Peter Schrag: Coming on Nov. 2 ballot: A lot more of the same

September 29, 2004

By Peter Schrag -- Bee Columnist - (Published September 29, 2004)

It's understandable why the leaders of California's cities and counties are gung-ho for Propositions 1A and 65, the measures on November's ballot that would stop the state from treating their revenues as a sort of perpetual sinking fund.

Ever since the early 1990s, when Gov. Pete Wilson and the Legislature snatched some $3 billion in local property tax to help balance a deficit-burdened budget, the state has been grabbing portions of their funds to meet the state's constitutional obligations, which in turn stem from another initiative guaranteeing minimum funding to schools and community colleges.

But like many of the other 14 propositions on the November ballot, the two measures are symptoms of California's larger governmental disease, not cures. Worse, in the name of reform they would freeze the current dysfunctional system ever deeper into the ice.

The two measures are similar. Proposition 65, an initiative sponsored by the locals, would prevent the state from taking additional local tax revenues without voter approval. Proposition 1A, reflecting a deal between the governor and the cities and counties, additionally would allow the state to take $2.6 billion this year and next to help balance its budget. Under the deal, the locals agreed to orphan their own measure and back Proposition 1A.

But like the governor's $15 billion deficit bond, it's another drunk's promise that after this bender, he'll never touch another drop.

The main problem is that both measures would make it nearly impossible to change the disincentives to good planning resulting from the imbalance between local sales tax revenues and the property tax. The resulting "fiscalization of land use" would make big-box retailers and auto malls much more attractive financially than a balanced mix of job-creating industry, housing and other development.

Indeed, the whole November ballot is a testimonial to the unintended consequences of the fix-all ballot measures, going back at least to Proposition 13, the property tax limitation initiative of 1978, that destroyed the power of local governments to raise revenues and handed the power to allocate the remaining resources to Sacramento.

Propositions 13 and 4, the Gann spending limit initiative passed in 1979, combined with two prior court decisions, resulted in sharply curtailed school revenues, which in turn brought Proposition 98. That measure, sponsored by the school lobby and narrowly approved in 1988, required the state to spend at least 40 percent of its general fund on K-14 education.

It's the Proposition 98 mandate that Wilson and the Legislature were trying to meet in 1992-3 when they first grabbed a share of the local property tax.

Meanwhile, four other measures, Propositions 61, 63, 67 and 71, would continue California's long string of ballot box budgeting, much of it well-intended. Two of them, Proposition 63 for improved, and desperately needed, mental health services and Proposition 67 for emergency rooms, would provide for tax increases (on millionaire incomes in one case, on phone service in the other) to pay for the programs. One calls for a $750 million bond for children's hospital improvements.

The fourth, Proposition 71, is a bald raid for $6 billion from the treasury over a 30-year period to pay for stem cell research that may do more to benefit researchers, biotech firms and venture capitalists than it ever will for those who suffer from the diseases this work may some day help alleviate. With the exception of the last, all four deal with California's own health needs.

But like Propositions 1A and 65, all reflect a dysfunctional fiscal process that, with each additional ballot measure, permanently ties up ever-larger chunks of state revenues - current or additional ones - for some particular purpose.

All are testimonials to the public's distrust of representative government. But each also makes the process of governing - of responding to the state's changing needs and making rational choices - that much more difficult.

Ever since he ran a year ago, Gov. Arnold Schwarzenegger has promised to clean up California's governmental mess - blow up the boxes, not just move them around. But almost everything he's done compounds the problem.

His deal with the locals, which became Proposition 1A, rather than addressing the fiscalization problem, would lock it into the constitution. His $15 billion deficit bond, rather than addressing the state's structural budget deficit, exacerbates it. His deal with the state's prison guards union merely defers the costs of the old deals and in some instances grants the union even more clout.

The centerpiece of the governor's reforms was supposed to be his much-ballyhooed California Performance Review. But what the panel of state bureaucrats produced was a combination of phony numbers, a weakening of environmental oversight and box-moving. The panel was told that major constitutional reforms were off-limits.

It's too soon to tell how much of that un-reform is due to the administration's ignorance about how the state works, how much to its right-left ambivalence and how much to a show-biz governor whose highest priority is popularity and applause, not policy.

November will be ballot business as usual.