As a professor of public budgeting and someone who has worked their entire career analyzing public budgets, I can say that ballot box budgeting wreaks havoc on the California budget process and taxpayer interests.
Yet it is something that voters are so accustomed to doing that most average voters don’t even know what “ballot box budgeting” is.
In short, ballot box budgeting is the practice of making major budget decisions at the ballot box. And unlike the normal budget process, these decisions are commonly written into the California Constitution, and not subject to change in any way short of another ballot measure.
The result is that funds are locked in to being spent for a particular purpose regardless of other budget needs and priorities, and commonly lack the same accountability and oversight that the rest of the California budget is subject to through the legislative process.
There are three measures on the November 2016 ballot that represent ballot box budgeting at its worst, and should be rejected—Proposition 51 School Bonds, Proposition 55 School Funding, and Proposition 56 Tobacco Tax Increase. There is one other measure, Proposition 64 Marijuana Legalization and Tax, which represents ballot box budgeting, but is less egregious and is worthy of consideration on its policy merits given that marijuana is not currently legal and therefore not taxed at all but should be considered on policy grounds.
The reality is that nearly all initiatives have some type of budget impact, but initiatives that allocate a significant dollar amount of public funds should generally be looked at with great skepticism, particularly those that raise taxes or reallocate existing public funds in some way.
Another common element in ballot box budgeting is a “pay to play” element, characterized by a situation where special interests sponsor a ballot measure that allocates public funds that benefit their private financial interest. All four initiatives mentioned above have a significant “pay to play” element, that should be considered as well, and viewed with great skepticism.
In generally all such cases, initiatives are sold as being crafted in the “common good” or for the “public interest” but the real motivation is to benefit the private interests that raised the money to quality the measure and run a support campaign.
For example, Prop. 51 authorizes $9 billion in general obligation bonds for construction of K-12 public schools. But this measure has recently drawn fire from California Treasurer John Chiang and the media because it utilizes a “corrupt” process that rewards special interests including developers, bondholders, and construction companies that pay to help lock in lucrative “no bid” contracts in many cases.
“Not only are these “pay-to-play” arrangements unlawful, they rip off taxpayers and endanger the integrity of school bonds,” Treasurer John Chiang declared, according to the Sacramento Bee.
Without cleaning up this “corrupt” process, Prop. 51 essentially puts $9 billion in public funds at risk for misallocation by school districts and public agencies. And will subject taxpayers to huge future costs, for spending with questionable public benefits given the process through which these bonds are issued under the current system.
Of course, these same interests are the primary proponents of Prop. 51, and are putting up millions of dollars to lock in these lucrative contracts for public bond spending. A number of local districts are also proposing local bonds to provide a local match for these highly questionable public projects.
Prop. 55 is the example of another measure which might appear legitimate on its face because it raises money for “schools” and “health programs.” But should also be rejected on ground of being a terrible case of “ballot box budgeting” and “pay to play” corruption of the state’s initiative process.
Prop. 55 extends the Prop. 30 (2012) income tax increases taxes on individuals and small businesses, which expire at the end of 2017, for another 12 years until 2030. The effort is being sold as being a legitimate effort to fund schools and health care because Prop. 30 is something that the Governor, Legislature and business community agreed on back in 2012.
But Prop. 55 is not the same as the deal cut back in 2012, and should be rejected. That's why Governor Jerry Brown has refused to take a position on Prop. 55. First, Prop. 55 is not "temporary" and is much more expensive, nearly twice as expensive as Prop. 30—Prop. 55 represents an $8-11 billion tax increase, as opposed to a $6.5 billion annual hit from Prop. 30.
Second, Prop. 55 adds a significant “pay to play” element as well by giving private hospital interests a piece of the action. Specifically, Prop. 55 locks in another $2 billion in funding for “health programs,” which did not even exist in Prop. 30, and is a pure handout to the hospital interests which have already contributed more than $21 million to the Yes on Prop. 55 Campaign.
Public employee union interests get the bulk of the funds, estimated at $75 billion over 12 years, in salary and benefit spending primarily but the public generally does not view them as being the same type of “special interest” as purely private interests. Yet, these public employee union interests have put up another $18 million thus far to support Prop. 55, and stand to reap huge rewards for their members and dues increases if Prop. 55 passes.
From a ballot box budgeting perspective, both Prop. 55 and the Prop. 56 $2 per pack tobacco tax increase are terrible budget policy because they lock in significant expenditure of public funds that will be allocated outside of the state’s annual budget process without regard to actual need or other pressing spending priorities.
Prop. 55 locks in $8-11 billion in spending with the bulk going for education, but another $2 billion going to “health care” programs—again not allocated according to need or the accountability standards under the state’s annual budge process which subjects all public spending to annual review. Prop. 56 locks in another $1-1.4 billion in health care spending that will be allocated outside the state’s budget process.
Voters are encouraged to reject Propositions 51, 55, and 56 on grounds that they are terrible examples of “ballot box budgeting,” in which special interests put up millions of dollars, even tens of millions of dollars, to try to pass “public interest” measures with the expectation of a big payday at taxpayer expense for the years to come.
David Kersten is executive director of the Kersten Institute for Governance and Public Policy (www.kersteninsitute.org). He is an expert on fiscal issues and teaches a masters’ course on public budgeting for the University of San Francisco.