At first glance, Proposition 57 and Proposition 58 would seem to
make sense. After all, nobody denies the fact that while in office,
former Gov. Gray Davis and the Legislature spent every penny they
took in ““ and a whole lot more ““ to create a massive
operating deficit.
In retaliation, Californians from one end of the state to the
other voted overwhelmingly to throw Davis out and elect a new
governor to clean up the mess.
Unfortunately, in an honorable attempt to fix the problem, the
newly elected Gov. Arnold Schwarzenegger fell for the oldest trick
in the book: He made a deal with the same politicians who created
the mess in the first place by not significantly cutting
over-funded ““ but politically important ““ programs.
He also agreed not to ask the voters to limit the annual growth
rate in state spending. Propositions 57 and 58 will not do anything
to help these problems.
To really understand why Propositions 57 and 58 won’t
solve California’s fiscal crisis, voters need to understand
what these “co-joined” initiatives won’t do.
Let’s start with Proposition 57, the so-called
“Economic Recovery Act.” Proposition 57 attempts to
accomplish a novel feat ““ to borrow our way out of debt. But
it only refinances our existing, legally dubious bond indebtedness
““ one that never should have been assumed in the first place.
Let’s make no mistake about this ““ the Legislature
needed to borrow money to balance the state’s budget because
over four years it allowed spending to increase by over 40 percent
while revenues were only increasing by 28 percent.
Proposition 57 codifies the fiscal irresponsibility of the big
spenders. It refinances our existing, unproductive debt at a
somewhat lower interest rate, but it doesn’t do anything to
rid us of that existing debt.
If passed by voters, Proposition 57 will eventually cost
billions more than the actual loan amount in interest, while not a
single new school, road, water treatment plant or bridge will have
been built, renovated, or replaced.
The money authorized by Proposition 57 goes toward paying off
existing debts ““ not toward investing in badly needed
infrastructure at a time when the need couldn’t be more
apparent.
In fact, just the opposite will happen. Because state bonds are
being paid back with sales tax and income tax revenues, and state
bonds have first-claim on the general fund, the dollars used to pay
back this $15 billion loan will actually come at the expense of
higher priorities ““ such as roads, water treatment plants and
schools.
And what about Proposition 58 ““ the so-called
“Balanced Budget Act”? Surely, every voter can
appreciate the value of requiring a balanced budget. Particularly
in light of what they are being asked to do with respect to
Proposition 57. Unfortunately, the very same politicians who put us
in the mess we’re in have crafted a measure riddled with
loopholes large enough to accommodate Schwarzenegger’s
Hummer, with plenty of room to spare.
Yes, Proposition 58 requires the budget to be balanced, but our
state constitution already requires that. Yes, Proposition 58
prohibits long-term borrowing to balance the budget, but
that’s always been the case, while bailout short term
borrowing is still permitted. Yes, it encourages the establishment
of a reserve, but the governor can divert that money any year by
executive order.
Most importantly, Proposition 58 allows the Sacramento
politicians to spend too much money. It doesn’t limit annual
spending to anything other than the amount of annual revenues
received, plus whatever short term money the Legislature decides to
borrow.
So, if revenues increase by 40 percent, government spending can
increase by 40 percent as well. As long as the budget is balanced,
the letter of the law will have been followed.
For every addict, the road to recovery starts with a single
step. And there comes a time in an addict’s life where
tough-love must prevail. I’m not talking about tough-love
Cruz Bustamante style, where taxes are raised on hardworking
families so the spending lobby can consolidate its power in
Sacramento. I’m talking about the kind of tough-love where
you take away whatever the addict’s particular poison might
be.
In the case of the Sacramento politicians, the poison is
excessive borrowing and relentless over-spending. Only by defeating
Propositions 57 and 58 on March 2, can the journey to fiscal
sobriety for the Sacramento politicians finally begin.
Armendariz is executive director of the Santa Barbara
Industrial Association, Santa Barbara County Taxpayers
Association.