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Southwest California Chambers of Commerce Take Action On May 19 Special Election Propositions

The Southwest California Legislative Council (SWCLC) released its positions on the May 19, 2009 Special Election ballot propositions. The ballot propositions are part of the 2009-2010 state budget agreement between the Governor and Legislature designed to help balance the state budget through various increase in length of time of taxes, shifting of former voter-approved propositions and borrowing of funds from future state lottery revenues. Also included is a savings account for the state, also known as the “Rainy Day Fund” that will be solidified only if tax increases that started April 1 are allowed to be extended.

The SWCLC serves as the regional business advocacy coalition of the Temecula Valley, Murrieta, Lake Elsinore Valley, Menifee Valley and Wildomar Chambers of Commerce.

Proposition 1A – “Rainy Day” Budget Stabilization Fund
SWCLC Position: OPPOSE

Proposition 1A would stabilize long-term budget spending by limiting of the state’s spending based on 10-year revenue trends. It creates a Budget Stabilization Fund, also known as a “Rainy Day” fund, which will allow the State of California to save when the economy is prospering and therefore can be used when the economy is in a decline.

As of April 1, 2009 several categories of taxes increased based on the budget agreement in February. The passage of Proposition 1A allows the length of time of the tax increases to be extended. The tax increases would be extended for one or two additional years depending on the particular tax. It is estimated that State tax revenues would increase by about $16 billion.

The following tax increase extensions will only go into effect if Proposition 1A passes:

- The sales tax increase of 1 % would be extended for one year through 2011 – 2012.
- The Vehicle License Fee (VLF) tax increase would be extended for two years through 2012 – 2013 from .65% to 1.15%.
- The personal income tax-related increases would be extended for two more years, through the 2012 tax year.

Proposition 1B – Education Funding. Payment Plan
SWCLC Position: OPPOSE

Proposition 1B would modify how voter-approved revenue for education could be used to balance the state budget. The State would be allowed to borrow from the education fund in order to give flexibility for balancing the state budget. In return, Proposition 1B ensures that the schools would be paid back over time starting in 2011.

Payments to schools will come out of the newly created Budget Stabilization Fund as outlined in Proposition 1A. In order for the funding guarantees in Proposition 1B to take place, Proposition 1A would also need to be passed.

Proposition 1C – Lottery Modernization Act
SWCLC Position: OPPOSE

Proposition 1C will allow the State to immediately borrow $5 billion from future protected State Lottery revenue in order to balance the current State Budget deficit. The changes could increase lottery ticket sales and allow the state to borrow $5 billion from future lottery profits.

Proposition 1C involves selling an asset (future lottery profits) to investors through a bond transaction by converting a stream of future annual payments into a “lump sum.” This type of borrowing – referred to as securitization – is somewhat different from most other types of state borrowing in that it involves no legal commitment to use General Fund tax revenues to pay investors.

Proposition 1D – Children’s Services Funding
SWCLC Position: OPPOSE

Proposition 1D temporarily redirects a portion of excess funds from a prior voter-approved tobacco tax to the general fund in providing for more flexibility of shifting funds to balance the state budget.
This would achieve state savings of up to $608 million in 2009 and $268 million annually from 2010 – 2014.

Proposition 1E – Mental Health Funding Budget
SWCLC Position: OPPOSE

Proposition 1E temporarily redirects funds from the Mental Health Services Act to fund children’s health programs that are at risk of elimination due to the budget crisis, including health care screening, diagnosis and treatment.

Similar to Proposition 1D in that it allows once again more general flexibility of shifting funds from voter-approved funding measures in order to help balance the budget. Proposition 1D and Proposition 1E are consider short term fixes.

Proposition 1F – Elected Officials’ Salaries
SWCLC Position: SUPPORT

Proposition 1F amends the State Constitution to prevent the California Citizens Compensation Commission from increasing the annual salaries of State elected officials when the state General Fund is expected to end the year with a deficit.