Propositions 1A and 1B

Of the six propositions on the May 19 Special Election ballot, Proposition 1A — the “rainy-day fund” — has garnered the most attention, and for good reason. The measure seeks to change how the state’s general fund would be balanced at a time when revenues are faltering and the need for public services is great.

Pushing 1A are Gov. Arnold Schwarzenegger, his political allies, corporations and business leaders. Opposing it are largely the public university and state employee unions. In the media, much of the focus has been on the impact this measure would have on the state’s education systems because public universities and K-12 schools receive a large chunk of the general fund and have suffered the biggest cuts.

Although the idea of a rainy-day fund may sound appealing, the most vocal opponent — the California Faculty Association union for California State University educators — argues that the restrictions put on how this rainy-day fund could be used are too rigid. Even in good economic years, there would be limits on its use. This is troubling to the CFA, which has seen several rounds of cuts fall on the CSU and University of California systems. CFA officials also say the fund wouldn’t resolve the current fiscal crisis anyway, since the state doesn’t expect revenues to come in until after two years.

“We could be coming out of this recession and see better revenues and better tax receipts and nevertheless, Prop. 1A will keep public higher education, healthcare, a whole lot of programs in the hole that they’re already in,” said Lillian Taiz, who is a CSU professor and the president of the CFA. With such restrictions over how the reserve fund can be used, she said, the CSU budget will not be restored to the level it should be.

Parties on both sides of the issue have been busy spreading their messages about what the passage or failure of this measure would mean for Californians.

Budget Reform Now, the coalition backing Prop. 1A and the five other measures, said aside from the rainy-day fund, which the group argues would stabilize funding for public services, this measure would prevent the government from overspending.

But if you read the mailers and watch the TV ads in favor of Prop. 1A, they don’t mention the state tax hikes that would be extended if this becomes law. This includes, extending for up to two years, the 1 percent sales tax increase, vehicle registration fee and the state income tax rate, while reducing the dependent tax credit amount, according to the California Budget Project – a non-profit organization that conducts non-partisan research and analysis on the state’s fiscal matters. Prop. 1A would also give the governor power to make budget cuts without oversight from the Legislature. 

In San Francisco, this means the sales tax jump of 9.5 percent experienced in April and scheduled to expire on July 2011 would remain; sales tax increases vary from county to county. The same extension would apply to the California vehicle registration fee, which is already set to increase from 0.65 percent to 1.15 percent on May 19, and 0.25 percent of a percentage point increase for personal income tax rates. This means a person’s tax rate would rise anywhere from 1 percent to 10.3 percent depending on income; the bigger the income, the higher the tax rate.

If voters approve Prop. 1A, these tax increases would provide California with $16 billion in revenues from 2010-11 through 2012-13, according to the Legislative Analyst’s Office.

Even if Prop. 1A passes and money starts going into the reserve, it would not help the current budget situation because the state would not see revenues until two years out. This detail is something not all voters realize, just as some are unaware of how Prop. 1A is linked to Prop. 1B — the “Education Funding. Payment Plan,” which aims to give back money reduced from the K-12 and community college budgets.

In a recent Field Poll, about 43 percent of those surveyed did not know that Prop. 1B would not take effect without the passage of Prop. 1A. Not only has this provision confused voters, it has also divided the CFA and its affiliate, the California Teachers Association, which represents 340,000 of the state’s K-12 educators.

"We parted company with CTA because we know that [1A] is going to hurt our program,” said Taiz of CFA. “Because 1B won’t pass if 1A does not, we are on opposite sides.”

“We have not taken a position on 1B,” she added. “We have only taken a position on 1A because we think that that’s the lynch pin.”

The CTA is backing all six ballot measures.

Even though the CFA and CTA are not on the same side, they have steered clear from any mud slinging. The CTA has stuck with focusing on how much Prop. 1B would help public schools and community colleges that have suffered budget reductions of $11.6 billion. The passage of Prop. 1B would restore $9 billion in funding to them.

“The repayment of some of the money cut from education will allow local school districts to restore student programs, reduce class sizes and rehire educators who have been laid off,” CTA President David Sanchez said in a statement released after the union’s governing board endorsed the propositions in March.

“Many of these initiatives, especially Propositions 1A and B, are dependent on each other and if they fail, the state is back to square one in trying to balance the budget and our schools could face even deeper cuts,” said Sanchez.

What some voters may not know, however, is that lawmakers are already mandated to provide K-12 schools and community colleges with a guaranteed amount of funding because of the passage of Proposition 98 in 1988. But since that amount was reduced by 20.3 percent because of the state’s fiscal crisis, what Prop. 1B is asking voters to do is decide on whether that money gets paid back starting in 2011.



Reach the reporter at cmorales[at]


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