Pete Rates the Propositions
Sensible opinions on the California ballot propositions      since 1980      by Pete Stahl

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Pete Rates the Propositions
February 2008

Pete recommends:
91   ABSTAIN   Made Superfluous by Prop 1A of 2006
92   NO   Community College Funding and Fees
93   YES   Rejiggering Legislative Term Limits
94   NO   Indian Gaming Compact: Pechanga Tribe
95   NO   Indian Gaming Compact: Morongo Tribe
96   NO   Indian Gaming Compact: Sycuan Tribe
97   NO   Indian Gaming Compact: Agua Caliente Tribe


Proposition 91: Made Superfluous by Prop 1A of 2006 – ABSTAIN

Two years ago, while the Secretary of State was counting signatures for this initiative, the Legislature plopped a nearly identical measure onto the November 2006 ballot. That proposition, Prop 1A, was approved by a whopping 77% of the voters, rendering this initiative moot. Sadly, there is no way to pull the plug on a meaningless initiative, so here we are. Prop 91 will have no effect one way or the other.

I plan not to vote on Prop 91 at all. That's right, neither a yes nor a no vote. I will leave my ballot incomplete.

You might find you have trouble doing this. It may even feel like a dereliction of your duty as a citizen, going against everything you learned in high school civics class. In fact, nothing could be farther from the truth. Not voting on a measure is actually the responsible thing to do in certain circumstances. Prop 91 is one such case: when a ballot measure is meaningless. Another time not to vote is when you have no earthly idea how to vote and nowhere to turn for guidance. For instance, I won’t vote for any candidates for judge or party central committee if I don’t have a clue who any of them are and no way to find out. Voting on name recognition alone can actually be dangerous: that is how the Democrats in my Southern California district nominated a notorious former Ku Klux Klan leader for Congress in 1980.

I encourage you not to vote on any office or measure where you have nothing more to go on than names you’re seeing for the first time, a billboard you drove by, or a television commercial you half-ignored. Abstaining is a little-used but powerful act. It says, “I’ll be honest: I don’t have enough information to decide, so I’m doing the right thing and not submitting a totally random vote.” Try it. You may find it refreshingly liberating.



Proposition 92: Community College Funding and Fees – NO

Every year, Prop 98 guarantees schools and community colleges 40% of the General Fund—about $45 billion. And every year, the Legislature engages in a tug-of-war over how to divide that funding between K-12 schools and community colleges. In recent years the solution has been a consistent 90/10, and this will probably continue for the foreseeable future. However, the Legislature holds the power to alter the proportion should the need arise.

Community college advocates aren’t satisfied with this. They claim they were promised not ten, but eleven percent of the Prop 98 funding guarantee back in 1988, and that the state is now billions of dollars “in arrears” in funding the colleges. In order to correct this, they have given us Prop 92, which will decouple the funding guarantee for community colleges and K-12 schools and restore community college funding to what it “should” be.

Here’s how it will work: The K-12 portion of Prop 98 funding will break off and sail away with its existing ratcheting mechanism, ensuring that the schools’ $41 billion will continue to swell (but never shrink) each year in response to increases in personal income and K-12 enrollment.

The remaining chunk, for community colleges, currently about $4.1 billion, would be massaged every year by a new machine. This would raise funding levels in response to increases in personal income and the population of young adults. The rates of growth of two demographics, 17-21 and 22-25, would be measured, and the higher one used as the multiplier for community college funding.

The statistically-minded among you will see instantly that this is certain to be higher than the aggregate growth rate of the whole age bracket from 17 to 25. For example, imagine that some year the 17-to-21-year-old population grows 2% but the 22-to-25-year-old population declines 2%. The overall growth rate of the community college demographic would be zero, more or less, but Prop 92’s sly scheme would ignore the 22-to-25-year-olds and grow community college funding 2% due to the younger bracket. If I recall correctly, the technical term for this type of formula is “cheating.”

But that’s not even the worst part of the algorithm. Remember that Prop 98 adjusts funding to K-12 schools based on actual enrollment. That makes sense: schools need a certain amount of funding per actual student. Prop 92, on the other hand, wants to adjust community college funding based on the population of potential enrollees—everybody in the state aged 17-25. It won’t matter if they’re actually still in high school, or attending UCLA, or deployed in Afghanistan, or (gasp) already have their Associate’s degrees. There’s a public out there to be served, whether they want service or not, and, like an empty McDonald’s with burgers on the grill, our community colleges will be ready for them should they decide to show up.

Oh yeah, and Prop 92 also increases community college funding further in any year where the state’s unemployment rate exceeds five percent. That has happened—let me check here—thirteen out of the past fifteen years, a mere 87% of the time. No biggie.

This is nonsense. Obviously K-12 enrollment should determine grade-school funding. But pegging community college funding to the growth of the pool of potential enrollees? And choosing just the tastiest half of the data? And enhancing it with a light sprinkling of unemployment dust? Give me a break.

Supporters of Prop 92 claim that the “enhanced” funding guarantee is needed to prevent colleges from increasing student fees, which will be effectively frozen under the measure. They point to a 2005 study commissioned by the Legislature that blamed a $15-per-unit fee increase for a 314,000 student drop in enrollment earlier this decade. I’m sorry, but that fee increase cannot possibly have been responsible for driving away one-eighth of the student body. Per-unit fees amount to just one-tenth of student costs; textbooks, health fees, student body fees, parking, and a plethora of other expenses are much more important. Instead, the drop resulted from slashed course offerings, the elimination of many recreational courses for non-degree seeking students (the greatest losses occurred in such areas as physical education, art and music), and those other increased student costs. Prop 92’s offer to freeze student fees is an irrelevant come-on that will accomplish virtually nothing.

At its heart, Prop 92 is an attempt to lock in funding for yet another area of government with a constitutional guarantee. We should all oppose this kind of ballot-box budgeting; it straitjackets the Legislature in its most important function. Budgeting sets the state’s true priorities, which should be allowed to adjust from year to year. By approving this measure, we would remove that flexibility, and instead say that community colleges are more important than law enforcement, health care, social programs, four-year colleges, and anything else subject to regular budget deliberations. That’s just not right.



Proposition 93: Rejiggering Legislative Term Limits – YES

“Throw the rascals out!” That was the rallying cry for Prop 140, the 1990 term limits initiative. Aimed at entrenched career politicians and the special interests supposedly keeping them in office, Prop 140 passed in a landslide of indignation. State legislators are now limited to eight years in the Assembly and six in the Senate.

Yes, Einstein, that adds up to fourteen years, but not many serve that long. The Senate is only half the size of the Assembly, and Senate vacancies occur less frequently, so most Assembly members are squeezed out of Sacramento after just six years, never reaching the Senate.

In the first dozen years after Prop 140 passed there was a fair amount of chamber switching in both directions, as termed-out Assembly members and Senators grabbed each others’ seats. So in the early days of term limits, a fair portion of the Assembly had prior legislative experience in the State Senate. But no longer. Only four current members of the Assembly have ever served in the Senate. The other seventy-five (there’s one vacancy) have been in Sacramento five years or less. In other words, the Assembly is filled with inexperience.

Most telling, the Assembly leadership is essentially a bunch of unseasoned sophomores. Speaker Fabian Núñez ascended to his position after just four years in the Legislature, as did Speaker Pro Tempore Sally Lieber. The Majority and Minority Leaders assumed their posts after just two years in the Legislature.

I don’t know about you, but is scares me to put a state with 37 million people and a twelve-figure budget in the hands of policy-makers with so little experience. Imagine how long it would take you to understand the nuances of budgeting, taxation, water, energy, environment, prisons, health care, education, transportation, agriculture, criminal and civil law, and so forth. Can you do it in two years? Guess what: that’s not good enough. You can’t just understand these subjects; you have to master them and lead state policy. After all, in two years you may have a leadership role.

How do they do it? How do our green Assembly members figure out how to make policy and laws with such insufficient background? They can’t always rely on staff—Prop 140 slashed legislative staff levels to the bone. So they rely on those with true experience: lobbyists and think tanks. And they might also listen a teensy weensy bit to campaign contributors. This is government by special interest, and it’s the exact opposite of what voters wanted when they passed Prop 140.

Because the situation in the Assembly is so dangerous, we must adjust term limits. Prop 93 will reduce the limit from 14 years to 12, and allow all 12 years to be served in the same house. The 12-year limit means there still will be no career state legislators. But allowing it all in one chamber means the Assembly Speaker will probably have eight or ten years’ experience instead of four, making it far less likely that leadership will be encountering important issues for the first time. Prop 93 means more continuity, more long-term policy, and more structural coherence to our government.

Opponents of this measure correctly point out that it “grandfathers” current members, allowing them to stay in their current chamber 12 years regardless of any prior service in the other chamber. This could lead to some current legislators serving 18 or even 20 years. They argue that we should leave Prop 140’s term limits in place so we can get rid of the current, unsavory leadership, set to be termed out this fall. To this I say, “Bah.” If you think that the replacements for Núñez or Senate President Don Perata would be any less unsavory (more savory?), you’re deluding yourself. Virtually all legislators, including any new leaders, are highly partisan animals due to their non-competitive districts. But that’s a story for another day.



Propositions 94–97: Indian Gaming Compacts – NO

Props 94 through 97 would allow four southern California Indian tribes to expand their casinos so they would be among the largest in the world. In exchange the tribes would pay billions of dollars into the state’s General Fund. Sounds like a painless solution California’s budget crisis, right? That’s certainly what the legislature and governor thought when they approved these compacts last June. But this isn’t a good way to balance the budget, and the agreements are tilted too heavily in the tribes’ favor anyway. We can do better—much better. Vote down the compacts to encourage a better solution to our budget crisis, or at least send the parties back to the bargaining table.

The tribes in question—Pechanga, Morongo, Sycuan and Agua Caliente—currently operate five casinos in Riverside and San Diego counties. Their existing compacts with the state allow each of them 2,000 slot machines. Props 94-97 will increase this to 5,000 for Sycuan and Agua Caliente and 7,500 for Pechanga and Morongo. This would place the latter two on par with the Foxwoods casino in Connecticut, currently the world leader in slots with over 7,400. For comparison, the enormous MGM Grand in Las Vegas has only half that number at 3,700.

Calculating from one of the compacts, each slot machine brings in approximately $130,000 a year in net profit (after payouts), so the four tribes’ 8,000 machines currently bring in $1.04 billion profit a year. Under the existing compacts the tribes pay nothing to the state’s General Fund. Instead, they pay roughly $74 million into special funds for local governments, poorer tribes, and other purposes. That’s an effective tax rate of 7%. Pretty sweet for the tribes.

Props 94-97 will impose a new payment to the General Fund. It will start with a base of $123 million (11.8% of the profit on the existing 8,000 machines), and add 15% of the net profit from the first 20,000 new slot machines, plus an additional 10% of the net profit on the final 5,000 machines at Pechanga and Morongo. If the $130,000 per machine figure holds for all new slots, this would mean $675 million in new income for the General Fund once all 25,000 new slot machines are operational. Pretty sweet for the state.

Or is it? The profits from all 33,000 machines will be about $4.3 billion, yielding an effective tax rate of 15%. This might be high for a regular business, but we’re talking about gambling. Compare it to the Lottery, which is “taxed” at a whopping 83%—that is, of income not used for prizes or operational costs, 83% goes to public education, with the rest used for retailer commissions and bonuses. Props 94-97 will turn that equation around for Indian casinos: 85% of profit will go to the tribes, the rest to the state. Obviously we should negotiate a better deal. If these propositions fail, that’s what will happen.

Why did Arnold and the Leg make such bad deals? Two reasons: campaign contributions and the budget gap. The four tribes regularly make lavish contributions to both political parties and elected officials, so everyone in Sacramento is, shall we say, predisposed to be nice to them. And the impending huge budget shortfall has made lawmakers even more desperate for a solution, so they’re willing to settle for any agreement they can get.

But the competitive climate is right to renegotiate. The tribes on this ballot are only four of more than 50 tribes operating casinos in California today. If these measures fail, the pressure will be on Pechanga et al. If they don’t agree to give more than 15% to the General Fund, competing tribes surely will. I’d like to see the state go for 50% or more. That would still leave billions in profits for the tribes, yet pale in comparison to the Lottery.

There are other provisions of the proposed compacts that make them bad deals for the state. Under the existing compacts, the state has the right to inspect casino records to verify payment levels. Props 94-97 allow the tribes to audit themselves instead. The temptation to shortchange the state may be too great to resist. Moreover, the propositions effectively grant the tribes exclusive franchises on card and slot machine gambling in their local areas. I can’t see any justification for this give-away.

The propositions also fail to address two important problems with the existing compacts: casinos’ immunity from the California Environmental Quality Act and the lack of labor union protections for casino employees.

But putting aside quibbles over the terms of the compacts, there are deeper reasons to oppose Props 94-97. See if any of these resonate with you.

“Sin taxes” have been around forever, and it’s hard to argue against them. It makes sense to tax, and thereby discourage, nonessential activities such as gambling, smoking and drinking, that have no societal merit. But I’m queasy about closing a budget deficit by creating more sins to tax. Props 94-97 hope to balance our state’s budget not by discouraging, but by expanding slot-machine gambling, which is an addictive, self-destructive behavior on par with smoking and drinking. This strategy seems to contradict the entire rationale for sin taxes.

Let’s take the strategy a step further. If it’s fine to close the budget gap partially by legalizing, franchising, and taxing one “victimless” activity, wouldn’t it be better to close it completely with more? We could legalize prostitution, grant a franchise to the Police Athletic League, and direct 35% of the profits into the General Fund. It would be worth billions! Why stop there? Let’s legalize marijuana, let the Salvation Army sell it, and collect 40%. Budget surpluses as far as the eye can see! Crystal meth, sold by the Girl Scouts? The state income tax becomes unnecessary! Heroin from the Church of Christ? No more sales tax!

Is this really how we want to structure our state budget? Should government income depend on the public level of avarice? Should schoolchildren suffer when there isn’t enough lust, greed and gluttony to pay for their textbooks? Of course not. I am not arguing that we should outlaw gambling, but rather that the state has no business depending so heavily on slot machines. Props 94-97 are emblematic of a legislature that cannot control spending, will not raise taxes, and is turning to desperate, stop-gap measures that will ultimately cause a much bigger problem than they solve.

The problem I refer to is gambling addiction. “Gambling can be as serious as a drug addiction, yet it is a government-subsidised form of addiction,” says addiction specialist Eric Nestler of the University of Texas. “We need to be made more aware of the potential risks, and we need ... [to] remove subsidies for addictive behaviors: tobacco, gambling, state lotteries—it’s absurd.” According to New Scientist magazine, “Some researchers predict as many as 10 per cent of the US population will soon have a gambling problem.”

The $9 billion that proponents claim will flow into the General Fund over the lifetime of the compacts will have to come from someone. That “someone” is ordinary Californians, who must lose $60 billion to the slot machines authorized by these propositions if the promised government funding is to materialize.

That much money—the equivalent of $2,400 in gambling losses by every adult in the state—cannot possibly come just from casual gamblers having a wholesome night at the casino. Instead, most of that $60 billion will come from addicts: people who have lost control over their actions. One study reportedly suggests 60% of slot machine revenues come from gambling addicts. That lost money could be funding retirements, or paying off credit card debts, or buying goods and services in the local community. Instead it will drain into slot machines, leaving the losers poorer and ever more vulnerable. Will that be good for our economy or society? Think about it.



 
 
 
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