Not So Fast – Voters Must Approve Budget Too!

Key budget items need voter's approval in May

Gov. Arnold Schwarzenegger has signed a package of bills designed to close California's $42 billion budget shortfall for the next year-and-a-half.

The Republican governor signed the bills Friday during a brief event that was closed to reporters. He made no public comments.

Schwarzenegger and the state's legislative leaders spent more than three months -- and one final, agonizing week -- to find a way to plug California's $42 billion budget hole.

As painful as that process was, they now face a potentially tougher challenge: persuading voters to agree with their solution.

The budget compromise that passed both houses of the California Legislature early Thursday requires voter approval of five ballot measures during a May 19 special election.

They would set a cap on state spending and institute a rainy day fund, authorize the state to sell bonds based on future lottery revenue, shift money from certain social programs and guarantee billions more for schools.

A sixth measure, placed on the ballot as part of last-minute deal-making to secure the final Republican vote, would be a constitutional amendment to freeze lawmakers' pay when the state runs a deficit. Another constitutional amendment, planned for next year, would create an open-primary election system.

The Republican governor said it was important to start campaigning and raising money for the budget-related measures immediately, with just three months until voters head to the polls.

"I think that it's very important that we start campaigning now, that we start educating the people and letting them know how important their partnership is again so that they help us and vote yes on those various different propositions," he told reporters Thursday, shortly after the Legislature approved the package of budget-balancing bills.

He noted that the ballot measures include government reforms, such as setting aside a rainy day fund to help the state through lean economic times and putting a limit on the amount the Legislature can spend in any given year.

"So we will be holding town hall meetings and traveling up and down the state to let the people know and let the people participate in this discussion," he said.

Schwarzenegger was scheduled to sign the package of 34 bills Friday afternoon, but the event was not open to reporters. The budget-balancing plan reduces the state's general fund spending by $13 billion for the rest of this fiscal year and approves a $96.3 billion general fund budget for the fiscal year starting July 1.

Asking the electorate to approve essential elements of the budget is "a giant wild card," said Mark Baldassare, president of the nonpartisan, nonprofit Public Policy Institute of California.

Baldassare said Schwarzenegger and lawmakers have their work cut out for them trying to sell their agenda to voters, who are worried about their jobs, houses and savings, and are fed up with political deadlock and partisan sniping.

Rejection of any of the revenue-related ballot measures will require lawmakers to plug that fiscal hole later in the year.

"The voters are in a very sour mood, a negative mood, about the direction of the state and the performance of both the Legislature and the governor around budget issues," Baldassare said.

Lawmakers said they had few other choices to close a $42 billion budget shortfall that had been projected through June 2010.

"Making the changes that we're doing to the Constitution require us to go to voters," said Assembly Speaker Karen Bass, D-Los Angeles, one of the four legislative leaders who crafted the package with Schwarzenegger. "I just hope voters have the patience with us."

There is plenty for voters to dislike in the compromise deal, which is intended to cover the state's spending needs through the rest of this fiscal year and next. The plan cuts $15.1 billion from programs, primarily education, and raises $12.8 billion in revenue, mostly through increases in the sales tax, personal income tax and vehicle license fee.

Lawmakers also will rely on $11 billion in borrowing.

Polls do provide a measure of hope for Schwarzenegger and lawmakers. With the nation sinking deeper into recession, a recent Public Policy Institute poll showed California voters becoming more pragmatic about finding a way out of the economic malaise.

The institute's survey suggest voters understand there is a need for balancing spending cuts and tax increases to solve the budget deficit, which has exploded as tax revenue has plummeted.

The weightiest of the ballot measures voters will consider calls for a limit on state spending and a rainy day fund long sought by Republicans and the governor. The compromise for Democrats in the same measure is a two-year extension of the 1 cent sales tax, increase in the personal income tax rate and vehicle fee. The combination gives nearly all interest groups something to oppose.

Schwarzenegger's office and Republicans who supported the compromise plan said implementing a spending cap for state government and saving excess revenue during boom years will end the wild fluctuations in the budget cycle.

"If we'd had it for the last 10 years, we'd have about $12 billion in the bank to pay down debt," said Assembly Minority Leader Mike Villines, R-Clovis.

The four other ballot measures would alter programs voters have already approved in previous elections -- money for mental health programs and early child development, a statewide lottery and California's landmark education-funding law, Proposition 98.

The education measure would guarantee California schools an extra $9.3 billion starting in 2011 and continuing for seven years. It also potentially mutes opposition from one of the state's most powerful interest groups, the California Teachers Association. It gives the union a stake in the election and is intended to prevent it from spending billions of dollars to fight the other initiatives.

That's what the teachers union did the last time Schwarzenegger sought sweeping changes, during a special election he called in 2005. Expensive opposition campaigns derailed all eight initiatives on the ballot then, four of them supported by the governor.

With voters already skeptical about their state leaders, it might not take a high-dollar campaign to defeat the ballot measures, said Jon Coupal, president of the anti-tax Howard Jarvis Taxpayers Association.

He already opposes the spending cap because he believes the language leaves lawmakers too many loopholes to get around it. He said approving a questionable spending cap is not worth extension of tax hikes, which would remain in effect through the 2013-14 fiscal year if voters approve the cap.

"We think it is an unprecedented assault on California taxpayers by politicians and special interests," Coupal said. "The taxpayers got virtually nothing out of this."

The deal lawmakers passed also relies on a proposal from the Schwarzenegger administration to sell bonds to investors based on future lottery proceeds, which the state hopes to increase through improved marketing and bigger payouts. In a Public Policy Institute poll in January, 61 percent of likely voters opposed the lottery plan, while 34 percent said they supported it.

If voters reject it, lawmakers will have to find a way to raise or cut another $5 billion.
Associated Press Writer Samantha Young also contributed to this report.

Copyright AP - Associated Press
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