends vehicle license fee increase and top income bracket increase for two years, generating some $16 billion in revenue. This measure also authorizes the Governor to make midyear spending reductions if the budget falls out of balance.
1B - Beginning in 2011-12 requires additional payments to local school districts and community colleges to offset recent budget cuts. Payments come from the rainy day fund established in 1A and continue until total amount is repaid.
1C - Makes changes to improve performance of state lottery and increase payouts and proceeds. Allows state to borrow $5 billion to address current budget deficit against projected additional lottery proceeds.
1D - Temporarily redirects $600 million in funds from California Children and Families Act (1998 Proposition 10) to General Fund for support of health and human services children's programs. Additional diversion of $268 million in years 2010-11 to 2013-14. Early childhood development programs funded by the Act would be cut.
1E - Redirects $230 million from Mental Health Services Act funds (2004 Proposition 63) for two years to existing health programs. Community mental health programs would be cut.
1F - Prohibits legislators and state constitutional officers from receiving pay raises when the State is running a deficit.
There are plenty of reasons for anyone from any part of the political spectrum to oppose these measures. 1A is the only proposition of the six that contains long-term structural reform of the budget process in an attempt to limit the revenue swings we have recently experienced. Its opponents on the left say it will deprive the state of essential revenue needed for important programs, yet some anti-tax groups oppose it because of its built-in taxes and perceived loopholes. This package moves revenues from voter initiative-established programs to the General Fund. Some say this thwarts the will of the voters and cuts these programs when such services are most needed. Others like that it moderates, if temporarily, our ad hoc initiative-based budgeting process.
The problem with defeating these measures is what might happen if they don't pass. The whole mess would go back to legislators and the Governor who are already likely facing a multi-billion dollar additional shortfall they must deal with, even if these measures pass. Hard-line anti-tax forces in the legislature would claim an even greater anti-tax mandate even though they don't have any other solutions. If these measures are defeated we wouldn't bet on a better resolution in round two than we have here. Which is why, painful as it may be, we recommend a Yes vote on all six propositions.