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California's Budget Lotto: Sacramento Now Forced to Spend by the Numbers

July 02, 1989|Sherry Bebitch Jeffe | Sherry Bebitch Jeffe is senior associate of the Center for Politics and Policy at the Claremont Graduate School

13,4, 98, 99. These are not last week's winning Lotto numbers. They are voter-approved initiatives that determine winners and losers in a far more important game: the California budget process.

In 1978, California voters, enraged by soaring property taxes and frustrated by Sacramento inaction, approved Proposition 13. The measure limited property taxation and made it more difficult for state and local governments to increase taxes or impose new ones.

Proposition 13's victory ushered in an era of fiscal policy-making by initiative, which has reduced the governor and Legislature to bystanders' roles in shaping California's fiscal policy.

In 1979, California voters, reacting to ever-increasing government expenditures, overwhelmingly approved Proposition 4. It put a constitutional limit on government spending, linking increases to population growth and inflation.

Last November, California voters passed two initiatives further limiting government spending choices. Proposition 98, sponsored by the state's education Establishment, requires that about 40% of the state general fund budget be spent on public education (kindergarten through grade 12 and community colleges).

Proposition 99 significantly increased the taxes on tobacco products and directed that the revenue be spent on new programs to reduce the effect of tobacco use in California and protect the state's natural resources.

"This has been the year when the constraints of all the initiatives have come to bear," said one fiscal expert.

The two propositions with most direct bearing on current budget problems are 4 and 98. Together they require a huge chunk of education money be set aside at the same time inflation and increased spending needs in other areas have pushed the state close to spending limits.

California, like the federal government, is discovering that mandated expenditures--in education, welfare, Medi-Cal and statutory cost-of-living increases, coupled with imposed spending limits and the governor's rigid attitude against new taxes, shrink the revenue pot to the point where even the most urgent priorities cannot--or will not--be met.

Gov. George Deukmejian paints the education-funding initiative as the major villain. It's not his fault, he protests, that Democrats' pet programs had to be cut to meet the mandate of Proposition 98. Well, not quite.

"Budgeting by initiative " does limit the range of fiscal choices. And few would deny that makes rational budgeting difficult. But don't underestimate Deukmejian's role in tightening the state's fiscal straitjacket.

The stage was set with his stubborn adherence to an election pledge of "no new taxes," despite deteriorating state services and resources.

In 1987, Deukmejian, backed by GOP legislators, insisted that about $1 billion in state revenue, collected over the Gann limits, be rebated to taxpayers rather than used for educational funding as Democratic legislators proposed. Then, confronted with a nearly equivalent--and unanticipated--budget shortfall, the governor abandoned his own proposed "revenue adjustment" program when the media labeled it a "tax increase."

And last November, Deukmejian refused to support Propositions 71 and 72, two attempts to raise Gann spending limits. The defeat of Proposition 71, sponsored by state schools' chief Bill Honig plus education, labor and government groups, helped pave the way for Proposition 98's victory last November.

Now the governor complains that these budget restrictions--even the Gann limits, which he has long championed--are "preventing your elected representatives from budgeting fairly for all Californians." He's right about that, but he has contributed to the problem, insisting that any tax increase be decided by the voters.

Nonetheless, and despite early rancor, the governor has met with legislative leaders in this year's budget negotiations--a departure from his characteristic "Lone Ranger" stance.

Some argue that this new-found flexibility stems from Deukmejian's desire to ensure his place in history. He wants to be remembered as a prudent fiscal manager. He has less than two years in which to position himself.

There's another reason 1989 negotiations haven't seemed so brutal. The state began the budget process this year with a predicted deficit of $1 billion. The governor and Legislature were primed to do battle over which programs to cut. Then new estimates projected a possible $2.5-billion surplus.

But plenty of room for conflict remains. With spending ceilings still tight, decisions have to be made about which programs get how much money. And under Proposition 98, public schools and community colleges get 40% off the top.

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