Reading the text of Proposition 57 will remind you of what it
felt like to open your January Visa bill, except it’s one
million times worse. Literally.
Like a credit card statement, the state’s money has
already been spent, and Proposition 57 is the easiest way to pay
the bill coming due. In June, California must pay off close to $15
billion of its debt. Proposition 58 will keep this situation from
happening again, but both must be approved for either to be
enacted.
The $15 billion borrowing initiative found its way onto the
ballot belatedly, after Gov. Arnold Schwarzenegger realized
“opening the books” for cuts was not going to yield any
substantial savings. Now, he’s run out of options. If
Proposition 57 passes, California will borrow money from investors
to pay off its debt while making interest payments for
approximately the next 10 years.
The prospect of paying down a $15 billion debt for the next
decade leaves the constituency caught between a rock and a hard
place. Why should voters bail out a state government that has spent
itself into an inexcusable deficit?
Because Proposition 57 is the most viable solution to pulling
California back from a fiscal disaster, other alternatives either
failed or were rejected. Cutting spending might have lightened the
debt, but it would have spread the pain elsewhere. (This approach
left the University of California with no outreach programs,
soaring student fees and fewer spots available for incoming
freshmen). Raising taxes might have paid down the debt, but
Schwarzenegger has opposed tax increases since the beginning of his
campaign.
Passing this bond is a bipartisan effort. Unions, business
leaders, teachers and law enforcement groups all support the
campaign, and it’s spearheaded by the Republican
Schwarzenegger and a Democratic Controller Steve Westly. Former
Gov. Gray Davis actually proposed a similar $10.7 billion bond
package last year, but it was held up in court because a taxpayers
group contended it violated the state’s constitution by
approving state debt without a statewide vote.
If this bond doesn’t pass, Schwarzenegger’s staff
has said it will rely on the Davis bond as a backup ““ and
even then, the state will need to come up with another $5 billion
in cuts or revenue before June. Either way, Californians are stuck
with the bill. Schwarzenegger’s strategy for eventually
paying it is unclear; it might mean higher taxes, though optimists
hope an inevitable upswing in the economy will increase tax revenue
enough to make a significant hike unnecessary.
To keep this scenario from happening again, voters also need to
pass Proposition 58. It requires the state to pass a balanced
budget as well as accumulate an $8 billion rainy day fund for
future economic downturns. As the constitution is written now, the
Legislature is permitted to approve a spending plan where expenses
exceed revenue. Proposition 58 prohibits the state from long-term
borrowing, so bonds like the one this year would be avoidable.
Voting for the propositions is an all-or-nothing shot; both must
pass by 50 percent, or they both fail. Schwarzenegger has staked
his 2004-2005 budget plan on their success.
For some, voting yes on Proposition 57 is a difficult decision,
but it’s the best choice left. Proposition 58 will prevent a
similar deficit in the future and will force the Legislature to
write a spending plan the bank can back up. Voting yes on both
propositions will get California back on track.