03.09.09: SSDA Special Election Recommendations
By David Walrath
SSDA has adopted support positions on Propositions 1A, 1B, 1C and 1F that are all on the May 19 special election ballot. The special election ballot is part of the agreement for balancing the state budget in 2008-09 through 2010-11. SSDA has adopted support positions for the following reasons:
Proposition 1A
This Proposition includes the funding mechanism for Proposition 1B which would provide additional funding for public schools. Proposition 1A also provides a larger rainy day fund and a limit on growth of the California state budget expenditures. The provisions of Proposition 1A ensure that one-time money will not be spent for ongoing budgetary commitments and that unanticipated revenues will be used for one-time purposes rather than ongoing purposes. The expenditure cap in Proposition 1A is built on the 10-year California revenue trend line. This trend line then provides the measurement to determine whether additional revenues would be placed in the rainy day fund for a state reserve. The reserve would be used in years in which revenues did not grow sufficiently to meet ongoing expenditures.
The purpose of the expenditure limitations and rainy day fund is to smooth the fluctuations and volatility of California revenues and expenditures to end the feast or famine of state programs. SSDA has advocated for a better state budgeting process that would limit, if not eliminate, the volatility in state revenues and the situation of having a 2006-07 year of major new state revenues followed by mid-year cuts and even deeper mid-year cuts in subsequent years. Schools cannot plan nor implement programs in this fiscal atmosphere. Proposition 1A would improve the ability of school districts to plan and implement programs.
Proposition 1B
Proposition 1B recognizes the Proposition 98 maintenance factor owed to schools as a $9.3 billion maintenance factor. The Department of Finance (DOF) had interpreted Proposition 98 to mean that there would be no maintenance factor. The education community objected and opposed the DOF interpretation. Proposition 1B would clarify in the California Constitution the education communities interpretation of the maintenance factor. The $9.3 billion would come available to schools commencing 2011-12 and would be approximately $1.5 billion per year in addition to any other Proposition 98 funds. An estimated six years would be necessary to fully repay the maintenance factor, but it would bring schools back up to the ongoing Test 2 funding levels.
SSDA supports full funding of the Proposition 98 Test 2 level which would be accomplished by the passage of Proposition 1B. Proposition 1B, however, is tied to the passage of Proposition 1A to provide the funding mechanism for the $9.3 billion. If Proposition 1A does not pass, then the passage of Proposition 1B would not result in the $9.3 billion in additional funding for schools.
Proposition 1C
This is the Proposition where the state would increase Proposition 98 funding by the schools’ share of the lottery. The state would then securitize future lottery revenues and sell those lottery revenues as an income stream to investors. The budget assumes the passage of this Proposition in order to provide approximately $5 billion for state budget balancing for 2009-10. While SSDA has serious reservations about the policy behind Proposition 1C, SSDA reluctantly supports the Proposition as a needed component to ensure continuation of the state program funding.
Propositions 1D and 1E
SSDA has not taken a position on Propositions 1D or 1E related to borrowing funds and then repaying funds from Proposition 10 for the First Five Commission and Proposition 63 for mental health services. The two Propositions combined provide budgetary relief, but it is not a significant amount of budgetary relief as compared to Proposition 1C.
Because of concerns regarding the fiscal policy behind the borrowings and because they are not major parts of the budget resolution, SSDA has not taken a position on Propositions 1D and 1E.
Proposition 1F
Proposition 1F prohibits salary increases for state officers if the state has a deficit. SSDA believes there needs to be a greater penalty for state officials if a state budget is not balanced. Proposition 1F would accomplish that goal. SSDA supports Proposition 1F for that reason.
