Sharp Lines Are Drawn on Prop. 56

SACRAMENTO — One group promises Proposition 56 would bring an end to the delay tactics and partisan games that freeze the Legislature in budget gridlock year after year.

Another warns it would be a disaster, greasing the way for all kinds of tax hikes, resulting in a mass migration of businesses from the state.

Gov. Arnold Schwarzenegger’s $15-billion economic recovery plan may be generating the most publicity of all the measures on next week’s ballot, but Proposition 56 seems to be generating the most spirited debate.

Called the Budget Accountability Act, it would make it easier for lawmakers to pass a budget, including one with new taxes. If voters approve it, Democrats, who dominate the Legislature, would be able to send a spending plan to the governor without a single GOP vote. California is one of a dozen states that require a budget with new taxes to be approved by at least three-fifths of lawmakers. California requires two-thirds. In recent years, that has given the GOP significant influence over deliberations on spending, and enabled them to block tax increases supported overwhelmingly by the majority party. No budget can pass unless at least six Assembly Republicans and two Senate Republicans vote for it.

The act seeks to lower the required threshold to a 55% legislative majority.

Corporations and business groups fighting Proposition 56 warn that it would open the floodgates for new taxes.

“The Legislature does not have a good track record of being able to restrain itself,” said Bill Hauck, president of the California Business Round Table. “That’s what got us into this mess.”

Unions, school organizations and others insist the measure would merely break gridlock, enabling lawmakers to pull a spending plan together on time after years of disruption in social service and educational programs caused by late budgets.

“We are out of sync with the rest of the country,” said Trudy Schafer, program director for the League of Women Voters of California, which has endorsed the initiative, noting that most states don’t require two-thirds majorities to pass budgets with new taxes. “The rest of those states don’t raise taxes willy-nilly, and we won’t either.”

A 1998 study by the General Accounting Office, the investigative arm of Congress, suggested that, over the course of a decade, states with less stringent vote requirements had raised taxes, on average, 7% more often than states like California. A December survey from the National Assn. of State Budget Officers, meanwhile, shows none of the states that require legislative “super-majorities” enacted large tax hikes last year to close their budget deficits -- and a handful of other states did.

In addition to changing the vote requirements for approving a budget and increasing taxes, the act would dock the pay of lawmakers every day a budget was late, set aside a rainy day budget reserve and provide information on state spending and how legislators voted on the budget in the official state voter guide and on a new website.

“That is just the proverbial sugar coating on the poison pill,” said Jon Coupal, president of the Howard Jarvis Taxpayers Assn., who argued that the extra measures were added to distract voters from the provision regarding taxes, which he said is the core of the initiative.

“It’s very clear that, almost exclusively, the money to pay for this campaign is coming from public employee unions,” Coupal said. “For all their complaining about the opposition being special interests, we submit these unions are the pinnacle of special interests. They thrive off more government spending. It directly expands their membership and expands their ability to provide better benefits for their members.”

“It is the pot calling the kettle black,” Coupal said.

The reserve requirement is similar to one that is part of the governor’s economic recovery package, which will appear on the March ballot as Proposition 58. Supporters of the Budget Accountability Act, however, say their provision would more tightly restrict lawmakers’ use of the reserve. But unlike Proposition 58, the Budget Accountability Act would let legislators put money into the reserve only when the state was flush with cash. If there weren’t enough money coming into the state to avoid program cuts, nothing would go into the reserve.

Schwarzenegger’s plan would require the state to continue building a reserve in good economic years and bad, unless the governor issued an executive order directing otherwise.

As for docking the pay of lawmakers when a budget was late, even Coupal supported that idea. But he said it was added to the initiative only as “window dressing.”

The two-thirds legislative vote requirement for increasing taxes in a budget dates to Proposition 13, which limits the amount by which local property taxes can increase each year. Organizers of the initiative added the two-thirds requirement to keep lawmakers from finding loopholes to add other property taxes.

Coupal warned that the Budget Accountability Act would tear down that safeguard.

“I’ve seen how creative they can be over there,” Coupal said. “They would find a way.”

But while scores of new taxes were introduced last legislative session, almost all of them were politically dead on arrival. Democrats had the opportunity to move them onto the floor of the Senate and Assembly but chose not to.

The taxes that would stand the best chance of getting through the Legislature if the vote requirement were lowered would probably be increases in the income tax rate for the rich and in tobacco taxes. Both ideas are popular with voters. Also a target of Democrats are taxes on gasoline to pay for road improvements, and increasing taxes on liquor, wine and beer.

“Would there be a basketful of tax increases if this passes? Hard to know,” said Fred Silva, a budget analyst at the Public Policy Institute of California. “It’s fairly easy for the majority party to put up a tax bill they know won’t pass. That might change once the vote requirement does.”

Silva suggested that Democrats sometimes propose tax hikes under the current system for political reasons, making it look as if they are trying to solve a problem but are being blocked by Republicans. Yet, he said, they would stop short of actually pushing such proposals through for fear of voter backlashes.

But one thing Silva said was certain was that the measure would shift the power dynamic at the Capitol, forcing the governor to show his hand on the budget much earlier. Under the current system, Schwarzenegger can hold up the budget process without appearing obstructionist by having the Republican caucus block its passage.

Under Proposition 56, he would probably get a budget on time -- with things in it that he did not want. He would have to either sign it or veto it.

“It puts the hot potato in the governor’s hand,” Silva said.