An Analysis of Propositions 1 and 2
By Doug Porter
Back in the middle of August the California Legislature worked up a plan to renumber a couple of propositions appearing on the Nov. 4 ballot.
Two of Gov. Jerry Brown’s legacy political projects — a multibillion-dollar bond for water needs and a constitutional amendment to enhance the state’s rainy day budget fund — dropped the ballot numbers assigned by Secretary of State Debra Bowen of Proposition 43 (water) and Proposition 44 (budget).
(Endorsements are coming… We just don’t meet that often)
Consequently, Propositions One and Two were created. The idea behind this bit of presto-chango is the hope that voters will see these propositions as a package deal; a one-two effort to fix some of what’s broken in California.
While there has always been controversy about addressing California’s problems (Prop 1), just about “everybody knows” the State needs a fix for its Rainy Day Fund (Prop 2).That’s the plan, anyway, and Gov. Brown has done an impressive job of selling both measures to as many parts of the west coast establishment as possible.
Water, Cool Clear Water
Proposition 1– Water Bond – Voter Approval for the Water Quality Supply, and Infrastructure Improvement Act of 2014
Supporters: Yes on Props 1 and 2, A Bi-Partisan Coalition of Business, Labor, Republicans, Democrats and Governor also: yesonprops1and2.com
Opponents: Californians Against More Debt, Misplaced Spending – No on Prop 1 also: noonprop1.org
Ballotpedia Guide: The details, in plain English
You Might Not Know: One of the great controversies about California water management concerns the Delta (and the ecosystems thereof). The legislature was very specific about saying bond monies will “not be expended to pay the costs of the design, construction, operation, mitigation, or maintenance of Delta conveyance facilities.”
My Analysis: This the latest in a series on water infrastructure bonds going back to 1960. The state proposes to borrow $7.12 billion, to be paid back at the rate of $360 million from the general fund annually for 40 years.
After being delayed (mostly for political reasons) for four years, Gov. Jerry Brown has rallied just about the entire political establishment behind this effort. Democrats can brag about jobs and ecosystemic benefits. Republicans can brag about the benefits for corporate farming operations.
The Chamber(s) of Commerce, the Democratic Party, the Republican Party, the San Diego Water Authority, the Nature Conservacy and the Natural Resources Defense Council all love Proposition 1. They’ve build up a war chest just short of three million dollars. (Funds are co-mingled with support for Prop 2)
UPDATE: The Water authority wants you to know that, although they support Prop 1, they’ve not contributed to the war chest.
On the other side of the question are various (commercial and sports) fishing groups, the Winnemem Wintu Tribe, the Center for Biological Diversity, Food and Water Watch, and the Factory Farm Awareness Coalition, to name a few. They’ve built up a war chest of less than $40,000.
In the history of public works projects I doubt there’s been one that wasn’t packed with what fiscal watchdogs call pork, and Proposition 1 is no exception. It also does little to nothing to address the current drought in California. This is a long term deal and I’d say it is a sure bet agribusiness interests are the big winners.
What we don’t hear from opponents is how they’d line up the political support needed for any alternative funding scheme or what we’re supposed to do about water management if the bond measure fails. Big public works funding is complicated and necessitates building coalitions (which you get by promising a piece of the action) that are extraordinary in nature.
I’ve concluded this is a question of perfect being the enemy of the “meh”.
I will probably vote yes. I completely understand why you might vote no.
The Devil is in the Details
Proposition 2 – State Budget. Budget Stabilization Account. Legislative Constitutional Amendment.
Supporters: Yes on Props 1 and 2, A Bi-Partisan Coalition of Business, Labor, Republicans, Democrats and Governor, also: yesonprops1and2.com
Opponents: No on Prop 2. also: Educate Or State
Ballotpedia Guide: The details, in plain English
You Might Not Know: Ellen Brown of the Public Banking Institute argues against Proposition 2, advocating instead for a state-owned bank (North Dakota does it) in lieu of the proposed fund:
“Having a state-owned bank can substitute for a rainy day fund. Banks don’t need rainy day funds, because they have cheap credit lines with other banks. Today those credit lines are at the extremely low Fed funds rate of 0.25%. A state with its own bank can take advantage of this nearly-interest-free credit line not only for emergencies but to cut its long-term financing costs in half.”
My Analysis: This proposition, along with the Water Bond, are at the top of Gov. Jerry Brown’s agenda, which is why they both got re-numbered to make them easier to market. These low numbers allow them to be presented (accurately or not) as the one-two package to fix what needs fixing in California by the powers that be.
What Prop 2 does is alter the requirements for funneling money out of the General Fund into the state’s rainy day fund. It also creates a mechanism to set aside money for a education rainy day fund.
Who wouldn’t want to save money for a rainy day? Isn’t it the fiscally prudent thing to do?
Various newspapers around the state have lauded Prop 2 based on the premise it would impose “desperately needed fiscal discipline” on lawmakers. And it does do just that by setting up rules about how budgets must function.
The fact is California budgets are notoriously vulnerable during stock market downturns. These contractions –which are really just shakeouts of whatever suckers have fallen for during the latest set of promises of quick riches– impact the state because capital gains taxes are a critical part of the revenue stream.
Rather than fix the tax system, our state government is opting to build up reserves to lessen the impacts of these downturns. Prop 2 also promises savings by paying down past indebtedness at a faster rate. And that’s kinda okay in principle…here comes the BUT…
Part two of this deal–the Public School System Stabilization Account (PSSSA)– promises to build a similar reserve “funded by a transfer of capital gains-related tax revenues in excess of eight percent of general fund revenues.” The devil, however, is in the details.
This education Rainy Day Fund ideas sounds great, except that it leaves a Constitutionally blessed way out for the State to give schools LESS than the minimum guarantee for school funding, while squirreling away the difference to help its cash flow. Then, in a bad year, it will ‘give’ schools their own money, while spending the State’s money elsewhere, Prop 98 (setting a standrad for education funding) be dammed.
Because the formulas in Prop 2 are based on the historically low funding levels that got us to number 50 in national for cost-adjusted per-pupil expenditures, education funding will continue to be California’s red-headed step-child when it comes to budgeting.
Also, the State’s largess when it comes to doling out these savings back to the school districts comes with a hefty price tag: they’re required to spend down their own reserves (to three weeks) when any savings begin to accumulate in the PSSSA. When the state gets richer, they get poorer.
Want me to move the shells around again so you can guess where the pea is?
Everybody who’s anybody in the political establishment loves Proposition 2. Both political parties, both gubernatorial candidates, Chamber(s) of Commerce, the League of Women Voters of California, the San Diego County Taxpayers Association, several large unions and the Howard Jarvis Taxpayer Association have all endorsed it. Hell, it passed through the legislature without a dissenting vote.
I can understand why this Constitutional Amendment is popular in that it provides a certain “certainty.” Keeping funding levels up for education when times are tough is huge pain in the keister and it’s a bi-partisan problem. The new certainty baked into Prop 2 gives politicians an out–now they can say “my hands are tied” when parents, teachers and student complain about budget cutbacks.
I am “certain” my in determination to vote “no” on Proposition 2. Polls, however, say it’s likely to pass, which is not surprising given the institutional backing it has received.
The above does not necessarily represent the collective opinion of the San Diego Free Press editorial board, of which Doug is a member. For all articles on the upcoming election at the San Diego Free Press, the online media partner of the OB Rag, check out this: 2014 Progressive Voter’s Guide.
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