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Read between the lines to find the tax hike

March 05, 2009|GEORGE SKELTON

FROM SACRAMENTO — Many Californians will be torn in May. They can vote for a ballot measure that forces Sacramento to control state spending. Or they can vote against it and reduce their future taxes.

Control spending or reduce taxes? Reads like a non sequitur. Do both, conservatives would say. Do neither, liberals would respond.

Nobody gets everything they want on taxes and spending. That's why there was a compromise haggled out in the Capitol to keep Sacramento from drowning in red ink.

Democrats wanted permanent tax increases. Republicans insisted that they be temporary. Really, the GOP didn't want any tax hike unless there also was a spending cap. Democrats detested a spending cap. But they needed tax hikes to save education and welfare programs. Republicans could block the necessary two-thirds majority vote.

So negotiators cut a deal: Higher taxes on sales, income and vehicles would last two years without a spending cap. If the spending cap -- Proposition 1-A -- were approved in a May 19 special election, the sales tax would be extended another year and the income and vehicle taxes two more.

"When I read that, I thought I was dyslexic or something," recalls highway construction lobbyist Dave Ackerman, a veteran of many ballot measure campaigns. "I had to read it three times. 'Wait a minute! If I vote yes, I'm voting to extend these taxes? If I vote no, I'm voting to cut them?'

"I thought, 'This isn't the way you want this thing framed. That's screwy.' "

That's compromise -- behind closed doors and without public input.

It was also a strategic move by Republicans. They thought it might discourage public employee unions from spending millions against Prop. 1-A. After all, they'd want the tax increases, even if they abhor a spending cap.

Gov. Arnold Schwarzenegger and legislative leaders provided an extra sweetener for the powerful California Teachers Assn. Budget cuts have cost K-12 schools and community colleges $9.3 billion. Under Prop. 1-A, that money would be repaid from a "rainy-day" reserve starting in 2011.

That was enough incentive for the CTA not to oppose the spending cap. The union hasn't decided whether to help finance the campaign.

Other public employee unions, however, didn't get a sweetener, and some are expected to oppose Prop. 1-A. One is the American Federation of State, County and Municipal Employees.

"It locks in state spending at unrealistic levels where the cuts are today and makes it impossible to address problems when the economy improves," says Willie Peloti, chief lobbyist for the union. "How could anyone in the Legislature, in good conscience, make such a decision? It was intellectually dishonest."

Under Prop. 1-A, spending growth would be capped at a percentage based on the previous 10-year revenue trend. Any excess revenue would be stored in the rainy-day fund. It could be dipped into to finance current services, but not to increase spending beyond inflation and population growth.

Starting in 2011, 3% of general fund revenue would be placed in the reserve each year. But half of that, if Prop. 1-B also passes, would be sent to schools. After the kitty reached 12.5% of the general fund, withdrawals could be made to pay off debt or finance one-time infrastructure projects.

Schwarzenegger warns that if voters don't pass the six-prop budget "reform" package, "we will lose billions and billions of dollars and we will have to take more money from education, more money from law enforcement . . . healthcare . . . "

The current budget system is "disastrous," he told a campaign photo-op last week in Fresno. "We spend all the money when the economy is good . . . and then when we have a downturn . . . we don't have enough money [and] all of a sudden everyone talks about increasing taxes."

The measure has generated a strange alliance between the conservative Howard Jarvis Taxpayers Assn. and the liberal Health Access California. The Jarvis group adamantly opposes the tax hikes. The healthcare lobby hates the spending cap, contending it can't possible keep up with medical inflation. So they have a mutual interest in killing 1-A.

They've jointly sued, demanding changes in the ballot language. They claim -- with some justification -- that it's "misleading" and "advocacy language."

The Legislature was allowed to write the language because it placed the measure on the ballot. The attorney general would have penned it if the measure had been a citizens' initiative. One more needed reform: The AG should write the ballot language for every proposition regardless of its origin.

The preliminary Prop 1-A wording refers only vaguely to the fact that a "yes" vote would extend the tax hikes. The lone mention: "Higher state tax revenues of roughly $16 billion from 2010-11 through 2012-13."

As we've seen in the past, often the coverup is worse than the crime. If it got around that the Capitol politicians were being sneaky and trying to hide a tax hike from the electorate, it probably wouldn't sit well. They're already mistrusted.

Prop. 1-A strategists are in a tough spot. A new Field Poll on Tuesday showed how vulnerable the measure is on taxes. Initially, 57% of likely voters said they supported 1-A. But when told that the measure extends the tax increases, support dropped to 34%.

Conservatives, however, may want to look at Prop. 1-A this way: It could well be their last chance in the foreseeable future to impose spending controls on Sacramento.

Liberals who loathe a spending cap must weigh whether they really want to surrender two years worth of tax hikes.

It's basic compromise.

--

george.skelton@latimes.com

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