By Loren Kaye
Why should Orange County businesses support the ballot measures on the May special election ballot?
Quite simply, because these measures are good for business. They set California state government on a path toward fiscal sanity and will in the future prevent the deficits that forced the latest round of tax increases.
Yes, the California budget is in crisis? dreadful economy has exacerbated a decade of wrongheaded and cowardly decisions by the Legislature that brought us to the fiscal precipice.
The governor and a bipartisan supermajority of the Legislature finally agreed on a balanced approach that pleased no one?hich is often the sign of a true compromise. In fact, the solution was so balanced, that the tax haters have been joined in their crusade by their polar opposites: unions representing teachers and state employees. Stranger bedfellows have never before been found under the sheets.
In this odd sleeping arrangement, it? the unions that have gotten it right. They recognize that the budget reform embodied in Proposition 1A is real, permanent and will have the long-range effect of reducing the growth of government and the prospect of profligate spending of revenue windfalls.
The budget reform measure requires annual deposits into a mandatory budget reserve that can only be used for a natural disaster or when revenues collapse?nd then only to bring spending to a level no higher than where inflation and population growth would have brought it.
The measure will not make it any easier for the Legislature to increase taxes. The bottom line for whether taxes would be increased has been, is, and will be getting a two-thirds legislative vote. Remember: since Proposition 13 passed in 1978, the Legislature has never raised taxes to increase programs and services?nly to address deficits or emergencies.
Out-of-control spending happens when the Legislature spends one-time revenues for permanent programs. For the past decade, when the California treasury received a revenue windfall from the tech or real estate bubbles, the Legislature then would spend it as if it would last forever.
The unique feature of this measure is to prevent access to these windfalls, place them in a reserve, and use them only when the economy heads south, for natural disasters or for one-time purposes such as infrastructure or tax relief. That is the key to preventing future tax increases on California business.
The remaining ballot measures are required to implement the other compromises that reduce spending or save money in other state programs.
?Proposition 1B resolves a thorny litigation threat and postpones repayment of education obligations by up to two years.
?Proposition 1C improves the productivity of the State Lottery and enables the state to advance the revenue stream from Lottery proceeds to bridge the shortfall in general fund revenues, thereby avoiding even larger tax increases or more painful spending cuts.
?Propositions 1D and 1E also mitigate further spending cuts and tax increases by temporarily transferring unallocated surpluses from education and mental health programs financed by tobacco taxes and income taxes on the wealthy.
?Proposition 1F prohibits any Legislative salary increases when the budget is out of balance.
California? investment climate will never be healthy as long as the prospect of targeted tax increases on business remains a real possibility. The constitutional protection of a two-thirds vote for legislative tax increases is an important bulwark, but pressure for tax increases will remain as long as deficits haunt policy makers.
Proposition 1A and the others will set the stage for fiscal stability and long-term predictability for our state? tax climate.
Kaye is president of the California Foundation for Commerce and Education, a think tank affiliated with the Sacramento-based California Chamber of Commerce.
