Replies

SO how can people who claim to be conservatives, agitate AGAINST limiting spending, against Prop. 76. When I point out the truth, they have no answer, that's why they won't explain.

Another baseless assertion.

I have taken the time to read the LAO's analysis of Prop. 76, as should you. It isn't the picture you are presenting here.

First, after all the wailing and gnashing of teeth from both the governor and the legislature about how the appropriations process is too constrained by voter mandates, Prop. 76 does virtually nothing to undo Prop 98. In fact, it effectively borrows the money from deferred Prop. 98 payments by stretching out the repayment for fifteen years. Why not just abolish it and restore budget authority to the legislature so that they can be held accountable for spending?

Second, Prop 76 does try to restore Prop 42 funding, but given that Proposition 42 IS ALREADY law, why do we need to do anything but either have our gutless grovelnator line-veto the legislative budget or sue to restore the principal of using gas tax funding to be ONLY for road construction and maintenance as the law requires? If the governor, as chief LEO, can’t enforce the law now, what good is yet another ballot proposition mandating the same thing but deferring implementation for another two years? The reality is that the governor is just as complicit in these illegal transfers and proposes to legalize them as is the legislature.

The case is similar with regard to other “loans” against special funds.

HERE is the LAO’s analysis of fiscal impact (emphasis mine):

Near-Term Effect. Since 2001 02, the state has faced a large “structural” shortfall between revenues and expenditures. Recent budgets have covered this shortfall partly through spending deferrals, loans, and other one-time or limited-term solutions. As the savings from these limited-term solutions expire, spending under current law will increase faster than revenues in both 2005 06 and 2006 07, leading to a reemergence of the structural shortfall in those years, absent corrective actions.

Given these circumstances, the impact of the proposed spending limit on the 2006 07 budget would depend in large part on how the state addresses the structural shortfall during 2005 06 and 2006 07 budgets. If the budget imbalances are eliminated through significant ongoing expenditure reductions, then the proposed limit would not have a major impact on allowable spending levels in 2006 07. However, if the shortfalls are not addressed in this manner, then the proposed limit could constrain spending in 2006 07.

In other words, all Arnold has accomplished so far in two years is to have deferred the date when we hit the wall to 2006-7 while increasing the interest payments (so much for “cut up the credit card”). What in the hell makes you believe that spending will be cut in 2006-7? If all Arnold has done is to borrow and defer, what makes you believe he will have the courage to ENFORCE Prop. 76 when all he has to do is sign a tax increase that he has already threatened to do if Prop. 76 doesn't pass?

All indications so far are that he hasn’t got the guts.

But that isn’t the only problem with Prop 76. Back to the LAO’s analysis:

During periods of accelerating revenue growth (such as often occurs during the early stages of a business expansion), the limit could constrain spending below what otherwise could occur. This is because the three-year average revenue growth would be lower than the budget-year revenue growth.

During periods of decelerating revenue growth or revenue declines (such as often occurs during recessions) this limit could allow more spending than could be supported by annual revenues. This is because the average revenue growth would be higher than the budget-year revenue growth.

IOW, when times are good (and the pain is less), Prop. 76 cuts spending. When times are bad it INCREASES spending over what we have now. Given that government spending is what hampers recover from spending, given that the President’s tax cut is what got us out of the 2001 recession, is increasing spending during recessions what you really want FO?

But does Prop. 76 really cut spending in high revenue years? Back to the LAO:

In years in which revenues increased sharply, the elimination of the maintenance factor provisions would result in less growth in the minimum funding guarantee for K-14 education than would be the case under current law. (The Legislature could, however, choose to raise funding for schools by overappropriating the minimum guarantee.)

In short, the legislature could over-ride the spending limits of Prop. 76 and build in yet MORE structural expenditures which is EXACTLY what Davis did to get us into the fiscal mess we are in today.

But, couldn’t the legislature cut those “one time increases”? Prop. 76 says no:

In years in which revenues fell, however, Test 3 would no longer be operative, and thus the minimum guarantee would not be reduced automatically. This could result in higher funding for K-14 education in certain years. (The Legislature, however, could still reduce K-14 education funding through suspension, and Proposition 98 would also be subject to gubernatorial reductions that could occur under the circumstances discussed above.)

If K-14 funding were not reduced during revenue downturns, more of the solutions to any budget shortfall would need to come from either (1) deeper spending reductions to non-Proposition 98 programs or (2) new revenues to cover budgetary imbalances.

Proposition 76 thus contains structural means to force tax increases while accomplishing little to reduce spending. It isn’t even as tight as were the Gann spending limits that are STILL ON THE BOOKS.

Some “solution.” I read McClintock’s support for this proposition as payback for his support in his re-election campaign for State Senate and for Lieutenant Governor. He'll let the current charade go on and hopes to come in to clean up the mess at a later date.

Excellent post, C.O.

There are a few things to like in Prop 76, but there are also many things to dislike. At this point, I think the cons outweigh the pros. Authorizing yet more bonds is the one that sticks in my craw.

The "Test 3" language as it exists today is the one provision that would actually allow spending on education to reduce, given a decrease in revenues, population, etc. Deletion of that single phrase guarantees that spending can never be reduced below the prior year's level. In the event we could ever send home the illegal aliens populating out school system, population would definitely decrease, but spending would continue, regardless.

Also, the "Cap" that has been proposed, can be waived by the Governor at any time.

Prohibiting the raiding of the Prop 42 funds is another misnomer. It specifically provides that those funds can continue to be raided for yet another year. I agree with your take--why do we need a new law when we already have one that simply needs enforcing?

The debt we have run up from Prop 57/58, combined with the additional long term borrowing in Prop 76, is only bolstering the current socialistic spending levels of today and deferring the obligations to future decades.

I just read this article that says the economy may be ready to slow (or tank) next year. The combination of a slowed economy, with all this borrowing, is a formula for disaster.

'Weak Growth' Is Forecast for California Economy
http://www.freerepublic.com/focus/f-news/1492605/posts