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Friday, May 8, 2009

Rider: To Understand Prop 1A, Revisit Props 57-58

Email from Richard Rider, San Diego Tax Fighters:

In today’s SAN DIEGO UNION-TRIBUNE, there are “pro and con” op-eds concerning the propositions in the upcoming 19 May election. Steve Poizner is spot on with his analysis, pointing out that Prop 1A is simply a repeat of the 2004 Prop 57-58 con job.

Prop 1A the same deal (complete with a $16 billion tax increase), with the same proponents, and will provide the same failed result at huge expense. I had a hand in opposing Prop 58, and the parallel is eerie.

At the request of then-state legislator Tom McClintock, in 2004 I wrote the ballot argument against Prop 58, the California "Balanced Budget Act." That last word in the title should have tipped off the voters, but didn't.

Prop 58 was indeed an act – a magic act. Complete with disappearing promises and illusionary savings. No budget was balanced, and no spending was reined in by the measure.

All we taxpayers got was a $15 billion state bond that built absolutely nothing (it was all spent on state budget operating costs) – a bond which – with interest – translated into a huge annual outlay for 30 years.

BACKGROUND: Governor Schwarzenegger wanted $15 billion worth of state municipal bonds issued to pay California’s state OPERATING expenses -- largely inflated public employee salaries and pensions. This was Prop 57.

The pitch was, “give us the money, and we’ll solve California’s budget problems through reforms.” The problem for Schwarzenegger was that this use of tax free municipal bonds was prohibited by the CA Constitution – bond proceeds were limited to infrastructure spending.

Hence Prop 58 was needed to overturn this longstanding taxpayer protection. To make this palatable, the governor claimed he arranged a trade-off – the $15 billion in exchange for new, supposedly solid budget reforms included in Prop 58.

In our opposition arguments, we made clear that there were loopholes galore in Prop 58 – that this would NOT solve our budget woes. Opponents castigated us for our concerns, and assured all that this was the real deal. As it turned out, we were absolutely clairvoyant, and the proponents were dead wrong.

It’s worth going back to read the actual Prop 58 ballot arguments – and to see who signed them. To see all four arguments, go to:


The most interesting of the four arguments is the rebuttal by Prop 58 proponents to our opposition argument. Here is that argument by the proponents:

REBUTTAL to Argument against Proposition 58

Don't be fooled by the opponents. The California Taxpayers Association supports the California Balanced Budget Act.

Proposition 58 WILL REQUIRE A BALANCED BUDGET for the first time. State government spending in California is out of control. Over the past three years, state spending has significantly exceeded state revenues.

Under Proposition 58, the Governor and the California State Legislature must ENACT a BALANCED BUDGET. It will CLOSE A LOOPHOLE that was used to create the huge deficit.

Governor Schwarzenegger's California Economic Recovery Plan includes both Propositions 57 and 58. Combined, the two measures will allow California to refinance its debt and prevent such a situation from EVER HAPPENING AGAIN. We should not be allowed to SPEND MORE MONEY THAN WE HAVE.

Proposition 58 requires the Legislature to enact a balanced budget and if circumstances change after they pass the budget, the Governor is required to call them into special session to make mid-year changes to the budget, so that we end the year with A BALANCED BUDGET. And Proposition 58 prohibits the Legislature from acting on any new legislation until the budget is balanced again.

Proposition 58 does not change the Gann Spending Limit. It is still the law, the BALANCED BUDGET ACT provides a new tool in the fight against overspending.

Proposition 58 prohibits borrowing for future deficits. Proposition 58 requires building a reserve of at least $8 billion. Please support the California Recovery Plan and vote YES ON PROPOSITIONS 57 and 58.

RIDER COMMENT: It’s really stunning to read just how ignorant, misinformed and perhaps dishonest these proponents were. At the very least, their credibility is ruined.

Now, note who signed this rebuttal. These are ostensibly all Republicans, I believe. And note particularly the third signer.

State of California

BILL HAUCK, Chairman
California Constitution Revision Commission

California Chamber of Commerce

The California Chamber of Commerce – and indeed, the California Taxpayers Association – have been wrong far more than they’ve been right on taxes and bonds. Contrary to what people would expect, they FAVOR most bonds and tax increases – as long as big business is not heavily hammered by such taxes. And the Prop 1A tax increases are strikingly REgressive in nature – which the fat cats love.

The CA Chamber of Commerce is a Big Government proponent, intent on currying favor with politicians for special interest legislation and government construction contracts. Based on the above dishonest/inaccurate/condescending ballot argument, this outfit is not to be trusted in such fiscal matters.

The parallels between Prop 57-58 and Prop 1A are obvious. Both entail empty, loophole-filled promises at the cost of many billions of dollars.

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