Proposition: 55 | 56 | 57 | 58     Also available one proposition per page and in PDF (small print) and en español.

PROPOSITION 55
KINDERGARTEN-UNIVERSITY PUBLIC EDUCATION FACILITIES
BOND ACT OF 2004

Legislative Bond Act

THE QUESTION

Should the state sell twelve billion three hundred million dollars ($12,300,000,000) in general obligation bonds for construction and renovation of K-12 school facilities and higher education facilities?

THE SITUATION

In November 2002, the voters approved Proposition 47, the first $13 billion of a $25 billion bond package for K-12 and higher education facilities construction and repair. The size of the package was based on the backlog of unfunded projects and projections of over one million additional K-12 students and about 700,000 college students entering the system in the next decade.

THE PROPOSAL

Proposition 55 allows the state to issue $12.3 billion of general obligation bonds for construction and renovation of K-12 school facilities and higher education facilities.

$10.0 billion for K-12 facilities:

• $5.26 billion for new construction with local districts paying 50 percent of costs. (Up to $300 million of this amount would be available for charter school facilities.)
• $2.25 billion for rehabilitation of older schools with local districts paying 40 percent of costs
• $2.44 billion for districts with critically overcrowded schools
• $50 million for joint-use projects such as facilities used by both a K-12 school district and a local library district

$2.3 billion for public higher education facilities--construction of new buildings and related infrastructure, alteration of existing buildings, and purchase of equipment for use in these buildings:

• $920 million for community colleges
• $690 million for the California State University
• $690 million for the University of California.

The Governor and Legislature would select the specific projects to be funded.

FISCAL EFFECT

Costs are estimated to be $24.7 billion over 30 years with average payment for principal and interest being $823 million a year.

WHAT A YES OR NO VOTE MEANS

A YES vote means that $12.3 billion in general obligation bonds could be sold for construction and renovation of K-12 school facilities and higher education facilities.

A NO vote means that $12.3 billion in general obligation bonds could not be sold for these purposes.

SUPPORTERS SAY

• 73 percent of California classrooms are over 25 years old and our classrooms are the third most crowded in the nation.
• Proposition 55 is an investment in the future of our economy, and it will produce local jobs.
• The measure contains strict accountability standards to assure that the funds are not wasted.
• The state treasurer says that Proposition 55 is a sound investment.

OPPONENTS SAY

• California has tens of billions of dollars in outstanding bonds and has the worst credit rating in the nation. This is no time to take on more debt.
• We could build and repair schools without borrowing the funds if the issue was given a higher priority in the state budget.
• Half of all school districts received nothing from the 2002 bond measure. Many districts cannot meet the 40 percent local matching fund requirement.
• 25 percent of the funds would go to Los Angeles, which has only 12 percent of the students.

For more information:

Supporters: Californians for Accountability and Better Schools, 888-563-0055, www.Yeson55.com

Opponents: California Taxpayer Protection Committee, 916-991-9300, www.ProtectTaxpayers.com

PROPOSITION 56
STATE BUDGET, RELATED TAXES, AND RESERVE.
VOTING REQUIREMENTS. PENALTIES

Initiative Constitutional Amendment and Statute

THE QUESTION

Should the state Constitution and certain statutes be amended to allow the state legislature to pass the state budget and budget-related tax and appropriation bills with a 55 percent vote, and to make other changes to the budget process?

THE SITUATION

The state budget bill provides the annual funding for most state government programs. It must be passed by a two-thirds vote (67 percent) of each house of the Legislature before being sent to the Governor for approval. The state Constitution requires that the legislature pass the budget bill by June 15 but this deadline has often not been met.

The Constitution also requires a two-thirds vote of each house of the Legislature to pass bills that increase taxes. Other types of bills can pass with a majority vote (over 50 percent).

The budget typically sets aside money in a reserve for unexpected events, such as revenue shortfalls or emergencies. Each year the Legislature and the Governor can choose the amount of money to be put into this fund.

THE PROPOSAL

Proposition 56 would amend both the state Constitution and certain statutes to change the state budget process.

The measure lowers the number of votes required to pass the budget bill and other bills related to it, including tax increase measures, from two-thirds (67 percent) to 55 percent.

The measure requires that at least 25 percent of excess revenues (the amount by which state revenues exceed what is needed for "current service levels") be put into the reserve fund until the reserve reaches 5 percent of prior-year spending. Use of the remaining excess revenues is not restricted. Reserve funds could be spent only in cases of an emergency or in years in which spending on current service levels is greater than available revenues.

Proposition 56 prohibits the Legislature and the Governor from collecting their salaries and expenses when the budget is late. In addition, the Legislature would have to stay in session until the budget is approved.

The measure also requires that a budget summary be included in the state ballot pamphlet with directions to an Internet Web site showing voting records of legislators on budget-related bills.

FISCAL EFFECT

The fiscal impacts of this measure would vary and would depend primarily on the composition and actions of future Legislatures. There could be changes in spending and potentially significant changes in state tax revenues in some years.

WHAT A YES OR NO VOTE MEANS

A YES vote means the legislature could pass the state budget and budget-related bills with a 55 percent vote, and other changes in the state budget process would also be made.

A NO vote means the state budget process would not be changed.

SUPPORTERS SAY

• Proposition 56 will end the pattern of late budgets and irresponsible deficits. The legislature has not passed a budget by the constitutional deadline since 1986.
• This measure holds legislators accountable by requiring them to pass the budget on time or face real consequences. They will have to stay in session and work only on the budget, and forfeit their salary and expenses until the job is done.
• Only two other states routinely require a two-thirds vote to pass a budget. This high threshold has given a handful of California legislators the ability to block compromise and demand concessions in return for their support for a budget.
• Prop. 56 helps avoid future deficits by building up a "rainy day" reserve fund when revenues are greater than needed to fund existing services.
• Deficits and late budgets hurt the state's credit rating. They force cuts to important programs as well as big tax increases.

OPPONENTS SAY

• This measure will make it easier for the legislature to increase our state taxes. Prop. 56 pretends to discipline Sacramento politicians, but it actually rewards them with an open-ended "blank check."
• The two-thirds vote requirement forces bipartisan consensus and strong justification before politicians can raise taxes.
• California's fiscal problems are not the result of the difficulty of achieving a two-thirds vote on budget and appropriation bills, but rather its failure to produce prioritized, balanced budgets and to pay attention to the state's economy and competitive position.
• Californians pay $130 billion in state and local taxes every year. This is more than enough to fund California's needs if our tax dollars were properly managed and budgeted.
• Spending is out of control. The best way to resolve the state's chronic budget problems is to cut wasteful spending and increase state revenues by stimulating economic growth, NOT by raising taxes.

For more information:

Supporters: Yes on Prop 56, 916-443-7817, www.budgetaccountabilitynow.org

Opponents: Californians Against Higher Taxes--No on 56, 310-996-2678, www.NoBlankChecks.com

PROPOSITION 57
THE ECONOMIC RECOVERY BOND ACT

Legislative Bond Act

THE QUESTION

Should the state of California borrow 15 billion dollars ($15,000,000,000) through the sale of bonds to provide financing for California's budget deficit?

THE SITUATION

California's General Fund budget supports a variety of programs, including public schools, higher education, health, social services, and prisons. In 2001 the economic and stock market downturns caused state revenues to decline sharply. Policymakers reduced program expenditures, raised revenues, and used a variety of other measures, including various forms of borrowing, to deal with the shortfalls.

Bonds have been traditionally used to finance major capital outlay projects. Recently, the state used bond financing to help close shortfalls in its General Fund budget. Last year the Legislature and the Governor authorized the sale of a $10.7 billion bond to eliminate the budget deficit that would have existed at the end of 2002-03. This bond is currently being challenged in court and has not been issued. (Short-term borrowing, due to be repaid in June 2004, is being used to finance the carryover 2002-03 deficit.)

The state is facing another large budget shortfall in 2004-05, which is estimated to be in the range of $15 billion. This estimate assumes that the currently authorized $10.7 billion deficit-financing bond is sold and the carryover 2002-03 deficit is taken off the books.

THE PROPOSAL

Proposition 57 would authorize the state to issue a $15 billion bond to address this year's budget shortfall. This bond would be used instead of the currently authorized $10.7 billion deficit-financing bond. Certain funds transferred to the state's Budget Stabilization Account (created by Proposition 58 on this ballot) would be used to accelerate the repayment of the bond. Proposition 57 would become effective only if Proposition 58, on this ballot, is also approved by the voters.

FISCAL EFFECT

The bond would provide up to $4 billion more now to help with the budget shortfall but would have higher costs in the long term and take longer to pay back than the currently authorized bond. It would be repaid by one-quarter cent of sales tax revenue. Funds from the state's Budget Stabilization Account (BSA) created by Proposition 58 would be used to accelerate the repayment of the bond. Assuming the maximum contribution from the BSA, the bond would be paid back in nine years. Annual cost would be $1.2 billion in 2004-05, increasing moderately thereafter.

WHAT A YES OR NO VOTE MEANS

A YES vote means the state could sell $15 billion in bonds to pay existing budgetary obligations.

A NO vote means the state would not sell $15 billion in bonds but could instead sell $10.7 billion in bonds as previously authorized by the Legislature to pay a smaller level of existing budgetary obligations.

SUPPORTERS SAY

• The California Recovery Bond and the California Balanced Budget Act, Proposition 58, together will give California's leaders the tools necessary to restore confidence in the state's financial management.
• Without this bond, California may be out of cash by June. The only choice will be to drastically increase taxes. Proposition 57 will let us refinance our inherited debt and give the state time to deal with its ongoing structural deficit.
• Proposition 57 will keep the state from running out of money and prevent drastic cuts in vital programs like education and health care.

OPPONENTS SAY

• Since 1849, California's Constitution has forbidden bonds like this from being used to paper over deficit spending. In order to put this unprecedented borrowing on the ballot, politicians propose repealing this historic constitutional provision and have the audacity to call it "a balanced budget amendment."
• California is billions of dollars in debt and this measure plunges us deeper in debt. California has the lowest credit rating in the nation because of its out-of-control borrowing. Total debt service from Proposition 57 will cost an average family more than $2000.
• Long-term bonds usually pay for building projects that will serve coming generations. This bond doesn't buy a single school, road, or park.

For more information:

Supporters: Join Arnold, 916-442-7757, www.joinarnold.com

Opponents: Senator Tom McClintock, 916-448-9321, http://tommcclintock.com

PROPOSITION 58
THE CALIFORNIA BALANCED BUDGET ACT

Legislative Constitutional Amendment

THE QUESTION

Should the state Constitution be amended to require that the state adopt a balanced budget and provide for mid-year adjustments if the budget falls out of balance? Should the Constitution also include state budget reserve requirements and limits on future borrowing to finance budget deficits?

THE SITUATION

California has experienced major budget difficulties in recent years. Although program spending has been reduced and revenues increased to address the shortfalls, large deficits and significant amounts of borrowing have continued. The State faces another major budget shortfall in 2004-05.

The state Constitution requires the Governor to propose a balanced budget each year, but does not require that the budget finally passed by the Legislature and signed by the Governor be balanced. The Constitution also requires a prudent state reserve fund, but does not specify its size or a mechanism to fund it. In general, voter approval is required by the Constitution for debt backed by the state's general taxing authority. In addition, bonds submitted for voter approval must be for a specified "single object or work."

THE PROPOSAL

Proposition 58 amends the California Constitution to require that the state enact a balanced budget. If the Governor later determines that the budget is going out of balance, he or she may declare a fiscal emergency and propose legislation to address the problem. If the Legislature fails to pass bills addressing the budget problem within 45 days, it would not be allowed to act on any other bills or adjourn until it did so.

This measure requires a reserve, the Budget Stabilization Account (BSA), in the state's General Fund. A portion (rising from one to three percent) of the state's estimated annual General Fund revenues would be transferred into the BSA each year until the BSA reaches the greater of $8 billion or 5 percent of the state's General Fund revenues. The annual transfers could be suspended or reduced for a fiscal year by an executive order of the Governor.

Each year, half the funds transferred into the BSA would be used to repay the deficit-recovery bonds authorized by Proposition 57 until $5 billion had been dedicated for that purpose. The remaining funds in the BSA could be transferred to the General Fund by a majority vote of the Legislature and approval of the Governor, and spent for various purposes--including covering budget shortfalls--generally with a two-thirds vote of the Legislature (as in current law).

This measure provides that the Proposition 57 bonds comply with the constitutional requirement concerning a "single object or work." Subsequent to the issuance of the bonds authorized in Proposition 57, this proposition would prohibit most future borrowing to cover budget deficits.

Proposition 58 will only take effect if Proposition 57 on this ballot is also approved by the voters.

FISCAL EFFECT

Fiscal effects could vary, depending on future budget circumstances and actions taken by Governors and Legislatures. Proposition 58 would limit the state's future ability to allow accumulated budget deficits to carry over from year to year. The larger reserve could smooth out changes in state spending as the economy goes up and down.

WHAT A YES OR NO VOTE MEANS

A YES vote means the state Constitution would be amended to require a balanced budget and to add other new requirements on state budgetary practices.

A NO vote means the state Constitution would not be amended to require a balanced budget and make other changes in the budget process.

SUPPORTERS SAY

• Proposition 58 will require the Governor and the Legislature to enact a balanced budget. Now, the Governor is only required to propose, not enact, a balanced budget. This loophole has led to huge budget deficits.
• Proposition 58 prohibits borrowing to pay off future deficits and requires building a reserve of at least $8 billion to protect California from future economic downturns.
• State government spending in California is out of control, significantly exceeding state revenues over the past three years and threatening the state's ability to pay its bills and access financial markets.
• Together with the Proposition 57, this measure will give California's leaders the tools to resolve our budget crisis and restore confidence in the financial management of the state.
• Proposition 58 puts a mid-year process in place to address fiscal crises and bring the budget back into balance, forcing the Governor and the Legislature to work together before it is too late.

OPPONENTS SAY

• We were promised a strong state spending limit to accompany the deficit retirement bond in Proposition 57, but Proposition 58 does not give us any spending limit. The Legislature is free to continue spending like crazy, sticking us with higher taxes and more debt.
• Proposition 58 does not protect us from the accounting tricks and short-term borrowing currently employed to balance the budget.
• This proposition allows Legislatures and Governors to ignore the prudent reserve requirement in current law. Its reserve funds are largely unprotected.
• Proposition 58 sweeps aside the provision in our state Constitution that has limited long-term borrowing to projects like schools, parks, or water projects that will serve coming generations, and allows the Governor and Legislature to borrow $15 billion to paper over California's biggest budget deficit ever.
• The Governor already has the power to call the Legislature into session to address a developing budget shortfall. Proposition 58 requires the Legislature to take action before it can move on to other business, but this rule is loophole-ridden.

For more information:

Supporters: Join Arnold, 916-442-7757, www.joinarnold.com

Opponents: San Diego Tax Fighters, 858-530-3027, e-mail rrider@san.rr.com

The League does not judge the merits of the arguments or guarantee their validity. Arguments come from many sources and are not limited to those found in the state ballot pamphlet.

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