California is a disaster and has been for some time now. This latest attempt to jimmy the books will most likely go down in flames. With their state at the mercy of the Fed and their fiscal situation so pathetic that they have been downgraded by credit agencies and they tried to pay bills in I.O.U's instead of cash. By the way the only one that might pass is the limit on politicians pay, which was thrown in their as a bone to the voters.
May 19 (Bloomberg) -- California voters head to the polls today to decide on a package of budget-balancing measures that Governor Arnold Schwarzenegger says must pass to keep a $15 billion deficit from widening to $21 billion.
The six propositions, which cap spending, extend temporary tax increases, authorize bonds backed by lottery profits, divert already dedicated revenue and limit legislators’ pay raises, were put on the ballot in February by Schwarzenegger and lawmakers as part of compromise budget designed to close what was then a record $42 billion deficit.
That budget raised $12 billion in taxes, cut $16 billion in spending and relied on $8 billion of federal stimulus money. Since then, the deficit re-emerged as California’s economy worsened amid the national recession.
“What we did not know in February was that the economy was going to continue to get worse,” Schwarzenegger said yesterday during a town hall meeting near Los Angeles. “I urge the people of California to go and vote yes on these measures, because we are talking about another $6 billion.”
California, a state that on its own would rank as the eighth-largest world economy, has been battered by collapsing revenue from income and consumer-spending taxes responsible for about 80 percent of its receipts. Tax revenue as of April 30 was down 16 percent from July 1 estimates. Income taxes slipped 13 percent and corporation taxes slumped 35 percent, state controller’s office figures show.
Trailing in Polls
All of the ballot measures, except one limiting lawmaker pay, trailed in the latest poll by the Public Policy institute of California. Of the measures that were behind, none were supported by more than 43 percent of voters, the survey conducted between April 27 and May 4 found. The poll had a margin of error of 3 percent
“The voters who are really tuned in are really turned off,” the survey’s director Mark Baldassare said. “They see the state’s budget situation as a big problem, but so far, they don’t like the solution.”
Proposition 1A, which would limit state spending to inflation plus 3 percent above the 10-year average. Any revenue above that cap would be deposited in a rainy day fund. When the amount in the fund exceeds 12.5 percent of the general fund, lawmakers can choose to spend the excess on one-time needs.
Propositions on Ballot
If Proposition 1A passes it would extend three temporary tax raises lawmakers approved as part of the budget in February. In all, the measures would increase taxes by $16 billion, according to state finance officials.
Proposition 1B would require the state to pay $1.5 billion from the rainy day fund to schools for six years starting in 2011. If Proposition 1A fails, it nullifies Proposition 1B.
Proposition 1C would allow the state to sell $5 billion of bonds backed by future state lottery proceeds and use the money to balance the budget, repealing a provision in the state’s 25- year-old lottery laws that require profits to be spent on education. This is needed, state officials say, to convince investors there will be sufficient money available for debt service payments.
Funds Diversion
If approved, the measure would require lawmakers to appropriate to schools each year at least the same amount of money the lottery sent them in 2008.
Proposition 1D would allow the state to strip $600 million over five years from a program that spends tobacco tax revenue on children’s health.
Proposition 1E would siphon $250 million a year from a mental health services program financed by an income tax increase approved by voters in 2004.
Proposition 1F would prohibit state lawmakers and elected officers from salary raises in years when the state is running a deficit.
Get ready for cries for a California bailout.
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