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How Prop 25 Is Making the Budget Worse

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    NEWSLETTERS

    David Parkinson via National Weather Service Data

    Prop 25 -- the November 2010 statewide ballot initiative that eliminated the requirement of a 2/3 vote on budget bills and replaced it with a majority vote provision -- was supposed to make budgeting easier and faster. In practice, however, it is making Gov. Jerry Brown's efforts to fashion a budget that much harder.

    Why? Because Prop 25 eliminated only one of the many supermajorities and other budget requirements in California. Most important, a 2/3 vote for raising revenues -- either through taxes or fees -- is in place.

    In times like these, when revenues are hard to come by, a Democratic governor like Brown is going to need new revenues to get a budget passed. So he has to win at least some votes from minority Republicans, who have more than one-third of the seats and thus power to block things. Brown 's budget proposal includes provisions that would extend temporary tax increases for five years; Brown wants to put those on the ballot via a ballot measure, and placing measures on the ballot -- at least as Brown has constructed this one -- would also require a two-thirds vote, and thus some Republicans.

    To understand how this all works in practice, put yourself in the mind of a Republican legislator. Under the old system, it was hard politically to justify to conservatives the act of giving your vote for a budget. But not impossibly hard. The budget was an annual process. A Republican legislator would exact a price in concessions for the vote and move on--in the knowledge that he or she would have the opportunity to have leverage again the following year in the next budget negotiations.

    Eliminating the 2/3 vote for the budget, however, ended the guarantee of annual leverage in the budget process. Republicans only have leverage when revenue is needed. Which makes each moment they have leverage more important, more politically fraught. It also raises the price that Republicans must extract.

    When Republicans hear that Brown is asking for tax extensions that run for five years, Republicans are thinking: wow, I need to get everything I can now because the governor is telling me I may not be relevant again for another five years. Since Assembly terms are limited to six years and state senate terms to eight years, many Republicans will be gone in five years.

    This dynamic tells us two things. Brown will have to pay a very high price to get Republicans to go along with his plan. If he won't pay a high price, he probably will have to shorten the number of the years of the tax extensions he wants -- from five to one or two.

    In either case -- with shorter extensions or a higher price to Republicans -- Prop 25 will have contributed to making budget balancing harder, and the long-term budget deficit worse.