Saturday, October 29, 2005

California Proposition 76: State Spending and School Funding Limits

California's special election next month gives voters the opportunity to decide several important state issues. This post will discuss the merits of , which, if passed, would place limits on state spending and on state school funding.

Currently, there are spending limits in place in the state of California, but due to the nature of the source of state revenues, primarily personal and corporate income taxes and general sales taxes, revenues rise and fall dramatically as the state's economy rises and falls. Spending must rise and fall accordingly, or large surplusses or deficits result. The legislature hasn't shown the ability to restrain spending the surplusses, instead of holding it in reserve for the years when revenues fall below expected expendatures.

Prop 76 would change all that. In general, this proposition would limit spending to "the prior-year level of expenditures, adjusted by the average of the growth rates in combined General Fund and special fund revenues over the prior three years", as the non-partisan Legislative Analyst reports in the Voters Guide. This would have the effect over time of constraining spending during revenue-rich periods, but would allow more liberal spending in revenue-poor periods. It would accomplish this by placing excess revenues in reserve for those leaner times.

For school funding, this measure would alter the current minimum spending guarantees in place from previous propositions. It's rather complicated, but essentially would likely lower minimum spending guarantees, while at the same time reducing school funding volitility. School administrators would be able to better plan budgets with the knowledge that future funding would be more consistent.

It is important to note as well that just because minimum funding guarantees would likly be reduced, there is no reason to assume that actual school spending will decrease. The legislature and the governor can fund schools at higher than the minimum, and no limits are initiated by this proposal. It will be up to you and me to hold the state responsible if school funding is inadequate.

Finally, this proposal would grant new power to the governor to control spending. Under Prop 76, the governor could declare a "fiscal emergency", and then unilaterally reduce spending without legislative approval.

The Democrats and the public employee unions are, of course, opposed to this measure. They oppose any limits placed on their ability spend your money. The unions are specifically opposed to any limits that might impact their ability to implement pay raises and improve retirement benefits for their members. The legislature is heavily dominated by Democrats, and they, of course, oppose anything thing that limits their power to spend, and grants authority to the governor to override their spending plans.

They have never before shown any ability to restrain spending, and this proposal will bring some fiscal sanity and consistency to the budget process.

Vote YES on 76

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