I agree with your editorial position.
The framers of the U.S. Constitution conceived of the separation of church and state for excellent reasons; we should not tamper with those principles.
A museum to honor the Jewish victims of the Nazi Holocaust is a commendable idea; but if state funding is approved, then next year Japanese-Americans who may be affliliated with a Shinto temple may request state funding to construct a memorial to Japanese-Americans who died during internment during World War II. Would the state of California be so eager to contribute $5 million to such a worthy memorial?
They would be hard pressed to say no. A precedent would have been established, and Americans should remember the injustices that we Americans have inflicted on our fellow Americans because of racism, especially if the state is prepared to honor victims of racism in foreign countries.