May 19 Budget Initiatives Explained:

Many people are either unaware of or are confused about the statewide special election coming up on May 19, which involves six budget-oriented initiatives, placed before the voters of California because they change laws previously passed by the voters.The League of Women Voters held a workshop on April 19 at the Church In Ocean Park, where League member Thea Brodkin described all six measures and analyzed their effects.“This is a very tough ballot,” Brodkin said. “If [the voters] don’t pass this legislation, [the State Legislature] will have to renegotiate the budget.”The State is relying on the passage of these initiatives to close a $41.7 billion gap in the state budget through June 30, 2010. Proposition 1A begins the process by adding more money to the state’s reserve or “rainy day” fund, raising the reserve target to 12.5 % rather than the 5% that it is now. 1A will also allow some reserve money to be used to pay off state debt, will allocate reserve money for emergencies such as natural disasters, will give future governors more power over the budget, and will extend the temporary tax increases of the February 2009 budget agreement (sales tax, vehicle tax, personal income tax and reduced dependent tax credit) by one or two years.“The lynchpin is [Proposition] 1A,” said Brodkin. “It is very complicated. The League brought in experts from the budget process and even they couldn’t tell you exactly how it is going to work.”Brodkin did explain that Proposition 1A’s short-term uses will supplement payments to education (if Prop 1B also passes), and will pay off some revenue bonds for the State. Over the long-term, it will restrict available revenues, will not take into account the state’s changing demographics, and, while it will result in a bigger reserve fund in the future, most of its provisions will not take effect for two years.Proposition 1B, which relies on the passage of 1A’s tax extensions, will change Proposition 98 (the 1988 education funding initiative) by requiring the State to pay K-12 schools and community colleges $9.3 billion to compensate for lower funding levels for the last two years. Payments will begin in 2011 and continue until the full amount is paid.Brodkin noted that 1B is largely aimed at receiving support from teachers. The California Teachers Association (CTA) and the California Federation of Teachers (CFT) support 1B. While it would decrease strain on the budget for the moment, state costs would increase beginning in 2011.Proposition 1C would reform the 1984 State Lottery initiative by stopping lottery profits from going to education (the state would substitute borrowed money from the General Fund for the lottery education funds and pay back that debt using future lottery profits). Lottery prizes could exceed 50 % of ticket sales, which it is hoped might result in more people playing the lottery; hence, more lottery money to be used to pay off debts. The February 2009 budget agreement is looking for 5 billion to be raised from the sale of lottery bonds to help balance next year’s budget.Propositions 1D and 1E transfer some funds from, respectively, the tobacco tax (1D) and the extra 1% income tax on personal income over $1 million (1E), currently directed toward early childhood education (1D) and metal health services (1E), to the state General Fund. Essentially, these initiatives move funds around, paying for some services but necessitating cuts in other areas.Finally, Proposition 1F will put a freeze on raises for state elected officials in years the state income falls short of state spending. This again, may save some money in the short term, but it also freezes pay raises for state officials not involved in the budget process.The League of Women Voters’ recommendations and more information is available at lwvc.org.