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	Blow Up A Box; Build Two More
	by Jeff Vaca
	In the 1950s, folk singer Pete Seeger wrote and sang a song called "Little Boxes" that was about suburbia, but could just as easily apply to the state's current fiscal situation:
		Little boxes, little boxes, little boxes all the same
		There's a green one and a pink one and a blue one and a yellow one
		And they're all made out of ticky-tacky
		And they all look just the same
	Upon his election as governor in the historic recall election of October 2003, Arnold Schwarzenegger boldly declared that it was his intent to "blow up boxes" in an effort to make California state government more responsive to the needs of its citizens. In his inaugural address, the governor went on to say that he would not rest until "our fiscal house is in order." In that same speech he conceded that "things may get harder before they get better," but asserted that he's never been afraid of the struggle, never been afraid of the fight, and never been afraid of the hard work. Anyone familiar with Schwarzenegger's rags-to-riches life story (and who isn't?) would have been hard-pressed to disagree with the governor's confident self-assessment.
	With a full year now under his belt, it is fair to judge Governor Schwarzenegger's proposed state budget for 2005-06 as his first real effort to "blow up the boxes" of the state's Gordian Knot-like fiscal structure. The rhetoric surrounding the budget has been bold, but unfortunately the document itself is a mixed bag that skirts the key issues and once again fails to tackle the big questions. No one is particularly happy with it, which in politics usually means that it represents the perfect compromise, but in this case I believe means that everyone who voted for Schwarzenegger (myself included) is more than a little disappointed that this represents his idea of "fiscal reform."
	The key problem, and the cynic in me is beginning to think that it might be an unsolvable one, is that the boxes are still there, they seem to get bigger every year, and to make matters worse we seem to add a new one with every election cycle. Part of the problem is that taken on their own, each box looks somewhat attractive, and probably seemed like a good idea at the time—I voted for several of them myself. But put them all together, and the next thing you know, you end up with a bunch of boxes that are cluttering everything up, and making it impossible to get to where you really need to be—sort of like my garage.
	So with apologies to everyone who voted for one of these grand ideas, let's review some of the boxes that are making it difficult for state policymakers to have a real, substantive conversation about what needs to occur to make California the state that we all want it to be—at least from a fiscal standpoint. Please note that this is not intended to represent a comprehensive overview of such measures or an in-depth analysis of each initiative, but rather a sampling of past decisions on the part of voters that are contributing to the difficulty in finding long-term solutions to California's fiscal woes.
	Proposition 1A (November 2004). This is likely to be an unpopular choice on my part, given the obvious benefit that accrued to cities, counties, and special districts from its passage. Approved by an astronomically wide margin, the measure amended the State Constitution to significantly reduce the state's authority over major local government revenue sources. On the face of it a fine idea, but one which nonetheless significantly reduces the flexibility of the state in crafting solutions in years during which the state has a budget deficit.
	Proposition 49 (November 2002). Approved by 56.6% of the voters, this initiative asked voters the following questions: should funding for before-and-after school programs be substantially increased, and starting in the 2004-05 fiscal year, should state General Funds be permanently earmarked for such programs? The answer was a resounding "yes," with the result being potential new annual state costs for before-and-after school programs in excess of $400 million, from within the amount of funding currently provided to K-14 Education under Proposition 98 (see below for details on the "Prop. 98 Box").
	In the big scheme of things, one could argue that $400 million is just a drop in the bucket, and it's difficult to find fault with the premise behind the initiative. However, one cannot argue with the notion that the initiative diverts funds that are currently used to pay for programs supported by the state's General Fund. The initiative is also noteworthy because it was sponsored by then-actor Arnold Schwarzenegger, when he was still in his "box-building mode."
	Proposition 42 (March 2002). Historically, most of the revenues from the state sales tax on gasoline have been used for various general purposes such as education, health, social services, corrections, and local government fiscal relief. Proposition 42, approved by 69.1% of voters, placed provisions in the State Constitution requiring that from 2003-04 through 2007-08, those revenues be used for specified state and local transportation purposes. The measure also required that starting in 2008-09, gasoline sales tax revenues continue to be used for transportation purposes, allocating 20% of the revenues to public transportation, 40% to statewide projects, and 20% to local street and road improvements (half to cities, half to counties).
	In the spirit of full disclosure it should be noted that Proposition 42 has been suspended for each fiscal year since its passage. However, a key component of Governor Schwarzenegger's 2005-06 proposed budget is a commitment to restoring the dedication of Prop. 42 funds to transportation. Thus, at the same time he is talking about blowing up boxes, the governor has committed to shoring this particular box up so that it can't be blown up in the future.
	Proposition 98 (November 1988). Under the constitutional requirements of Proposition 98, the state must dedicate a specified minimum amount of funding to K-12 schools and community colleges each year. The actual percentage in any given year is dependent on complex formulas that are probably fully understood by only 4 or 5 education experts, but the overall amount usually represents about 40 percent of the state's General Fund. The initiative was intended to establish a floor for school funding, but has often served as a ceiling.
	There's little doubt that education would always be a high priority in the state budget, regardless of which formula one used to calculate the exact amount allocated to schools. But the existence of Proposition 98 has made it virtually impossible for policymakers to have a meaningful conversation about the fundamental question facing California education today: how much funding do schools need to ensure that students are able to meet or exceed the state's academic standards? Currently, the governor and political pundits are engaged in a largely pointless debate over whether the amount allocated to schools in this year's budget represents a "cut" or an "increase." And while this debate goes on, California has fallen to 44th in the nation in per-pupil spending. The longer that the education funding debate is tied to Proposition 98, the longer it will take for the state to ensure that schools are adequately funded.
	Proposition 13 (June 1978). The granddaddy of them all. The Holy Grail of California politics. The issue that put Howard Jarvis on the cover of TIME Magazine, and made him a household name. Love it or hate it, the single most important California political event of our lifetime. And, the lollapalooza of all budget boxes.
	This is not the place to debate whether the passage of Proposition 13 was a good thing or a bad thing. Suffice to say, there were understandable reasons that it passed. In the 1970s home prices and property taxes were skyrocketing, there was a clear need for reform, and yet the Legislature failed to address the issue—despite having a good five years on which to work on it.
	The supporters of Proposition 13 argued that it was "simple property tax reform," and on the face of it that was accurate. The maximum property tax rate was set at 1 percent of the value of the property; the value of the property was set at its 1975-76 level but allowed to increase by the rate of inflation up to 2 percent each year; property could be revalued only upon change of ownership; no new ad valorem (according to the value) property taxes could be imposed; special taxes needed to be approved by a 2/3 vote. Considered on its own, it's not terribly complicated.
	The importance of Proposition 13 to the conversation about reforming California's fiscal structure is that in essence the initiative represents the starting point for every fiscal decision, whether good, bad, or indifferent; made by policymakers or the voters over the past 26 years. Everything that has come since—the initiatives above, and others such as Proposition 62 (1986), Proposition 111 (1990), and Proposition 218 (1996)—could be characterized as a reaction to the new fiscal realities created by Proposition 13.
	Perhaps the most significant consequences of the new state/local finance system implemented as a result of Proposition 13 are those that were unintended: the fiscalization of land use; the proliferation of new finance techniques such as Mello-Roos districts; the increase in state control over county finances; the list goes on and on.
	And therein lies the rub. It is simply not possible to have a meaningful conversation about long-term fiscal reform in California without including Proposition 13 in the mix, yet to do so has represented political suicide since its passage in 1978 and continues to be anathema to legislators today.
	There is one person in California with the political power, with the charisma, with the popularity, and with the money to affect the changes that are needed to truly reform California's budget mess, and that is Governor Arnold Schwarzenegger. Unfortunately, based on his 2005-06 budget proposal, "the Terminator" is just another cowardly lion in disguise.
	Jeff Vaca has been a resident of Elk Grove since 1989, and chaired the Franklin-Laguna Area Community Planning Advisory Council in the early 1990s..
	The opinions expressed in this article are those of the author and do not represent those of the Elk Grove Insider or any other entity.
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