As featured on p. 218 of "Bloggers on the Bus," under the name "a MyDD blogger."

Tuesday, March 24, 2009

Prop. 1A: Stakeholders Line Up

I'm thoroughly unsurprised that Steve Poizner has joined Meg Whitman in an effort to out-anti-tax one another through opposition to Prop. 1A.

Specifically, the politicians don’t want you to know all the facts when it comes to Proposition 1A. This is the ballot measure that would impose a state constitutional spending limit - a concept that is supported by an overwhelming majority of Californians.

However, if the measure passes, it will also extend the huge tax increases recently approved by the legislature. Passage of Proposition 1A means that the near-doubling of the car tax, the 1 cent statewide sales tax increase, the income tax hike and the reduction in the dependent tax credit would continue for an additional two years. That adds up to an estimated $16 billion in higher taxes. It’s no surprise these taxes are not supported by the majority of Californians.

That’s why our state legislators want to keep the truth from you about Proposition 1A and they’ve stacked the deck in their favor. So when you read the official ballot description of the measure – what should be an objective description on what is being voted on - you will see no mention of the taxes. The legislative leadership wrote the ballot description themselves and intentionally omitted any reference to the tax increase extension. They made sure what you read is biased.

The Yacht Party has been so consumed with tax ideology, as if the only role of government is to decide what not to tax, that they fail to see the spending cap forest through the trees. Which is fine with me, because as Anthony Wright notes, this cap would painfully ratchet down services and make any economic revival in California extremely difficult.

The revenue forecast amount established by Proposition 1A, which limits spending from the state’s existing tax base, would be significantly below the Governor’s “baseline” spending forecast, a forecast that assumes that the cuts proposed by the Governor in his New Year’s Eve budget release continue. For example, in 2010-11, the first year when the Director of Finance would be required to calculate whether the state has received “unanticipated revenues,” the revenue cap would be an estimated $16 billion lower than the Governor’s “baseline” spending estimate for the same year. The gap would widen in 2011-12 and 2012-13 to $17 billion and $21 billion, respectively.

By basing the new cap on a level of revenues that is insufficient to pay for the current level of programs and services, Proposition 1A would limit the state’s ability to restore reductions made during the current downturn out of existing revenues [...]

Proposition 1A limits the amount that can be used from the reserve in “bad budget” years to the difference between anticipated revenues and prior year’s spending adjusted for population growth and the CPI. It does not allow the reserve to be used to support a “current services” or “baseline” budget, even if sufficient funds would be available in the reserve to do so. The discrepancy arises from the fact that the CPI – the inflation measure used by Proposition 1A – is designed to measure changes in the cost of goods purchased by households, not governments.

Thus, the CPI does not accurately measure the year-to-year increase in the cost of delivering the same level of public services. Specifically, the CPI does not take into account the fact that government spends a larger share of its budget on items – such as health care – for which costs have risen faster than the rate of inflation. Between 1990 and 2007, for example, national per capita health care expenditures more than doubled, rising by 164 percent, while the CPI for California, which measures inflation in households’ purchases, rose by just 61 percent.

The particular concern for health care is noteworthy. If the formulas in Prop 1A don't take into account medical inflation, an aging population, or other impacts--like the erosion of employer-based health coverage--then existing health programs are threatened.

Read the whole thing. These are the guts of this awful deal, what you won't hear when you call your legislator and they use buzzwords like "rainy day fund." At a time when the health care system in California frays at the edges, this spending cap would ultimately stop any progressive reform on anything that costs money, bottom line. The executive under 1A gets all kinds of new powers to make cuts, and absolutely none to raise revenues. It's Prop. 13 on steroids. That's why the Governor likes it so much.

But 1A has been structured to sidestep vigorous opposition through a series of bribes, particularly to the teacher's union. Prop. 1B, which would repay $9.3 billion dollars to schools starting in 2011-2012 can only pass if Prop. 1A passes. This has led the CTA to support all six budget measures on the May ballot, severing the united front that labor used to beat Arnold's special election measures in 2005. Interestingly, the California Federation of Teachers (CFT) will only support Prop. 1B, and in a pique of schizophrenia, denounced 1A as a "power grab" by the Governor.

Of course, the CFT is substantially smaller than CTA. And while the California Nurses Association's opposition to the whole special election ballot is noble and appreciated, ultimately some of the stakeholders with money will need to enter the arena. We leave a shameful legacy to the children of this state if the spending cap passes.

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