Vote No on Proposition 22: State Borrowing From Local Government Funds
This is the third part of a series of posts giving recommendations on California’s propositions. This post recommends a "no" vote on Proposition 22, which restricts state borrowing from local funds.
Proposition 24 (and not 23, which everybody has already heard about) will be the subject of the next post in this series.
California, It’s Budget, …
On October 8th, California’s legislature passed its yearly budget. The state has become famous for its late budgets and the never-ending budget shortfall. This year was no different; lawmakers were handed a $19 billion dollar shortfall and forced to come up with enough spending cuts and fees to balance the budget (on paper, at least).
California’s officials did a variety of things to balance the budget. Some of these things constituted substantial changes. Most notably, the budget takes steps to reform the state pension system, which if left untouched would create a massive unfunded liability in the future.
Other things, however, were less substantial. Lawmakers, for instance, assumed that the federal government will give California $5.4 billion collars, without any evidence that this will happen.
One of the more gimmicky things done to balance the budget was the raiding of local community funds. The state government, for instance, diverted $761.6 million from state fuel revenues to the General Budget. This money belongs to the Highway Users Tax Account, and supposed to fund road construction in local cities.
Raiding local funds to balance the state budgets is a storied California tradition. In 2009 the state government raided about $5 billion from local communities to balance the budget. Understandably, it is also something that makes local communities furious. This year, the League of California Cities has proposed Proposition 22, which will put an end to the practice.
…and Proposition 22
Proposition 22 is a complex piece of legislation, and I admit to not understanding all the details provided in the state’s official analysis (which might be a good reason to vote against it).
Nevertheless, the broad thrust of the proposition is fairly clear. For decades California’s legislature has borrowed money from local communities to balance budgets in hard times. Proposition 22 will prohibit this.
Raiding local funds is not the sexiest tool to balance a budget. It is not something politicians are proud of doing. Nevertheless, it is a still a tool that helps balance the budget, and California needs all the budget-balancing tools it can get these days.
If state officials are unable to use divert local funds, they will have to get that money elsewhere. If Proposition 22 prohibits them from using $761.6 million in highway funds, that $761.6 million will have to come from elsewhere. And it will probably be in the form of increased taxes and reduced spending.
Proposition 22 is another example of ballot-box budgeting, in which propositions strangle the legislature’s flexibility to make laws and pass budgets. It is useful to note that California’s biggest newspapers – the influential Los Angeles Times, the capitol’s Sacramento Bee, the liberal San Francisco Chronicle, and the conservative Orange County Register- have all come out against Proposition 22.
Moreover, it is not necessarily true that local spending is better than state spending. As the scandal in the city of Bell shows, cities can spend just as unwisely as states do. Their priorities are also not necessarily better; much of the money raided from local communities goes to fund schools. That money – around $2 billion – would otherwise be used for redevelopment. It’s arguable that education is a better thing to spend money on than development (that is certainly my personal opinion).
Proposition 22 is a well-intentioned proposition that seeks to end a hard-to-defend practice: raiding local funds to balance state budgets. But that practice, however unsexy, is still a necessary tool for the state to have.
That is why I recommend a “no” vote on Proposition 22.