With an estimated budgetary shortfall of $15 billion for the
coming year, two propositions on the March 2 ballot aim to bring
California out of debt.
Propositions 57 and 58 are complementary bills providing revenue
for the state to pay the budget deficit and enacting measures to
try to prevent future deficits.
Proposition 57, known as the Economic Recovery Bond Act,
authorizes the state to sell up to $15 billion in bonds to pay off
the existing deficit. The proposition would increase by $4 billion
the previously authorized bond of $10.7 billion.
Currently, the deficit is being financed by short-term
borrowing, because the previously authorized bond is being
challenged in court and has not yet been issued.
Proposition 58, known as the California Balanced Budget Act,
requires the annual budget proposal submitted by the governor be
balanced, limits future borrowing by the state, and establishes a
state budget reserve.
In the days leading up to the election, Gov. Arnold
Schwarzenegger has traveled around California to garner support for
the two propositions which, he says, will consolidate the budget
and help eliminate the deficit. The two propositions are being
considered together because Proposition 57 cannot be enacted unless
Proposition 58 is also passed.
Many of the proponents of Proposition 57 support the bill
because they believe it ensures the state will not run out of money
and does so without raising taxes.
The Los Angeles Area Chamber of Commerce was one of the first
organizations in California to publicly support the two
propositions. Its support is derived largely from the lack of
preferable alternatives said Brendan Huffman, director of public
policy for the L.A. Area Chamber of Commerce.
Huffman said irresponsible spending has created a state budget
problem so large, it must be dealt with immediately.
“The Legislature does not have the political will to solve
this problem,” he said.
Proposition 57 is criticized because some say it pushes
California deeper in debt rather than ending the deficit.
Richard Rider, chairman of the San Diego Tax Fighters, said
instead of borrowing, the Legislature needs to instill strict
spending limitations to bring California out of debt. The
proposition allows the Legislature to continue spending and raising
taxes, he said.
If the proposition is passed, it would take between nine and 14
years to repay the $15 billion bond, according to the Legislative
Analyst’s Office.
In recent years, some administrations have allowed budget
deficits to carry over from one year to the next. According to the
LAO, Proposition 58 limits this option by putting restrictions on
borrowing and forcing more immediate action to pay deficits.
Proposition 58 requires the governor submit a balanced state
budget proposal by Jan. 10 of each year, though the actual state
spending need not necessarily be balanced.
The bill also prohibits most future borrowing to pay the budget
deficit but does not prohibit all types of borrowing.
“What (Proposition 58) does do is allow short-term
borrowing, which is what got us into this mess in the first
place,” Rider said.
In addition to spending limitations, Rider proposes the
privatization of many government operations like prisons as an
alternative to the bill.