Did You Know?
In this edition of "Did you know?" we take a look at Prop. 1C. Sure, the ballot statement, the legislative analyst's report, and every public utterance about Prop. 1C to date asserts that it would allow the state to borrow $5 billion dollars against future lottery revenues. But did you know that, according to Darrell Steinberg, it would actually allow the state to borrow twice that?
Trailing badly in the polls, Proposition 1C would infuse the state budget with cash by borrowing against future California Lottery revenues. The February budget assumed that it would provide $5 billion for the 2009-10 budget. But Steinberg said he now believes the state could borrow $10 billion from the Lottery and use it all in 2009-10.
Consider it something of a "Hail Mary" argument for Proposition 1C.
"In my view we can triage our way through an $8 billion problem," Steinberg said. "That doesn't mean that there won't be some difficult choices. But, you know, we have a $2 billion reserve. There may be other opportunities with federal economic stimulus ... If 1C passes, you know, it's actually a $10 billion one-time securitization. It was just contemplated as being spread across two fiscal years. You could bring the second $5 billion into the budget year."
What fun things you learn when your proposition trails in the polls!
Let's go to the summary of Prop. 1C, shall we?
Impact on 2009–10 State Budget: Allows $5 billion of borrowing from future lottery profits to help balance the 2009–10 state budget.
Hm, no mention of future state budgets there. But yes, the Senate President Pro Tem is correct. In the analysis by the Legislative Analyst, he mentions that "the state also could borrow more from lottery profits in future years." In fact, the $5 billion dollar figure appears nowhere in the text of Prop. 1C. Here's the relevant portion of the text:
(2) Notwithstanding any other provision of law or this Constitution to the contrary, the Legislature is hereby authorized to obtain moneys for the purposes of the California State Lottery through the sale of future revenues of the California State Lottery and rights to receive those revenues to an entity authorized by the Legislature to issue debt obligations for the purpose of funding that purchase.
Well, that would be interesting to know before voting, wouldn't it? That this proposition basically opens up a new state credit card for the potential purpose of endless borrowing? Borrowing that would have to be paid back, with interest, for the next several decades?
California's reliance on borrowing to cover the budget deficit has been part of the landscape for 30 years. Debt service currently costs the state $5 billion a year. If you think this is a good idea, I invite you to enable it by voting to allow basically limitless borrowing against the lottery. Surely that won't be abused.
...by the way, the depiction by Steinberg of $8 billion dollars as a niggling problem not to be trifled with, but $14 billion as simply insurmountable, is another new one. Considering that Steinberg and the Senate passed a majority-vote fee increase of around $9 billion last year, more than the $6 billion allegedly at stake in the special election, and his description of how to fill the budget gap did not include this, forgive me for saying that his beliefs don't hold up to scrutiny.