Bell Curve The Law Talking Guy Raised by Republicans U.S. West
Well, he's kind of had it in for me ever since I accidentally ran over his dog. Actually, replace "accidentally" with "repeatedly," and replace "dog" with "son."

Saturday, July 18, 2009

More on the California Budget

So various sources tell us that California's prison population has either quintupled or septupled (depending how it gets counted, apparently) over the past 20 years. The population has increased by half - i.e., not even doubled. That is the major internal source of economic pressure on the budget (the external source is lack of revenue). True, the $11 billion on prisons is about 10% of the budget, and only half the $24b budget gap. But it's been driving up the budget for years. In 2007, the budget had about $10b for prisons and $12 billion for higher education. Higher education had a $15 billion budget, but had to raise $3 billion from bonds. Prisons got all their money in cash. Apparently, the prison budget in the 2005 budget year was only $7 billion. That's a big increase in just a few years.

While health expenditures at $30b are the second largest single expenditure, they were, for example, raised by just 1% between 2006 and 2007. Prisons went up 6%. (I look at 2006-2007 because those were the last "good years" budgeting-wise).

However, the largest expenditure is on K-12 education, at about $40b. Proposition 98 protects that, unfortunately. Prop 98 requires that 40% of the general fund be spent on schools. This is the other problem. In good years, that means a lot more money. In bad years, that percentage has to go up dramatically or there are serious cuts. Pegging it at 40% of the general fund is an awful idea that makes it impossible to restrain the growth of spending.

But the other issue is tax cuts. That's right. According to the LA Times, about $100 billion in tax cuts have been enacted over the past 15 years. Tax breaks require a simple majority vote; tax increases a 2/3 vote. So various loopholes and tax reductions for special interests have drained the treasury.

And proposition 13 has abeen an unmitigated disaster. According to another report, it has drained revenue from our governments. The year prop 13 was passed, California received about 27% of its total revenue (state and local) from property taxes. That percentage is now 12%. As whole, all states had about 21% of its state/local revenue from property taxes in 1977, the year prop 13 was passed. That percentage nationwide has gone down to 16%. So the nationwide reliance on property taxes has dropped by 5 percentage points of the total, but CA has gone down by 15 percentage points, three times as much. The result has been an increase in the use of the personal income tax, a fickle source of funds. In 1977, all states, including CA, got about 10% of their state and local revenue from income taxes; in CA, that went up to 16%, while the rest of the country crept up to 12%. Note the imbalance: CA lost 15% of its revenue stream in property taxes and made back only 6% of its needs from personal income tax.

So that's it in a nutshell. (1) external to budget: Declining tax revenue from various sources, including tax breaks, so the revenue stream has skewed to unstable income taxes. (2) internal to budget: prop 98 and prisons.

The clear culprit in all of this is (1) the 2/3 budget rule and (2) the ballot propositions 13 and 98 that have monkeyed with the constitution.

This is why we need a constitutional convention to reform the constitution:
1. Establish majority-vote budgets like almost every other state
2. Bar constitutional amendments by initiative except with a 2/3 vote or higher
3. Allow the legislature to repeal any initiative/proposition statute by simple majority vote (now not possible)
4. Outlaw paid signature gathering for propositions. All-volunteer signature gathering was the norm before the 1970s, and the result was very few propositions ever made it to the ballot. The reason we have so many propositions now is that you can just pay money to hire signature gatherers who get it done. This means that instead of representing grass roots efforts, ballot propositions are playthings of rich special interests. I would not outlaw ballot propositions altogether because it is our political tradition in California to be allowed to circumvent the legislature, or to threaten to do so, from time to time. I would prefer to contain this rather than try to outlaw it. Lots of other states have such direct democracy in limited form that is not a serious problem.
5. Reform Prop 13 to make it fair. Nobody should have to pay 10x or 20x more in taxes than their neighbor for the same property, particularly in tract-home neighborhoods where the properties are practically interchangeable. Seriously, people paying $1000/year for properties next to those paying $10K or $15K/year is not uncommon in some areas. You shouldn't be able to pass that tax basis on to your children and grandchildren. Commercial property owners who can charge market rent for their property should be taxed on full market value. It is not fair for business A to be charged 1/10 the taxes of competing business B just because the new business moved in to the next door property 20 years later. The goal of prop 13 was to protect homeowners, particularly those on fixed incomes, from being socked with double-digit % increases in their property taxes as a result of increases in property value that they did not cause and would not benefit from unless they sold the property. The obvious solution is to restrict increases to, say, 5% on an annual basis, allowing for greater reassessment every 7 or 8 years, except for those over 65 years old. Sure, this will cause some unfairness, but it will probably keep neighbors within 50% of each other, which is so much better than now.
6. Abolish prop 98 altogether. There is no excuse for pegging any program's budget to the amount of revenue raised by the state rather than to the programmatic needs!
7. Abolish the "plural executive" and make the Attorney General, Treasurer, Sec of State, Sec of Education, Insurance Comm'ner appointed rather than separately elected. It is ridiculous to have the governor of one party and the heads of his departments of another party. Guess how that affects transparency and openness in government.


Raised By Republicans said...

I agree with 99% of this. The only difference I would make is rather than allowing the Legislature to veto initiatives, I would make it so that no initiative could take place without a majority vote in the legislature to put it on the ballot.

That is, the new process in my ideal world would be, you get the signatures (without paid signature operations - they're obnoxious) then you take your initiative to the legislature and ask for a vote on whether it can be on the ballot. If 50%+1 of the legislature think its worth voting on, it goes on the ballot. Note: they don't have to support it, just support it being on the ballot. So theoretically, an initiative that would not pass the legislature as a law could get put on the ballot. But an initiative like prop 13 or 98 would get blocked because people who take the time to think about it would see the disastrous implications.

Dr. Strangelove said...

I cannot believe my huge response just got eaten by blogger. AAARGH!

Dr. Strangelove said...

OK, well here's the gist of what I wrote before. (It's too long to try to recapture.)

I really, really liked this post. Excellent work, LTG!

I agree with everything you wrote except for #1. As I understand it (and please correct me if I am wrong) a simple majority actually can pass a budget--the 2/3 requirement comes from Prop. 13 and technically only is a requirement for raising taxes. That's why the Democrats have tried several times to pass a budget by majority vote that used "fees" and other gimmicks to raise revenue without increasing the tax rate or assessing new taxes. I would eliminate that requirement for 2/3 to raise taxes because I think the rule against raising taxes should be political, not structural. We need to avoid structural fixes to political problems.

I would add an eighth point: eliminate or ease term limits. I think that's half of what got us into this mess. Without "elder statesmen" in the legislature, we get only young turks and the compromises required to make the 2/3 majority for taxes never happen. To me, the term limits were another attempt at a structural solution to what was really a political problem: incumbents were perceived as being too entrenched and too isolated from their constituencies. Most would argue, I think, that the term limits have only worsened things.

Raised By Republicans said...

"We need to avoid structural fixes to political problems."

Very well put!

"eliminate or ease term limits...To me, the term limits were another attempt at a structural solution to what was really a political problem:"

I agree!

Raised By Republicans said...

I would also suggest that term limits and the Prop 13 stuff were neither progressive nor conservative but rather populist. They cater to an approach to policy that seem more based on emotional appeal than sound policy from either the left or right.

The initiative was intended to be a progressive check on corrupt politicians but it has proven to be more easily manipulated by populists than the progressives who originally proposed it.

The Law Talking Guy said...

1. Dr.S - you are nto quite right. Article IV sec. 12(d) states that "Appropriations from the General Fund of the State, except appropriations for the public schools, are void unless passed in each house by rollcall vote entered in the journal, two thirds of the membership concurring."

The Democrats have passed intricate bills to raise the fees (not taxes) necessary to finance most of the budget through special appropriations (i.e., not from teh general fund), but they aren't really budget bills and aren't comprehensive.

2. Totally agree on term limits. I just forgot to add that in.

3. RBR - your fix for initiatives makes sense for constitutional amendments, but not for initiative statutes (if you can already get a majority of the lege, why put it to a vote?). I presume you would abolish initiative statutes, whereas I would just make it a lot harder (requiring the sort of grass roots effort that will normally just go into the legislative process).

Raised By Republicans said...

Arg! Blogger just ate my comment! Bad blogger!

LTG, I knew you'd ask that! :-)

I had this great reply to your question with examples and stuff but here is the short version:

The biggest problem with initiatives is that they hand agenda setting power to the "high demander" fringe groups (like the ones that proposed Prop 13, Prop 187, etc). These groups are often populists that favor policies far from the median voter's preferences and take advantage of dissatisfaction with gridlock and a bad status quo to propose "solutions" that are nearly as bad as the problems they supposed to solve (like Prop 13).

Giving the legislature control over when they are put on the ballot would make it harder for such fringe groups to use the ballot initiatives to short circuit policy making in the state.

It would also, and this is really the answer to your "why bother" question, provide political cover for politicians that have strong local opposition (or strong party leadership opposition) to policies that are otherwise popular statewide.

I can come up with examples on request to help clarify my point.

Raised By Republicans said...

BTW, the local opposition problem is a big deal for this reason...

Consider a policy (say a budget or a tax increase that would enable a budget) that would have 60% support statewide but has strong opposition in the central valley. Some Republicans might be willing to compromise if left alone but can't do so without outraging their local constituents. With the initiative option they can go home and say, "I felt an issue of this magnitude needed to be decided by the people" or some such thing. They could even go home and campaign vigorously against the initiative in the home district knowing it would pass based on statewide numbers. Critics would have to go through a complicated story about how voting to put the thing on the ballot was the same as voting for it to become law but that would be a hard case to make in a 30 second ad.

Also, there are several countries that have ballot initiatives which require a parliamentary majority to be put on the ballot (I think Italy is one example).

Dr. Strangelove said...

As you probably remember, RbR, California has two types of ballot measures: initiatives and referenda. Voters sponsor initiatives by petition; a majority of the legislature can place an issue on the ballot for a referendum. (And you are correct that sometimes the legislature uses referenda to provide political cover for themselves. Recently some Republicans have been persuaded to place a measure on the ballot for which they would not or could not otherwise have voted.) But by requiring legislative approval to place something on the ballot, you would in effect gut the initiative process and permit only legislative referenda.

No matter how much we Californians like to complain about it--and we do--polls still show that something like 75% or more of California voters want to keep the initiative process... They just want to reform it. (I looked to find the source, but could not locate it--I hope my memory is correct on this.) I like initiatives too although I must admit I have trouble thinking of any initiatives that actually did any good.

LTG: Perhaps we could remove the 2/3 budget requirement in Article 12 while retaining the 2/3 requirement to raise taxes in Article 13:

Article 13A, Section 3, reads:
"From and after the effective date of this article, any changes in state taxes enacted for the purpose of increasing revenues collected pursuant thereto whether by increased rates or changes in methods of computation must be imposed by an Act passed by not less than two-thirds of all members elected to each of the two houses of the Legislature, except that no new ad valorem taxes on real property, or sales or transaction taxes on the sales of real property may be imposed.

Raised By Republicans said...

"But by requiring legislative approval to place something on the ballot, you would in effect gut the initiative process and permit only legislative referenda."

I guess that is the point. I want to prevent the petition initiatives and permit only legislative referenda. Petition initiatives are a bad way to make policy and easily abused by pernicious fringe groups. Of course, banning paid signature gathering would be an improvement but not as big an improvement as getting rid of them entirely.

Really, I think the petition initiative thing is one of those "structural fixes" to political problems. They were set up originally as a check against corrupt legislators at a time when corruption was rampant. I don't see the inherent advantage of letting the biggest cranks in town write the legislation then offer it to the rest of us under a closed rule vote.

I could also point out that simple majority initiatives/referenda violate a basic principle of democracy - namely protection of minorities against the "tyranny of the majority." Prop 8 is a great example of the result of that failing of the process. Prop 187 is another.

The Law Talking Guy said...

RBR - simple majority referenda/initiatives do not violate "tyranny of the minority" rules unless they are allowed to impinge on minority rights that should be protected by supermajority vote.

I see your point on legislators voting to put things "on the ballot" while claiming to oppose them for the sake of their constituents, but does it work? I mean, the Senate filibuster doesn't work that way - nobody gets away with saying "I voted for cloture because I believe in an up-or-down vote, but I oppose the measure." I'm not sure if the legislature, btw, puts things on the ballot to avoid responsibility or whether (as I suspect) because they have to do so constitutionally. Most ballot referenda are placed on the ballot by majority vote of the legislature to avoid the necessity of a supermajority within the legislature (taxes or to override a veto).

Allowing a budget by 50% but retaining a 2/3 vote for taxes would guarantee budgets based on borrowing and financial gimmicks.

Raised By Republicans said...

"simple majority referenda/initiatives do not violate 'tyranny of the minority' rules unless they are allowed to impinge on minority rights that should be protected by supermajority vote."

Fair enough (not sure what you mean by "rules" though. I was referring to a basic principle of democracy. Is there a legal doctrine or law that you are referring to that has a more specific meaning?). How could one ensure that the petition initiative system could not be used to do exactly that? How do we prevent the Prop 8s and Prop 187s? I'd argue also that Prop 13 trampled on minority interests (keep in mind "minority" in the sense I am using it is not always a demographic group).

What I argue is that since this process is so easy for nasty little fringe groups to abuse and so prone to be used to impose "tyranny of the majority" that it is not worth whatever benefits it may have.

Speaking of which, what benefits does petition initiative have? Why is it necessary to have petition proposed initiatives? Isn't this one of those nasty little "structural fixes" for political problems that Dr. S. mentioned?

Dr. Strangelove said...

RbR, to me the argument in favor of petition initiatives is twofold.

First, there is a structural or prcess argument: there are certain popular policies (usually governmental reforms) which the legislature will almost certainly oppose. One example is term limits, another is redistricting reforms. Of course, I think that term limits has been a disaster, so the argument is clearly a mixed one. But I think the basic idea is that it helps to have an alternative process available for certain special cases. I think this is what the Progressives were thinking a century ago when they started this whole thing.

What I am saying is, yes I agree with you that initiatives are, in most cases, one of those nasty little "structural fixes "for political problems--but the legislature may have some existing structural problems for which a structural solution is therefore appropriate.

The second reason for initiatives is that, as a form of direct democracy, they tend to be viewed as more legitimate representations of the views of "the people" than most--and so they can create political earthquakes that really change the political landscape. The infamous Prop. 13 "taxpayer revolt" is one such example. Arguably Prop. 8 was another. Again, those were both disastrous, so the argument is at best a mixed one. But sometimes a little revolution is a good thing.

Raised By Republicans said...

OK, Dr. S. I'll give you the first argument which is mixed and applies to a limited number of special cases.

The second one though assumes the there is inherent value in direct democracy. I'm not convinced there is. Mainly because unless direct democracy is combined with super-majoritarian requirements then it is simply a means for a narrow majority to impose a policy on the rest of society without opportunity for compromise.

And that's really my problem with initiatives and referenda. In a normal representative legislature, policy is the result of compromise among disparate interests who have legitimate differences. Amendments can be made and policies that are perceived to be extremely onerous can even be quashed. But no such process of give and take is possible in the initiative or referendum process. Voters are given a policy proposal and bombarded with supporting advertising and given no opportunity to amend it. They must either take it or leave it. Given who writes these things and why this is just begging for Prop 8 and Prop 13 style disasters.

Granted, no form of government is going to be perfect even by subjective standards. So we must choose which failings we're willing to tolerate. I would much rather live in a world where we couldn't override the legislature's redistricting rules than live in a world where Prop 8 and Prop 13 are even possible let alone a fairly common occurrence.

Dr. Strangelove said...

I think there is inherent value in direct democracy, but clearly the initiative process--which may have worked well enough a century ago--no longer works.

One note: Props. 8 and 13 were constitutional amendments that required only a majority vote. We have all said that requiring a 2/3 vote for constitutional amendments is a critical reform. Neither would have passed under the 2/3 requirement (even the populist Prop. 13 only got 64.8%).

Raised By Republicans said...

What is the inherent value of direct democracy? Please elaborate. Is it just the legitimacy issue or is there a practical element as well?

I would suggest that direct democracy is wholly impractical in large communities. The average voter simply cannot devote the time required to really understand the complexities of modern laws. Prop 98 is a great example. I doubt very much if it even occurred to most people who voted for it that it could require massive cuts in education during budget crunches or allow massive increases in education when the budget increases.

Representative democracy takes advantage of economic principles of specialization and provides a better product - i.e. better policy.

The Law Talking Guy said...

RBR - it's a legitimacy issue, I think. The populist platform of 100 years ago that put in the modern referendum system in CA (dates to 1911, apparently) was about empowering the grass roots over special-interest dominated legislatures. That view remains prevalent. Why, particularly in a 2-party system, should the only recourse for voters who don't like certain laws be to vote for the other party with whom they thoroughly disagree?

Put another way, the ballot initiative system actually tamps down on wedge issues by allowing them to be separated from the main reasons you vote for or against a party.

Raised By Republicans said...

But if the two party system is the problem the referendum system doesn't fix it. Changing the electoral system however would. (aside: I would love it if California adopted a proportional electoral system for its state legislature. The Greens would probably get about a quarter of the seats and the Democrats and Republicans would divide the rest.)

It is ironic though that the referendum system is at least as dominated by "special interests" as any legislature.

Raised By Republicans said...

One other question:

Assume that referenda are both more legitimate and more desirable because of that.

Assume that the quality of the policies generated by this system is lower (because of all the problems I've mentioned above).

How much would you be willing to sacrifice in terms of legislative quality for how much gain in legitimacy? Wrapped up in this is a question about how much more legitimate is direct democracy than representative democracy with free and fair elections?

The Law Talking Guy said...

Why doesn't a referendum ameliorate the bad effect of a two-party system requiring voters to select one set of priorities and disdain the other, even if they agree with the opposing party on just one issue? Doesn't it allow voters to vote Republican but for a single Democratic initative over the GOP's head, and vice versa?

The Law Talking Guy said...

Legislative quality? If our legislative quality sank any lower, they'd be printing bills on toilet paper.

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