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

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Pete Rates the Propositions
November 2006

Pete recommends:
1A   NO   Earmarking Sales Tax on Gasoline for Transportation
1B   YES   Transportation Bonds ($20 billion)
1C   YES   Housing Bonds ($2.85 billion)
1D   YES   School & University Construction Bonds ($10 billion)
1E   YES   Flood Control Bonds ($4 billion)
83   NO   Increasing Punishment of Sex Offenders
84   YES   Drinking Water & Flood Control Bonds ($5.4 billion)
85   NO   Parental Notification for Minors Getting Abortions (Again)
86   YES   Cigarette Tax Hike to Fund Health Services
87   YES   Oil Production Tax to Fund Alternative Energy
88   YES   $50-per-Parcel Tax for K-12 Education
89   YES   Public Financing of Political Campaigns
90   NO   Limiting Regulation of Private Property


Proposition 1A: Earmarking Sales Tax on Gasoline for Transportation – NO

Prop 1A concerns the state sales tax on motor fuel. This is not the "gas tax." Look in the table. The excise taxes are the gas tax. The sales tax is not; it's a general tax, and should go to the General Fund to pay for education, health care, social services, and so on. Four years ago, however, Prop 42 passed, diverting the sales tax on motor fuels to transportation.

Price of a typical gallon of gasoline in California
Source: California Board of Equalization
Price    Item    Earmarked for
$2.00base price
.18federal excise taxtransportation
.18state excise taxtransportation
.156.25% state sales taxtransportation
.031.25% city/county sales taxgeneral purposes
.010.25% county sales taxtransportation
$2.55total price

I opposed Prop 42 because it amounted to a raid on the General Fund by the road construction in­dus­try. Prop 42 forces the legislature to allocate a pre­deter­mined portion of the General Fund to transpor­tation projects (read: road construc­tion contractors) every year, regardless of need. This is budgeting by robot, and it leads to perverted spending priorities. The largest mandate, Prop 98 of 1988, automatically reserves half the General Fund for education. Okay, maybe education should be the state's number one priority, with a special budget set-aside. But what's priority number two? Prisons? Health care? Roads? A ballot proposition is not the right way to choose. I pay my legislators to decide whether transportation deserves that funding each year, or whether it would sometimes be better spent on hospitals, schools, or homeland defense.

If we divert the sales tax on gasoline to transportation projects, as Prop 42 requires, perhaps we also ought to divert the sales tax on running shoes to sports facilities, and the sales tax on electronic equipment to building Internet infrastructure. You can see where I'm going with this. Pretty soon there won't be any discretionary funding for schools, hospitals, and other things we really need. The sales tax is a general tax. It ought to go into the General Fund so the legislature can allocate it appropriately among deserving programs, year by year, as needs arise.

Prop 42 contained a loophole, allowing the state to suspend the motor fuel sales tax earmark if it would "result in a significant negative fiscal impact on the range of functions of government funded by the General Fund." This has happened in two of the four fiscal years since Prop 42 passed. The suspended amounts will be "repaid" to transportation projects, with interest, by 2009.

This isn't good enough for the road construction industry, however, and that's why Prop 1A is on your ballot. Prop 1A will tighten the loophole, making it harder for the state to suspend the earmark. Under Prop 1A the sales tax earmark can be suspended only twice in any ten-year period, and any suspended amounts must be "repaid" with interest within three years. Further, no suspension can occur unless all prior suspensions have been repaid in full.

Obviously, since Prop 42 was a bad idea, Prop 1A is even worse. The state sales tax on motor fuel brings in about two billion dollars a year. What will we do when we need that two billion over an extended period to address some future natural disaster, economic downturn, or terror threat? Prop 1A selfishly says, "No! Go take money from programs for health, safety, water, and the poor. Our transportation projects are sacred!"

Sales taxes are levied per dollar, not per gallon. Since the price of gasoline has doubled, the total amount of motor fuel sales taxes has jumped by one billion dollars. This has provoked a frenzy of spending in support of 1A and 1B by business, construction and labor groups drooling over that huge trough. You can read about it online. As I wrote about Prop 42, if we pass this measure, it will encourage other industries to place their own special funding mandates on the ballot. The result will be an atmosphere where special interests feel they can buy legislation for their own benefit. You might believe these interests already own most of the politicians in Sacramento and Washington. Don't let them think they own us, too.



Proposition 1B: Transportation Bonds ($20 billion) – YES

(Please see My Semi-Biennial Lecture on Bonds for my opinion on bonds in general.)

Contrary to Prop 1A, Prop 1B is a good measure. How can this be? Both dedicate chunks of the General Fund to transportation. Both are heavily backed by the road construction industry. Both will fund road repairs, new highways, and public transit. What's the diff?

The difference is in the funding models. Where Prop 1A grabs an income stream forever, Prop 1B is limited, allowing us to reevaluate before renewing it. Where Prop 1A provides unpredictable funding, varying with the consumption and price of gasoline, Prop 1B is a known quantity, exactly $19.925 billion. And where Prop 1A earmarks specific revenues, Prop 1B gives the legislature the flexibility to pay with any income source.

The projects funded by Prop 1B are sorely needed. Over one-half of the bond proceeds will be used to reduce congestion and increase capacity on roadways throughout the state. Another $4 billion will improve local and intercity rail and transit services, including new rights of way and rolling stock. Also included are projects to improve the movement of goods through ports and highways, enhance the security of transit systems, increase the earthquake resistance of bridges and overpasses, and reduce harmful emissions from school buses and commercial trucks.



Proposition 1C: Housing Bonds ($2.85 billion) – YES

(Please see My Semi-Biennial Lecture on Bonds for my opinion on bonds in general.)

Prop 1C authorizes $2.85 billion in bonds to build reasonably priced homes and provide assistance to low-income Californians in our absurdly overpriced housing market. Nearly half the bond will be used to revitalize existing neighborhoods and inhibit sprawl by subsidizing "infill" development, higher density near public transit, and parks near housing.

An additional $590 million from Prop 1C will be directed to the Multifamily Housing Program, where it will provide low-interest loans for the construction of affordable rental units. Such units, once completed, are reserved for low-income renters for 55 years. The MHP program is key to providing decent living conditions for those near the bottom of the economic ladder.

$135 million will provide housing assistance for farmworkers, who are among the most housing-starved populations in the United States. It is estimated that over half of farmworkers live in "overcrowded," and nearly one third in "extremely overcrowded" conditions. Prop 1C offers a way to reduce the squalor.

Another $50 million from Prop 1C will be used for the construction of homeless shelters throughout the state. The state estimates there are over 360,000 homeless in California, one third of them in families. Prop 1C will fund thousands of new homeless shelter beds.

Finally, Prop 1C dedicates $625 million to homeownership programs such as the California Homebuyer's Downpayment Assistance Program and CalHome. These provide down payment assistance and low-interest loans to low- to moderate-income first-time homebuyers. This is especially needed in a state where "starter homes" routinely top a quarter-million dollars.



Proposition 1D: School & University Construction Bonds ($10 billion) – YES

(Please see My Semi-Biennial Lecture on Bonds for my opinion on bonds in general.)

You may try to build a school
With an axe an' saw an' mule
'Neath the sun until your sweaty hide turns bronze.
But if money's what you need
So construction can proceed,
You'll have to get it done by floatin' bonds.
      For it's Bonds! Bonds! Bonds!
   With all their "hereby finds" and "whereupons".
      There's no other way to pay for
      Buildings we can't brook delay for;
   Friends, the only way to finance 'em is bonds.
 
In our sprawlin' Golden State
There's eight million kids who wait
For refurbished or new classrooms, halls an' lawns.
To build every last pavilion
Would take over thirteen billion,
So they've got to ask us voters for some bonds.
      Oh, it's Bonds! Bonds! Bonds!
   They're the toast of all the trendiest salons!
      They will fund modernization
      Of temples of education.
   To kick off this transformation, vote for bonds.
 
We must make schools earthquake-safe
To protect each little waif,
An' it can't be done with wizards' magic wands.
College buildin' must expand
To meet increasin' demand,
An' the only way to do it all is bonds.
      Yes, it's Bonds! Bonds! Bonds!
   We've evaluated all their pros and cons!
      Vote for Proposition 1D
      On the day that follows Monday.
   Let's build better schools for students with these bonds.



Proposition 1E: Flood Control Bonds ($4 billion) – YES

(Please see My Semi-Biennial Lecture on Bonds for my opinion on bonds in general.)

No Katrinas here.

Over half the state gets its water via the Delta, where aging levees put the water supply at risk. The Army Corps of Engineers has identified 180 levee sites in California with serious erosion. We may not get a hurricane, but we certainly will get earthquakes, fires and heavy rains. Scared yet? Prop 1E will pour $4 billion into reinforcing these levees and other flood control systems, offering protection from natural disaster and peace of mind. Ahh, that's better.



Proposition 83: Increasing Punishment of Sex Offenders – NO

News Flash! On September 21, Governor Schwarzenegger signed SB 1128 and SB 1178, tough new laws clamping down on sex offenders. Nearly all of Prop 83 was included in the two bills. So disregard your ballot pamphlet on this one.

There are just two remaining major differences between the bills the Governator signed and Prop 83. First, under the newly-signed laws, sex offenders identified as high-risk will have to wear electronic monitoring devices while on parole. If Prop 83 passes, all registered sex offenders, even low-risk ones, would be electronically monitored for life.

This is unnecessarily harsh. A low-risk offender may have been convicted of a nonviolent, lewd act decades ago, yet will still be monitored with a GPS device until he dies. Don't we have better ways of spending our law-enforcement dollars?

Second, under the newly signed laws, those convicted of sex offenses against a child may not reside within a quarter-mile of a school (a half-mile if the offender is high-risk). Prop 83 would expand the bubble for low-risk offenders to 2,000 feet around every school and park, and drop the requirement that the victim be a child.

San Jose Mercury News map The San Jose Mercury News has created a map showing what parts of the city would still be available to sex offenders under Prop 83. After carving out 2000-foot bubbles around all schools and parks, only a few small islands remained. Prop 83 would virtually bar sex offenders from legally residing in urban areas. How will these people find jobs? How will they rebuild their lives? These 2000-foot bubbles will drive sex offenders underground or out of state, utterly defeating our clumsy attempts to keep tabs on them.

The laws the Governor signed prohibit sex offenders from loitering near schools and parks. That's what we really need. Limiting where someone can live is harassment; limiting what he can do is crime prevention. In view of the new laws, Prop 83 is completely unnecessary, and may actually do more harm than good.



Proposition 84: Drinking Water & Flood Control Bonds ($5.4 billion) – YES

(Please see My Semi-Biennial Lecture on Bonds for my opinion on bonds in general.)

Prop 84 is a big, sloshing barrel of bond money for water quality, rivers and lakes, flood control, urban parks, beaches, state parks, and wildlife habitat. It's an environmentalist's delight, and a boon to outdoorsmen across the state.

The largest piece of Prop 84, $1.5 billion, will be dedicated to the delivery of safe drinking water for a rapidly growing population. This is an obvious necessity in our arid region. The $928 million for rivers, lakes and streams will be used for Bay, Delta and coastal fishery restoration, Salton Sea restoration, various river parkways, the California Conservation Corps, and various local conservancies.

Weighing in at $800 million, the flood control part of Prop 84 will improve emergency response to levee breaches, and also improve floodplain mapping to reduce potential losses from future floods. It will also supplement the levee reconstruction funds from Prop 1E. $580 million will fund local and regional parks and urban greening projects. $540 million goes to protect beaches and coastal waters from pollution. And so on.

With a few tiny exceptions (find them if you can!), the projects funded by Prop 84 meet my criteria for long-range, tangible acquisitions and improvements that are appropriate for bond funding. In particular, a long-term investment in safe drinking water makes sense for California.



Proposition 85: Parental Notification for Minors Getting Abortions (Again) – NO

Prop 85 is essentially identical to last year's failed Prop 73. I recommended a "no" vote then, and I recommend a "no" vote now. Here's a rerun of the rating I gave last time, with a few minor changes.

Prop 85 is about minors who become pregnant. These teenage girls are already under the ordinary pressures of adolescence in our high-intensity culture. Now they face the embarrassment of revealed sexual activity, a strained relationship with the presumptive father, and God-knows-what from their parents. On top of all that is the life-changing decision of whether to terminate the pregnancy, carry it to term and raise the baby, or give it up for adoption. It's a dizzying prospect.

Most girls in this situation can count on their parents for steadfast support and sound advice. But many cannot. Domestic violence is a fact, and adolescent pregnancy is intricately intertwined with it. According to a 2001 report by the Center for Assessment and Policy Development and the National Organization on Adolescent Pregnancy, Parenting and Prevention,

Evidence suggests that no fewer than a quarter of adolescent mothers experience some form of interpersonal violence in the year surrounding their pregnancy, with some studies reporting rates of 50 to 80 percent.

Prop 85 would require physicians to notify a parent or legal guardian and wait 48 hours before they perform abortions on girls under 18. If a girl is fearful of her parents, Prop 85 allows her to go to juvenile court, where a temporary guardian and attorney will ask a judge to waive parental notification.

Now put yourself in the shoes of a pregnant 17-year-old who needs this waiver. You're in desperate trouble. You may already have experienced violence. You can't let your parents know. Will you go to Juvenile Hall for help? Is that the key to safety? It just isn't plausible.

Prop 85 will cause many scared adolescents to go outside the system to avoid notifying their parents. They'll go to neighboring states if they can (as now happens where there are notification laws, according to a USC study). Or they'll pursue back-alley abortions, with the attendant risk of medical complications and death.

Or they'll give up and carry the baby to term. This, of course, is the outcome supporters of Prop 85 are after. Because at its core, Prop 85 is a Pro-Life law, intended to prevent as many abortions as possible.

Prop 85 is a roadblock to safe, legal abortion. It will lead to more domestic violence, more back-alley abortions, and more unwanted pregnancies carried to term. There is no upside. Vote no.



Proposition 86: Cigarette Tax Hike to Fund Health Services – YES

I want to tax cigarettes into oblivion. Smoking is a putrid and disgusting habit that kills over 40,000 people a year in our state, or more than 100 Californians every day. Smokers who haven't yet died incur over $8 billion a year in health care charges, straining the system and driving up costs for everyone. And the tobacco industry has been unequivocally shown to be run by lying scoundrels, yet remains immensely profitable; shares in Altria, makers of Marlboro and other brands, are at an all-time high.

Prop 86 will boost the tax on a pack of cigarettes by $2.60. Woo-hoo!! It will raise the total cost of a pack to about $6.50. Yippee!! This will be high enough to discourage teens from starting habits, and it will reduce the amount current smokers consume. Way gnarly!!

The new tax will initially bring in $2 billion a year. Do I care what they do with all that dough? Naah. Pave Death Valley. Build a football stadium in L.A. Buy new cars for all the sixth-grade teachers in the state. Whatever.

For the record, Prop 86 will fund a wide variety of health care programs, principally emergency care and children's health coverage. Other funded areas include nursing education, smoking prevention, and cancer research. There's also a nifty backfill for Prop 10 in anticipation of reduced tobacco sales.

Despite my blithe dismissal above, I really would prefer that the money from Prop 86 go into the General Fund. This is for two reasons. First, I'm allergic to budget earmarks in general. The Legislature should be able to allocate funds each year in response to changing conditions. Taking Prop 86 taxes off the table reduces flexibility we might need later.

Second, and more important, if Prop 86 is effective, people will buy fewer cigarettes, causing the $2 billion it rakes in initially to dwindle dramatically. What will happen to the children who depend on the health coverage the cigarette tax provides? It will be a sticky problem. But it's a problem I'm willing to deal with if I can cut tobacco use. This proposition will significantly reduce smoking in California, improving the quality of life for you, me, and everyone in the state.



Proposition 87: Oil Production Tax to Fund and Alternative Energy – YES

By now it's searingly obvious: We must burn less oil. Take your pick of the reasons why:

  • Foreign policy. If we didn't need to import so much oil, we might be able to extricate our country from that messy situation in the Middle East.
  • Economics. We don't want to compete with China for the world's oil supplies. By 2030 China's rapidly industrializing economy may require as much imported oil as the United States does today (see http://www.iags.org/la020204.htm). That kind of demand-side pressure on the world oil market cannot be good.
  • Health. Those who suffer from asthma or other breathing problems detest all the "unhealthful air" days when they have to stay indoors. Less oil burned would mean less smog.
  • Environment. There have been too many crude oil spills, refinery accidents, underground tank leaks, and other destructive events. If we used less oil, maybe we'd have fewer petroleum industry-related problems.
  • Pocketbook. Who likes to pay $3.00 for gasoline? If we could all figure out a way to use less oil, maybe it wouldn't cost so much to drive a car.
  • An Inconvenient Truth. The planet's very survival may depend on reducing carbon emissions. Plus, if we don't cut greenhouse gasses, we'll have to listen to Al Gore saying "I told you so" for the rest of our lives. Nobody wants that.

The best way to reduce oil consumption is to use less gasoline in our cars. Driving significantly less would do the trick, but, sadly, it's unrealistic. Californians must go to work, school, shopping and activities, and the car is the only way for most of us to do it. For better or worse (actually, it turns out, just for worse), cars are inextricably embedded in the California lifestyle. It will take decades to change that.

If driving less isn't an option, maybe we can drive cars that consume less oil. Yes, this means cars that get high gas mileage. But it also means something else entirely: cars not powered by oil. That's right—cars powered by alternative energy.

Prop 87 will create a $4 billion program to research, develop, and subsidize the adoption of alternative fuels and the vehicles that use them. Over the course of ten years, alternative fuel systems will be proposed and investigated, and the most promising chosen for deployment. Program money will then be used to build out any required infrastructure (e.g., fueling stations) and to assist in the purchase of vehicles.

Here's how it might work. Let's say you have developed a prototype system that uses clean, renewable tidal energy to isolate hydrogen from seawater, and I have developed an efficient car motor that runs on the clean-burning hydrogen you produce. If we can convince the board established by Prop 87 that our systems are best, we will get up to $400 million to build production and distribution facilities for the hydrogen and a factory for the vehicles. Then Prop 87 will make up to $2.3 billion available to help people buy your cars and my fuel.

The target of Prop 87 is to reduce California's use of petroleum by 25% by 2017. Whether we can actually do this is anybody's guess. I'm skeptical we can reach that goal, but even if we get only halfway there, it will be a huge improvement.

The candidate technologies identified in the measure are hydrogen, methanol, natural gas, 85% ethanol blends, and 20% biodiesel blends, although the door is left open for other possibilities. When evaluating a fuel, the amount of petroleum it takes to produce it (the "full fuel cycle") is considered. This will reduce the prospects for corn ethanol, which takes a lot of fossil fuel to produce, and presumably will knock out any vehicles that plug into wall sockets, since most electricity comes from oil-burning power plants.

Prop 71 of 2004 (embryonic stem cell research) required the state to negotiate rights to any intellectual property resulting from the research it funded. Prop 87 contains similar language, but it's laughably weak. Arrangements must "assure that such research is not unreasonably hindered by those intellectual property agreements." (Article 4, Sec. 26055(a)) So don't hold your breath waiting for the state to reap major royalties from research funded by Prop 87.

To pay for the program, Prop 87 will impose a new tax on oil extracted in California. This "severance tax" will be temporary, expiring after $4 billion has been collected, which could be anywhere between ten and thirty years, depending on the price of oil, how much is extracted, and the interpretation of the ambiguously worded section specifying the tax rate.

Can the oil companies afford this tax? Of course they can, especially if they pass it on to consumers, which they will, despite some well-intentioned but essentially unenforceable language in the initiative that purports to prevent it.

How much will a gallon of gas go up? A penny or two. Let's do the math. California annually consumes roughly 15 billion gallons of gasoline. If the new tax collects $300 million per year, oil companies will have to crank up the price of each gallon by just two cents to offset it. That's noise compared to gasoline price fluctuations we've seen lately.

And two cents a gallon is definitely a small price to pay to decrease our dependence on foreign oil, forestall an oil showdown with China, reduce air pollution, shield the environment, protect our pocketbooks, and maybe, just maybe, help save the planet.



Proposition 88: $50-per-Parcel Tax for K-12 Education – YES

Prop 88 will levy a new, statewide property tax of $50 per parcel. It seems ridiculous to tax all parcels the same amount. Should a small vacant lot in Barstow be charged the same tax as a mansion on five acres in Hillsborough? Of course not. Property taxes should reflect property value. It's only fair.

Ha ha, fooled you! Property taxes in California don't reflect property value! Instead, they reflect length of ownership. This is because the famous Prop 13 of 1978 permanently pegs each parcel's assessed value at its most recent sale price, adjusted by only 2% a year. A parcel's real value may skyrocket, but the property tax will barely increase. The result is that longtime owners pay just a fraction of the tax paid by newer neighbors, even if their parcels are identical. Property taxes in California are not fair. They're not even in the same time zone as fair.

Viewed in this light, the $50 parcel tax added by Prop 88 will actually make property taxes more equitable. Here's how. Someone who just bought a $250,000 condo pays $2,500 in property taxes. When Prop 88 adds $50, it's only a two percent increase—just noise. A neighbor who bought an identical unit in 1975 for $35,000 currently pays just $634 in property taxes. Adding a $50 parcel tax cranks up the property tax a whopping eight percent. More telling, Prop 88 reduces the ratio of the two property tax bills from 3.9:1 to 3.7:1. I'd like to see something even lower, such as 2:1 or (gasp) 1:1, but Prop 88 still represents progress.

Prop 88 will pour $450 million a year into our K-12 schools. It will increase the budget for textbooks and other instructional materials by 25%, and the budget for school safety by 15%. The money allocated to class size reduction would be sufficient to reduce fourth grade classes throughout the state from 29 to 25 students. This is very good stuff.

You might be thinking, "Do we really need a new parcel tax? I don't like new taxes." Yes, we need this new tax. Prop 13 has severely limited our ability to tax our most valuable natural resource—land. The accumulated equity in residential and commercial real estate is a vast ocean of unearned wealth, exactly the type of asset we should be taxing. Yet it is beyond our reach because of Prop 13. The authors of Prop 88 have cleverly exploited a loophole in Prop 13 to impose this new parcel tax statewide by majority vote. It will tap into an enormous vein of affluence, make the property tax fairer, and provide needed funding for schools. We do need new taxes like that.

Lest you worry about poor, old Aunt Hilda on her fixed income, Prop 88 exempts senior citizens and the disabled from the new tax.

If you've read about Prop 88, you'll know it is opposed by the California PTA. I must say the PTA's position paper on this measure is one of the most selfish and poorly-reasoned things I've seen in a long time. In essence, the PTA opposes Prop 88 because the PTA is in the middle of its own study on educational funding, and doesn't want Prop 88 to steal its thunder. The other arguments—that Prop 88 won't do enough, that voters will think they've solved the whole problem, and that parcel taxes are traditionally local—are specious and irrelevant.

There's one PTA argument that almost holds water:

The statewide parcel tax could impair a local school district's ability to persuade two-thirds of the voters to approve a local parcel tax. In effect, the state-imposed tax could usurp the ability of local agencies to develop a local funding source.

I might buy this if local agencies were actually capable of developing this funding source. But most local parcel tax measures fail due to the two-thirds vote requirement. In last June's election, all six local parcel tax measures failed; last year 18 of 28 died on the ballot. Also, local parcel tax measures tend to pass only in more affluent areas where the need for additional funding is less acute. Prop 88 will apply to the whole state, and direct funds where they'll make the biggest difference.



Proposition 89: Public Financing of Political Campaigns – YES

Politicians spend too much time and energy raising money. It distracts them from their real jobs and distorts their priorities. It can make large donors more important than constituents. No one enjoys asking for money, but to win elections candidates must buy expensive media exposure, so a-fundraising they must go.

Prop 89 will break this cycle by implementing "Clean Money" public financing of political campaigns. This system has enjoyed great success in Arizona and Maine. It will affect ballot propositions as well as elected state officers and legislators, so you know I'm paying attention.

How would you go about freeing candidates from perpetual fundraising? You could try imposing a spending cap. After all, the less money candidates can spend, the less they'll have to raise. Sadly, this approach was ruled an unconstitutional infringement on free speech in the 1976 case Buckley v. Valeo. The courts, however, have upheld spending limits if they are a requirement for receiving public campaign financing.

This is exactly what Prop 89 will do. Candidates who accept Prop 89's public financing must agree to limit their campaign spending to a cap based on the type of election and office they're seeking, from $250,000 for a primary Assembly race to $15 million for a general election for Governor.

Now, what would you do if privately funded opponents threatened to swamp clean-money candidates by outspending these caps? Prop 89 raises the publicly funded candidate's spending limit up to five times the original figure (four times for Governor) to match the opponent's spending. Spending limits also rise if an independent committee Swift-Boats a candidate. So that Assembly primary candidate could have his cap bumped from $250,000 to as high as $1.25 million.

To discourage privately funded campaigns from attempting to overwhelm publicly funded candidates, Prop 89 seriously tightens contribution limits. Maximum individual contributions to privately funded Assembly candidates will shrink from $3,300 to just $500; for Governor they dwindle from $22,300 all the way to $1,000. Small contributor committees will be allowed to give just $2,500 to candidates at any level. And for the first time political parties will have their contributions capped, from $20,000 for Assembly races to $750,000 for Governor. This will certainly help level the playing field.

Even further, Prop 89 prevents individuals from contributing more than $7,500 in total to all state candidates and related committees. It prohibits any fundraising more than 18 months before a primary election, and prevents candidates from contributing to each others' campaigns. And it prohibits contributions from state lobbyists and contractors. This is especially relevant in the wake of the Abramoff scandal in Washington.

Prop 89 imposes harsh penalties on publicly funded candidates who exceed its spending limits, including fines, jail, and removal from office. This actually happened in Arizona, where earlier this year state Rep. David Burnell Smith was ousted for overspending his limit by more than 10%. Prop 89 will have teeth, including proven power to rectify tainted elections.

So far so good, but that cap of $15 million is still a lot of smackers for my gubernatorial nominee to solicit. How much of that will be public money? Prop 89 answers: All of it. That's right: This measure doesn't just reduce the amount of fundraising a candidate needs to do; it virtually eliminates it.

Let that sink in for a minute. Politicians not needing to raise money. What will they do instead? Well, instead of cultivating major donors, maybe they'll pay attention to the voters. Instead of playing up wedge issues to bring in cash from the fringes, maybe they'll focus on what's important to the majority. Instead of playing special interest politics, maybe they'll work for the unspecial interests—the people, in all their inconsistent diversity. Maybe.

Now you're probably thinking, "Gosh, that's a marvelous vision, but it sounds awfully expensive." Well, it won't be cheap: $150 million a year, on average. Prop 89 will raise that dough by adding 0.2% to the corporate income tax rate. The new rate will still be lower than it was from 1980 to 1996. Hardly any small businesses will be affected. The tax increase will bring in $200 million per year, probably far more than needed. If the new revenue outpaces what campaigns need (plus a prudent reserve), Prop 89 stipulates that any excess be turned over to the General Fund for general use. This relief-valve feature is wonderfully sensible; I wish all propositions that earmark revenue streams would adopt it.

Okay, we have a reliable source of clean money, tight contribution limits and reasonable spending limits. Are we done? Not yet. See that $250,000 you can get just by running for Assembly? Everybody's gonna want it. How will we prevent every Tom, Diego and Harriet from running for office and claiming that quarter-mil?

Under Prop 89, anyone seeking public financing must gather token $5 qualifying contributions to prove they're not just after the dough. The number of contributions required ranges from 750 for Assembly to 25,000 for Governor. Qualifying contributors must identify themselves, and cannot support more than one candidate for a given office. This will prevent everyone in the district from running.

Of course, gathering all those qualifying contributions will cost money itself. To pay for it, candidates may accept private "seed money" donations as high as $100 per donor, up to a total of $10,000 for Assembly or $250,000 for Governor. All seed money must be spent (and all qualifying contributions collected) before the campaign season starts, 90 days before the primary election.

Lest you think Prop 89 is a plot to exclude independent and third-party candidates, the measure contains provisions allowing such candidates to receive as much as one-half the amount major party candidates receive. This would be a huge step forward. And if a third-party nominee for Governor somehow grabs 10% of the vote, all the party's candidates will become entitled to full funding.

"All right," you say. "I think I've just agreed to give millions of dollars to sleazeball politicians. What's to prevent them from spending it all on mudslinging, negative advertising?" Nothing, I'm afraid; we cannot legislate attitude. But Prop 89 does prevent those who go negative from hiding behind the smokescreens of their stink bombs. All clean-money candidates must engage in at least one debate for primary and two for general elections, giving opponents an opportunity to confront them on their tactics.

In addition to candidates for state office, Prop 89 also limits contributions on ballot propositions. Under Prop 89, corporations would be limited to $10,000 to support or oppose any measure. This will certainly reduce the incidence of corporate special-interest propositions such as those we've seen recently from pharmaceutical, Indian gaming, and transportation construction industries. But Prop 89 has no similar provision for unions, nonprofit advocacy groups, or any other organization. This part of Prop 89 seems to be payback for last November's failed Prop 75, which would have limited use of union dues for political purposes. I can't say I like this kind of one-sided limitation. However, I'm sure the corporations are savvy enough to work around it.

And in any event, it's not enough to dim the brilliance of the whole, complicated mess of a public campaign finance system I describe above. I assure you, this thing is working beautifully in Arizona and Maine. Really. And though it's manifold, each of those folds makes perfect sense. Prop 89 has the power to create an entirely new political dynamic in California, one where fundraising makes less of a difference and voters matter again. We should jump at the opportunity.



Proposition 90: Limiting Regulation of Private Property – NO

It's appropriate that Prop 90 is on the ballot so close to Halloween. The initiative wears the costume of an angel. But underneath lurks a real monster.

First, some background. In 2000 the city of New London, Connecticut, in dire need of an economic boost, approved a redevelopment plan for the middle-class neighborhood of Fort Trumbull. The centerpiece was a major new research facility for Pfizer pharmaceuticals; also included were a resort hotel and conference center, a new state park, and office, retail and residential space. To make room for the project, the 115 existing property owners were offered buy-outs. When 15 owners refused, the city invoked eminent domain and condemned their lots.

Eminent domain requires that property be taken for public use. The 15 holdouts in Fort Trumbull sued the city, arguing that their property was being taken not for public use, but for the private use of the new owners (principally Pfizer). The case made it all the way to the U. S. Supreme Court, which ruled last year, 5-4, in Kelo v. City of New London, that the city could condemn the property. Justice John Paul Stevens's majority opinion stated, "The city has carefully formulated a development plan that it believes will provide appreciable benefits to the community, including, but not limited to, new jobs and increased tax revenue." (Emphasis mine.)

This has caused quite a stir. Before the decision, eminent domain was used only to raze blighted or hazardous areas, or to make room for public works such as schools and roadways. Now the government can condemn perfectly viable property and sell it to new, private owners, solely to jack up the tax base.

Imagine the implications for California, where Proposition 13 suppresses property taxes far below their potential. For example, say your town wanted to pump up its property tax revenues. Under Kelo, it could condemn, rebuild and resell a few hundred homes and businesses, particularly those with longtime owners (and therefore artificially-low assessed value). Tax revenue from the freshly reassessed property would jump all right, by tens of millions of dollars. Your town would be allowed to do this because, according to the decision, increased tax revenue is a sufficient benefit to the community to justify eminent domain. Would your city fathers be able resist that huge payoff? Don't bet on it.

Prop 90 will amend the state Constitution to prevent such abuse of eminent domain. Under Prop 90, government will be allowed to take property only to build public facilities, or for private facilities offering public services (e.g., a private toll road or prison), or to correct a public nuisance on a specific parcel. As the measure says, "Private property may not be taken or damaged for private use" [p. 188 of your Prop Book, sec. 19(a)(1)] in order to boost tax revenues.

This is very angelic. And I could support Prop 90 if stopped there. But it doesn't. Prop 90 also monstrously requires that the government fully compensate property owners every time a new law or rule causes "substantial economic loss." In other words, the government must reimburse you not only if it takes away your property, but also if it merely reduces its real or potential value.

What does that mean? It means you'll be entitled to compensation if your neighborhood is rezoned from two-story to one-story, even if you have just a one-story house. You'll be entitled if a new noise abatement regulation makes your planned discotheque less popular, even if you haven't yet opened it. You'll be entitled if a new anti-pollution law makes your oil refinery less profitable, even if you haven't yet built it. According to the initiative, government must compensate you whenever a new law reduces "the highest price the property would bring on the open market" [sec. 19(b)(7)].

The cost of Prop 90's compensations will be so high that it will effectively paralyze land use planning, environmental regulation, and zoning in California. Don't believe me? Look north, to Oregon. Their Measure 37, passed in 2004, is nearly identical: when rules reduce the value of property, government must compensate the owner or waive the regulations. A recent New York Times article gives the result:

Since the measure was approved, Oregon property owners had filed 2,755 claims covering 150,455 acres, according to [Portland State University's] Institute of Portland Metropolitan Studies, which is tracking the measure's impact. If all the claims were paid, state officials say, it could amount to more than $3 billion in compensation. But not a single claim has been paid, the institute reported.
Instead of paying property owners, local government agencies have routinely chosen to waive the regulations, clearing the way for numerous developments in rural areas.

These developments have included a gravel mine near a neighbor's home and a power plant inside a national monument. The unpaid ransom in Oregon was $3 billion, monstrous enough. California's population is ten times Oregon's, meaning it might take $30 billion to avoid waiving new land-use regulations here. Yikes!

Prop 90 will make land use regulation in California so expensive that it will simply cease. We will become powerless in the face of sprawl, pollution, traffic congestion, noise, and everything else we regulate today. If you think the rights of owners to milk every penny of potential profit from their property trumps all these, vote for Prop 90. But if you want to live in a California that can continue to protect its environment and its neighborhoods, vote down this monster in phony angel wings.



My Semi-Biennial Lecture on Bonds

When California wants to finance a large project, it asks the voters for permission to take out a loan. Props 1B, 1C, 1D, 1E and 84 are just such requests. If voters approve, the legislature may take out loans for the projects by selling general obligation bonds, which are paid back with interest over thirty years or so. The bond payments come out of the state's main budget, the General Fund. So when we vote on bond measures, we are really voting on whether the projects in question ought to be added to the state's budget.

"Wait a minute!" I hear you cry. "What about those interest payments? Won't we end up paying more for interest than for the bonds themselves?" This may once have been the case, but with today's low interest rates each dollar of bond money will cost only 30 cents in interest, accounting for inflation. (See details online or on page 96 of your ballot pamphlet.)

"Okay," you admit, "but loans are still more expensive than pay-as-you-go." This is true. But loans are the only way to buy a house, or a car, or anything else that you need immediately but can't pay for yet. It's worth paying the premium of interest to get the funding now.

"Well and good," you continue, "but there are $42.7 billion in bonds on this ballot. Isn't that too much to borrow?" For you, yes, but the State of California can handle it. Bond payments today amount to just 4.2% of the General Fund, down from a high of 5.7% in the early 1990s. The bonds on this ballot would raise that figure to 5.9% in 2010. This is higher than it has been in recent decades, perhaps an all-time high, and not something to enter into lightly. But the state has proven it can handle higher debt ratios when called upon to do so.

The five bonds on this ballot will fund long-lived, tangible acquisitions, such as roads, levees, and school buildings. It's sensible to make extended payments for things that will be used far into the future. Remember, too, that California's population continues to grow by hundreds of thousands of people every year. Borrowing makes particular sense if you know your income will go up in the future. As the state grows, the General Fund will certainly grow too.

There is one last reason to vote for a bond measure. In addition to being formal requests for permission to take out loans, bond measures are also looked upon as referenda on the merits of the proposed projects. If a bond measure fails, legislators are likely to believe that the public feels the project is not worthy of receiving state funding. By voting no, you may have meant, "Yes on the project but no on the bonds," but your message to Sacramento will read, "No on the project." So if you vote down a bond measure just because you don't like bonds, you may well have killed forever the project the bonds were to have funded.



 
 
 
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