Summaries of November 5, 1996 Ballot Propositions

Proposition 204

Legislative Statute (SB 900, Jim Costa and David Kelley)

Major Provisions:

• Allows sale of $995 million in general obligation (G.O.) bonds for improvements in the San Francisco Bay and delta of the Sacramento and San Joaquin rivers ($193 million for levee repairs and wildlife habitat); ecosystem restoration ($390 million to match federal funds for environmental restoration and fish and wildlife habitat improvements); clean water and water recycling ($235 million for loans and grants to local agencies); water supply reliability ($117 million for conservation, groundwater recharge and river corridor parkways, and local flood control and prevention ($60 million for levee repairs).
• Changes the 1988 water bond act (Proposition 83) by allowing the repayment of $40 million in loans to local agencies to be used instead for a revolving loan program.

As of June 1996, all but $79 million of $2 billion authorized by previous water bond acts had been committed. Additionally, the CALFED Bay-Delta Program, a joint state and federal effort to restore ecological health and improve water management, calls for funding of $4 billion to $8 billion over the next 20 to 40 years. Flood control, which the state had funded in the past from the general fund but has been unable to fund recently, requires a state infusion of $158 million. Specified water development and clean water projects would be funded by this measure, and also by a new revolving loan program.

Fiscal Impact:

According to the Legislative Analyst, the general fund cost of Proposition 204 would be up to $1.8 billion ($995 million principal, $776 million interest). The average payment over 25 years would be up to $71 million per year.

As of July 1, 1996, state general fund bond debt totaled $20.2 billion ($14.3 billion in G.O. bonds and $5.9 billion in lease payment bonds). Unsold were $9 billion in authorized bonds awaiting project approvals. Debt payments for 1996-97 should total about $2.4 billion, increasing to $2.9 billion in 1999-00 as authorized bonds are sold. This represents a debt ratio increase (debt payments as a percentage of the state general fund) to 5.3% in 1998-99, and declining thereafter. The debt ratio in 1990-91 was less than 3%.

If all three bond measures on the November ballot were approved, the Legislative Analyst projects the bond debt payments would remain at $2.9 billion for two more years, through 2001-02. General fund bond debt would total $21.3 billion, and the debt ratio would remain at 5.3% an additional year through 1999-2000 and decline thereafter. Voter approval at subsequent elections and authorization of additional lease-payment bonds would increase those figures.

Support Arguments:

• Unless we act now, California's residents, businesses and farms face a future of chronic water shortages and potentially unsafe supplies.
• Proposition 204 is a balanced water solution that is good for our economy and jobs, good for our environment and good for all Californians.
• The last major investment in our water supply system occurred 36 years ago, in 1960.

Opposition Arguments:

• Using bond financing almost doubles the cost of any government project.
• Taxpayers should not be put on the hook for water pollution damage caused by private businesses and individuals.
• Many of Proposition 204's provisions could cause serious damage to private property rights. Armies of bureaucrats will march through the Sacramento Delta to impose rules and regulations.

Proposition 205

Legislative Statute (AB 3116, Jim Brulte)

Major Provisions:

• Allows a general obligation bond issue of $700 million to fund construction, renovation, remodeling and replacement of local facilities that are used to treat, rehabilitate, and punish juvenile offenders ($350 million) and adult offenders ($350 million).
• In order for a county to receive bond funds, it would have to provide 25 percent of the project's cost in matching funds (subject to waiver by the Legislature). The county would also have to provide a plan for providing services for juvenile and adult offenders ranging from prevention through detention; show that the county has used, to the greatest extent possible, alternatives to detention, and identify how the county will maximize all funding sources (local, state and federal) for providing services to offenders.

Almost all juvenile halls to house the more than 50,000 juvenile offenders in the state report overcrowding. Since 1988, voters have approved $100 million in G.O. bonds for juvenile facilities. These bonds are fully committed. According to a 1995 assessment, $350 million is needed to upgrade and develop new juvenile facilities.

There were more than 1.1 million adults booked in California jails in 1995. Because of overcrowding, many inmates serve only a fraction of their sentence. In 1995, more than 21,000 persons per month were released early from jails because space was lacking to house them. The Board of Corrections has identified a need for an additional 30,000 beds by the year 2000.

Since 1981, $1.6 billion in G.O. bonds has been raised to expand and improve county jail facilities; all funds are committed.

Fiscal Impact:

According to the Legislative Analyst, the general fund cost of Proposition 205 would be up to $1.25 billion ($700 million principal, $550 million interest). The average payment over 25 years would be up to $50 million per year. The Analyst also notes that counties would incur unknown increased costs, in the millions of dollars per year, to operate the facilities built with these bond funds.

Support Arguments:

• Proposition 205 is urgently needed to keep violent criminals out of our schools and neighborhoods and keep them behind bars.
• Without funds from this bond proposal, thousands of convicted criminals will be released early.
• California's tough "three strikes" law is working to remove violent criminals from our streets. But without adequate county jail space, criminals who have already received their first and second strikes could be released early.

Opposition Arguments:

• "Three strikes" is designed to lock up career criminals who are housed in state prisons, not in county jails.
• To save taxpayers money, nonviolent convicts should be placed under house arrest and monitored electronically.
• Of the prisoners in county jails, some are dangerous, some aren't. In fact, 50% of all crime is related to drug use, including simple possession of controlled substances. We believe that only criminals who are violent and dangerous to others should be locked up.

Proposition 206

Legislative Statute (SB 852, Don Rogers)

Major Provisions:

Provides a general obligation bond issue of $400 million to fund home and farm loans for veterans.

Background:

The money from veterans' bond sales is used by the Department of Veterans Affairs to purchase farms, homes, and mobilehomes which are then resold to California veterans. Veterans' payments to the department are sufficient to cover all costs; there is no direct cost to taxpayers.

Since 1921, voters have approved about $7.5 billion of G.O. bond sales. As of July 1996, only $250 million remained of these funds. The Department of Veterans Affairs advises that funds from Proposition 206 would enable at least 2,000 additional veterans to receive loans.

Fiscal Impact:

According to the Legislative Analyst, the cost of Proposition 206 would be $700 million ($400 million principal, $300 million interest). Average payment for both would be $28 million per year for 25 years. The Cal-Vet program has been totally supported by the participating veterans, with no direct cost to taxpayers.

Support Arguments:

• Voter-approved G.O. bonds finance assistance to veterans, who repay all costs. The Cal-Vet program does not cost the taxpayer one thin dime.
• The Cal-Vet program is an appropriate expression of our appreciation and thanks for the sacrifices of U.S. veterans.
• In addition to helping veterans, Cal-Vet farm and home loans generate thousands of jobs and millions of dollars in annual payrolls.

Opposition Arguments:

• California's real estate market is not as strong as it used to be. If participating veterans default on their loans, taxpayers will have to pay.
• Since it duplicates the federal VA home loan program, Cal-Vet is merely another unnecessary government program.
• Contrary to its proponents' claims, Proposition 206 will not generate jobs and millions of dollars in new payrolls. The housing market in California is no longer booming; there are more houses for sale than people to buy them.

Proposition 207

Initiative Statute

Sponsor: Consumer Attorneys of California

Major Provisions:

• Prohibits any restriction on the right to negotiate attorneys' fees.
• Prohibits attorneys from charging excessive fees by adopting existing State Bar rules.
• Authorizes courts to sanction attorneys who file frivolous lawsuits and allows attorneys to appeal any proposed sanctions.
• Requires the State Bar to recommend appropriate discipline for attorneys with repeated sanctions.

Current law places few limitations on fees attorneys can charge clients. Notwithstanding, there have been repeated efforts to limit attorney fees. This measure would pre-empt future efforts to impose fee limits by requiring a vote of the electorate. A two-thirds vote of the Legislature could make changes if they further the purpose of the initiative.

Fiscal Impact:

According to the Legislative Analyst, the net fiscal impact of Proposition 207 is unknown, but probably insignificant. There could be fewer lawsuits filed due to the sanctions for filing frivolous lawsuits, but there could also be increased courtroom use for appeals filed by sanctioned attorneys.

Support Arguments:

• Lobbyists for multi-million dollar insurance companies want to make it impossible for consumers to hire contingency fee attorneys.
• The measure punishes irresponsible lawyers no matter which side they are on.
• The measure takes all fees away from lawyers who indulge in frivolous lawsuits.

Opposition Arguments:

• Proposition 207 will mean more frivolous lawsuits, costing consumers millions of dollars a year in higher costs for such things as insurance and health care.
• The measure doesn't protect us from greedy lawyers and lawsuit abuse - it just protects their fees.
• Trial lawyers support Proposition 207 because it is intended to prevent limitations on their fees and will not prohibit them from filing lawsuits. Their real intent is to lock in their ability to take whatever fee they can get from a client.

Proposition 208

Initiative Statute

Sponsor: Californians for Political Reform

Major Provisions:

• Limits campaign contributions that individuals or groups can make. Prohibits the transfer of campaign funds. Prohibits lobbyists from making contributions.
• Increases allowable contribution amounts if voluntary campaign spending limits are accepted.
• Limits the amount of personal loans candidates may make.
• Limits when fundraising may take place.
• Establishes and increases penalties for campaign violations.
• Requires that campaign advertisements on ballot measures disclose names of donors contributing above specified levels.

Federal law places limits on campaign contributions for individuals and groups. California, generally, has no similar restrictions, although some localities have imposed limits.

Similarly, state law places no restrictions on candidate spending from personal sources, including personal loans, nor does it restrict campaign expenditures from campaign committees.

Past efforts to impose limits on contributions and/or spending (Propositions 68 and 73) have been nullified by the courts.

Fiscal Impact:

The Legislative Analyst estimates an annual cost of $4 million to administer and enforce Proposition 208 and additional but insignificant state and local election costs.

Support Arguments:

• Proposition 208 will bring an end to special interests and their high-priced lobbyists buying political influence with campaign contributions.
• The measure reforms all levels of government, from City Hall to the Governor's Office, and will give California the toughest campaign finance law in the nation.
• The measure is the only genuine campaign reform measure on the ballot.

Opposition Arguments:

• Proposition 208 is cosmetic; it doesn't provide an overhaul of the current system.
• The measure is soft on special interests, on lobbyists, and on campaign spending.
• The measure only replicates ineffectual federal campaign finance laws which have left Congress awash in special interest money.

Proposition 209

Initiative Constitutional Amendment

Sponsor: California Civil Rights Initiative committee

Major Provisions:

• Prohibits all state and local governments from giving preferential treatment to any individual or group in employment, education or public contracting on the basis of race, sex, color, ethnicity, or national origin.
• Excludes from this prohibition preferential treatment by government agencies that receive money under federal programs that require affirmative action.

Current law provides for targeting or "affirmative action" to increase opportunities for various groups, including women and racial and ethnic minority groups. These preferences or set-asides, which rose out of the civil rights movement, were deemed remedies for past discrimination. More recently, there has been a backlash over quotas and reverse discrimination. Proposition 209 would disallow preferential treatment based on race, sex, color, ethnicity, or national origin.

Fiscal Impact:

According to the Legislative Analyst, the elimination of affirmative action programs would result in savings to state and local government. These savings would occur for two reasons: government agencies would no longer have the expense of administering affirmative action programs, and secondly, the prices paid on some government contracts would decrease. Savings are estimated to total tens of millions of dollars each year.

Additionally, school spending for voluntary desegregation programs, tutoring and outreach, could be lower by some $75 million. However, because of Proposition 98 guarantees, total spending would remain the same, i.e., the $75 million would be expended for other school purposes.

In the state university systems, spending for similar tutoring, financial aid and outreach programs would no longer be required, resulting in a savings of $50 million. As this funding is not protected by the Proposition 98 guarantee, overall higher education spending could be lower.

Support Arguments:

• "Reverse discrimination" based on race or gender is plain wrong.
• Proposition 209 will stop the practice of race and gender classification which is dividing our people and tearing us apart. People naturally feel resentment when the less qualified are preferred.
• Hiring, promotions and university admissions ought to be solely based on merit.
• Discrimination is costly. Government agencies waste tax dollars for costly bureaucracies to administer affirmative action programs, and they waste much more money on high-bid contracts based on unfair set-asides and preferences.

Opposition Arguments:

• Proposition 209 creates a loophole that allows discrimination against women.
• Ridding of affirmative action does not guarantee a meritocratic system.
• The measure means opportunity based on favoritism.
• The measure is so broad and misleading that it eliminates equal outreach opportunity programs, including tutoring and mentoring for minority and women students, and programs designed to encourage girls to study and pursue careers in math and science.

Proposition 210

Initiative Statute

Sponsor: Liveable Wage Coalition

Major Provisions:

• Increases the state minimum wage for all industries from the current $4.25 per hour to $5.00 per hour on March 1, 1997.
• Increases the minimum wage to $5.75 per hour on March 1, 1998.

Minimum wage standards were first enacted in California in 1916, and at the federal level in 1938. At present, state and federal laws are similar. Where differences occur, employers usually must conform to the law providing higher wages and broader coverage.

Thirty-nine states, including California, require a minimum wage equal to the federal minimum of $4.25 per hour. Eleven states require higher wages, ranging from $4.27 to $5.25 per hour.

At the federal level, an increased minimum wage has just been enacted - to $4.75 per hour this year and $5.15 per hour next year. California's minimum wage will automatically rise to the new federal level effective October 1, 1996.

Approximately two million (out of 13 million) California wage earners are paid less than $5.75 an hour. About one-fourth of all minimum wage earners are teenagers. Industries paying minimum wages include restaurants and fast food franchises, nursing facilities and child care.

The last change in California's minimum wage occurred in 1988, when it was raised to $4.25 per hour from $3.35.

Fiscal Impact:

According to the Legislative Analyst, there would be an unknown net impact on state and local government revenues, depending on the effect of the measure on employment, income, and taxable sales in California. State and local governments costs would increase by approximately $300 million due to the higher cost of providing public services. Net annual savings in state health and welfare programs, potentially in the low tens of millions of dollars, could result due to more wage earners collecting income above AFDC and Medi-Cal thresholds.

Note: Adoption of a higher federal minimum wage causes the specific effect of this measure to be reduced by about half. Costs would remain the same, but half would be attributable to the federal minimum wage and half to the higher state minimum wage.

Support Arguments:

• Because of inflation, California's minimum wage buys less today than at any time in the past 40 years. Proposition 210 restores the purchasing power of the minimum wage.
• Higher minimum wages will make work more rewarding than welfare.
• California's economy will benefit from having consumers with more money to spend.

Opposition Arguments:

Passage of Proposition 210 will put people out of work.

• Studies show that minimum wage increases make it harder for people to get off welfare by making it tougher for low-skilled workers to get jobs.
• Proposition 210 will place additional burdens on small businesses, which provide most of the job growth in California.

Proposition 211

Initiative Statute

Sponsor: Citizens for Retirement Protection and Security

Major Provisions:

• Extends liability in California securities law beyond the limits of federal law by allowing aiding and abetting claims, claims specifically disallowed by the U.S. Supreme Court.
• Creates new liability for actions that result in a loss to pension funds and retirement savings.
• Lowers the culpability standard by recognizing "recklessness" as a basis for liability.
• Requires juries to award punitive damages, which are not permitted in federal securities law.
• Codifies and expands the "fraud on the market doctrine" allowing plaintiffs to claim and recover damages without proof that they relied upon, or even read, allegedly fraudulent statements. The California Supreme Court previously rejected this doctrine as a matter of state law.
• Subjects all defendants to full joint and several liability.
• Allows the assertion of derivative securities fraud claims without regard to existing limitations on these claims.
• Prohibits regulation of plaintiffs' lawyer fee arrangements.

Lawsuits alleging securities fraud have become a major problem for high technology companies, costing them billions of dollars in legal costs and countless hours of wasted management time. Last year, they helped forge a bi-partisan coalition strong enough to override a Clinton veto and enact important reforms to this area of federal law.

The initiative - often called the Lerach initiative after its author and chief sponsor, Bill Lerach, a securities lawyer - would make California state law much more plaintiff-friendly in securities cases. It would be more favorable, in fact, than the pre-reform federal securities law. Supporters include high-profile lawyers, like Lerach, who specialize in filing securities cases, as well as several senior citizens groups and union organizations.

Fearing an outbreak of abusive securities lawsuits in California state courts, a broad coalition has formed to oppose this initiative, including the California Chamber of Commerce, the Association for California Tort Reform, senior groups, high technology and financial services companies and small business associations. Both major party candidates for President oppose Proposition 211.

Fiscal Impact:

If passed, the initiative would shift securities cases historically brought in federal court into what would become a much more plaintiff-friendly California state court system. Since California would be the only state in the nation to circumvent the federal securities reforms, lawyers from around the country would have an incentive to file securities cases in California state courts.

The increased costs of more securities cases burdening California state courts is undetermined. However, the initiative would bring many more of these major, complex securities cases to the California judicial system, adding significant administrative costs and demands for new judges.

Support Arguments:

• Americans lose $1 billion a year to investment swindlers, according to the Federal Trade Commission, and Congress has gutted the law that allowed victims of Charles Keating's fraud to recover most of their money.
• The initiative requires full disclosure of all information affecting the value of pension and retirement funds. The initiative gives retirees and pension plan participants the right to sue if they believe that their savings have suffered losses due to fraudulent misrepresentation or reckless investment practices.
• Corporate wrongdoers violating the provisions of the measure would be liable for punitive damages.Consumers, the elderly and retirees would retain the right to freely contract with an attorney in cases of securities fraud or other civil matters.

Opposition Arguments:

• The measure is a sneaky attempt by lawyers to circumvent the carefully crafted reforms enacted by Congress last year, making California the Mecca for abusive and frivolous securities lawsuits. Taxpayers would have to pay additional court costs (salaries of additional judges and court facilities).
• The avalanche of securities litigation unleashed by this measure would destroy the business climate in California - driving jobs and investment out of the state. Companies could no longer indemnify their officers and directors, thereby exposing them to personal financial ruin.
• The measures encourages lawyers to drag in as many "deep pocket" co-defendants as possible; contains no protections against abusive litigation practices, such as the use of "professional plaintiffs."
• It prohibits future restrictions on attorney contingency fee arrangements.

Proposition 212

Initiative Statute

Sponsor: California Public Interest Research Group (CALPIRG)

Major Provisions:

• Repeals existing law that limits or prohibits gifts and speaking or appearance fees (honoraria) received by public officials.
• Limits the amount of contributions that individuals, political parties and "citizen contribution committees" (defined as groups of 25 or more, contributing no more than $25 per member) can make to candidates for public office. Prohibits direct contributions from business, labor and nonprofit organizations. Such organizations can, however, create political action committees (PACs) for the purpose of supporting candidates.
• Imposes mandatory and voluntary limits on campaign spending.
• Limits time for fundraising.
• Prohibits tax deductions for lobbying expenses. Prohibits lobbyists from making or arranging contributions to officials whom they lobby.
• Increases penalties for existing campaign law violations.
• Provides that if this measure is approved by more votes than Proposition 208, this measure will supersede. If Proposition 208 is approved with more votes, the provisions of this measure not in conflict with 208 will take effect.

Federal law places limits on campaign contributions for individuals and groups. California, generally, has no similar restrictions, although some localities have imposed limits. Similarly, current state law places no restrictions on candidate spending from personal sources, including personal loans, nor does it restrict campaign expenditures from campaign committees.

Efforts to impose limits on contributions and/or spending (Propositions 68 and 73) have been blocked by the courts.

Proposition 112 restricts or bans gifts, honoraria and travel payments to state elected officials.

Fiscal Impact:

Elimination of tax deductions for lobbying expenses would generate about $6 million annually in state revenues. The Legislative Analyst projects administrative costs of up to $4 million per year and additional, but insignificant, state and local election costs.

Support Arguments:

• Proposition 212 will break special interest control.
• The measure makes politicians accountable to all voters, not special interests.
• The measure sets real contribution limits, unlike its rival measure, Proposition 208.

Opposition Arguments:

• Proposition 212 legalizes unlimited cash gifts to elected officials.
• The measure contains a special-interest loophole which allows PACS to give candidates 100 times what anyone else can give.
• The measure is foolishly unconstitutional and will never be implemented.

Proposition 213

Initiative Statute

Sponsor: Insurance Commissioner Chuck Quackenbush

Major Provisions:

• Denies all recovery of damages to convicted felons whose injuries were caused during the commission of a crime or flight therefrom.
• Denies recovery of pain and suffering claims (noneconomic losses) to drunken drivers and uninsured motorists.
• Allows injured uninsured motorists to claim damages against drunken drivers.

Currently, a person who is injured while breaking the law may recover losses resulting from the injury. One school district had to pay more than $1 million to a burglar who fell through a skylight on the roof of the building he was attempting to enter illegally.

Fiscal Impact:

According to the Legislative Analyst, the state could experience less than $5 million-a-year revenue loss due to a reduction in taxable insurance premiums. This would be the outcome if the restrictions on uninsured motorists and drunk drivers resulted in lower cost for auto insurance. The denial of the right to recover losses in Proposition 213 could result in reduced annual court-related costs to state and local governments and fewer lawsuits filed against state and local governments with resulting unknown savings.

Support Arguments:

• Proposition 213 will fix a system that rewards people who break the law.
• The measure says "no" to uninsured drivers by saying "no" to huge monetary awards for "pain and suffering."
• Proposition 213 takes the profit out of crime by closing a legal loophole that allows convicted felons to sue for injuries incurred while running from their crime.

Opposition Arguments:

• Proposition 213 allows insurance companies to take $327 million more every year out of our pockets.
• Proposition 213 is "No-Fault" for reckless drivers.
• There is nothing in this measure that says Californians will see their insurance rates go down.

Proposition 214

Initiative Statute

Sponsor: Service Employees International Union and Neighbor to Neighbor

Major Provisions:

• Forbids any health care business from prohibiting any licensed or certified caregiver from disclosing to a patient any information the caregiver determines to be relevant to the patient's health care.
• Prohibits retaliation against any health care provider for advocating for safe, adequate and appropriate care for patients in any private or public setting.
• Provides that caregivers, including physicians, nurses and others could only be discharged for "just cause."
• Prohibits payment of any financial incentive for the denial, withholding, or delay of medically appropriate care.
• Requires health plans to have written criteria developed by physicians, nurses or other licensed health professionals for denying payment for care.
• Requires a physical examination by a licensed professional of appropriate training and experience before a health care business may deny care to a patient.
• Mandates that people employed by health plans who are responsible for determining what care may be provided are subject to the same standards and disciplinary procedures as caregivers providing direct patient care.
• Requires that all health facilities maintain minimum safe and adequate staffing levels of physicians, nurses and other licensed caregivers as established by the Department of Health Services and the Department of Corporations based upon illness severity, recovery quality and other patient needs.
• Requires that all health care businesses annually file with the state a variety of financial, quality, staffing and business information and makes this information public. Additionally, health insurers are required to disclose the amount spent on administrative costs.
• Provides the right for private citizens to file lawsuits to enforce the initiative's provisions.
• Applies the provisions of this measure to workers' compensation, disability, and other types of insurance by broadly applying its terms to any organization of any kind that provides health services, defined as health care services of any kind.
• The initiative may not be amended except by another vote of the public or by a law passed by a vote of the Legislature to "further its purposes."

As indicated in the summary on the California Nurses Association (CNA) initiative proposal (Proposition 216), this measure is nearly identical to the other proposal. Three key differences are that Proposition 214 does not contain the direct taxation provisions of the CNA measure, it does not create the Consumer Association, and it explicitly repeals the doctrine of "at will" employment for health care workers.

Fiscal Impact:

The Legislative Analyst and Director of the Department of Finance estimate the following fiscal impact on state and local government:

• Unknown direct and indirect costs to state and local governments of potentially $10 million to several hundreds of millions of dollars.

• Preliminary estimates on the impact on health insurance premiums range from an increase of 10 - 15% to an increase of 30% or more.
• The increase in staffing costs is estimated at up to $345 million per year.
• The measure could also result in higher costs of hundreds of millions of dollars annually to the state and local governments as providers of health care, primarily due to the provisions affecting staffing.
• To the extent that this measure increases costs for health care delivery in the private sector, it could also result in indirect but significant costs to state and local governments which provide health care for employees.
• Preliminary estimates of workers' compensation impact is a 10% increase in costs ($700 million).
• The abolishment of "at will" employment will add unknown, but significant costs to health care entities.

• The health care industry is changing rapidly, and some of those changes are dangerous to your health.
• This measure would preserve patient rights by preventing HMOs from establishing rules that save them money but endanger your health. It prohibits rules that urge doctors to deny important care or to withhold important information about your health.
• This law would be administered by existing agencies, minimizing enforcement costs.

Opposition Arguments:

• Proposition 214 would increase costs by hundreds of millions of dollars, leading to cuts in other services or tax increases.
• Existing law already provides many of the protections this measure claims to enact. Its real purpose is to establish special interest job protection, staffing ratios, and other rules to benefit the union that sponsored it.
• This measure does nothing to make insurance more affordable, and would even increase the number of uninsured because it will increase insurance costs as much as 15%. These increased costs will hurt small businesses most.

Proposition 215

Initiative Statute.

Sponsor: Californians for Medical Rights

Major Provisions:

• Makes marijuana use legal for prescribed medical treatment.
• Provides legal cover for doctors who prescribe marijuana for medical treatment purposes.

A number of other states have decriminalized marijuana for medical treatment of various diseases, including cancer and AIDS. In California, the City of San Francisco has fostered the sale of marijuana for the same purposes. Past legislation that would make the substance available for medical use has been unsuccessful.

Fiscal Impact:

According to the Legislative Analyst, Proposition 215 would probably have no significant fiscal impact on state and local governments.

Support Arguments:

• Proposition 215 will allow seriously ill and terminally ill patients to legally use marijuana, if, and only if, they have the approval of a licensed physician.
• Marijuana doesn't help just cancer patients. It is also effective for patients with glaucoma, AIDS, multiple sclerosis, epilepsy, and spinal cord injuries.
• Marijuana often eases the nausea patients experience from chemotherapy.

Opposition Arguments:

• The American Cancer Society says that smoking marijuana may be more cancer-causing than tobacco.
• Smoking marijuana is not approved by the U.S. Food and Drug Administration for any illness.
• Proposition 215 is marijuana legalization - not medicine.

Proposition 216

Initiative Statute

Sponsor: California Nurses Association (CNA) and Harvey Rosenfield, head of the Foundation for Taxpayer and Consumer Rights

Major Provisions:

• Forbids any health care business from prohibiting any licensed or certified caregiver from disclosing to a patient any information the caregiver determines to be relevant to the patient's health care.
• Prohibits retaliation against any health care provider for advocating for safe, adequate and appropriate care for patients in any private or public setting.
• Prohibits payment of any financial incentive for the denial, withholding, or delay of medically appropriate care, but does not prohibit a health care business from using pre-paid, per-capita rates.
• Requires health plans to have written criteria developed by physicians, nurses or other licensed health professionals for denying payment for care.
• Requires a physical examination by a licensed professional of appropriate training and experience before a health care business may deny care to a patient.
• Mandates that people employed by health plans who are responsible for determining what care may be provided are subject to the same standards and disciplinary procedures as caregivers providing direct patient care.
• Establishes minimum staffing standards by requiring that the state Department of Health Services determine the numbers and classifications of licensed or certified caregivers for all health facilities and requires that caregivers maintain all requirements of professional licensing and certification standards.
• Requires that all health care businesses annually file with the state a variety of financial, quality, staffing and business information and makes this information public.
• Creates the Health Care Consumer Association as a non-profit corporation to issue reports, advocate legislation, advise existing agencies and intervene or initiate legal proceedings to implement or enforce the initiative. The organization would be funded by contributions from the public, who would be invited to join the group through membership notices required to be inserted in insurance mailings.
• Provides that health insurance premiums, co-payments, deductibles or charges for health services shall not be increased unless the health care business has first certified to the Department of Health Services under penalty of perjury that the increase is necessary. Consumers could challenge increases in court.
• Institutes a number of new taxes including:
• A 1% tax on a health care business that reorganizes, downsizes or closes;
• A 10% tax on non-profit health care businesses that convert to for-profit status;
• A tax of 2.5% on stock or compensation worth more than $2 million given to executives (or their families) of health care businesses;
• A 1% tax on the assets of a health care business that acquires or merges with another entity;
• A 3% tax on total gross revenues of a multi-provider network that acquires or merges with another entity. This tax shall be paid for five consecutive years.
• Allocates the revenue from the above taxes to a new special fund to pay for the administration of the initiative, community public health services such as trauma care and communicable disease control and prevention services, services for seniors, and care for people who have lost health benefits due to job loss or a decision by an employer to curtail benefits or coverage.
• Provides the right for private citizens to file lawsuits to enforce the initiative's provisions. Prohibits mandatory arbitration and ensures the right of a patient to sue in disputes over quality of care.
• Applies the provisions of this measure to workers' compensation, disability, and other types of insurance by broadly applying its terms to any organization of any kind that provides health services, defined as health care services of any kind.
• The initiative may not be amended except by another vote of the public or by a law passed by a two-thirds vote of the Legislature to "further its purposes."

Proposition 216 is similar to Proposition 214 sponsored by the Service Employees International Union (SEIU). CNA is the labor organization that represents many registered nurses in the state, while SEIU represents other classes of health care workers. For the past several years, CNA and SEIU have collaborated on strategies to publicly criticize health care providers and managed care organizations while advocating for provisions to increase health care staffing and give providers more control over coverage decisions. In 1994, CNA played a leading role in the qualification of Proposition 186, the "single payer" initiative that was rejected by a decisive 73% "no" vote. The 1996 measure contains a number of provisions that were advanced in Proposition 186, such as staffing requirements and regulatory oversight by a health care consumer board. Many provisions of the CNA and SEIU measures are nearly identical. Both groups were collaborating on a single measure to advance to the 1996 ballot, but could not reach agreement on some key provisions, particularly the tax provisions of the CNA measure.

Fiscal Impact:

The Legislative Analyst and Director of the Department of Finance estimate the following fiscal impact on state and local government:

• The cost of this initiative could be hundreds of millions of dollars annually for state administration costs and certain health services. It could also result in revenue losses of tens of millions per year due to the tax-deductible business expenses of health care businesses.
• The measure could also result in higher costs of hundreds of millions of dollars annually to the state and local governments as providers of health care, primarily due to the provisions affecting staffing.
• To the extent that this measure increases costs for health care delivery in the private sector, it could also result in indirect but significant costs to state and local governments which provide health care for employees.

Support Arguments:

• The move to managed care has sacrificed patient care in order to maximize HMO profits. Providers can get paid more by HMOs in the form of bonuses if they minimize care to patients. That's not only unethical; it puts lives at risk.
• Medical decisions should be made by physicians and other caregivers, not insurance executives who are acting to protect a bottom line. Proposition 216 would put patients, doctors and nurses back in control of health care.
• Managed care organizations have made billions of dollars by scrimping on care for patients. They pay their executives huge salaries.

Opposition Arguments:

• The cost of this measure will be massive - costing billions of dollars per year. It will mean significantly higher costs for virtually every taxpayer, local government entity, business and non-profit group in the state.
• The real motivation for this measure is providing job protection for its special interest sponsors. What the proponents really want to accomplish is to guarantee high staffing levels so that their members will have jobs.
• Passage of this measure will have the perverse impact of resulting in less health care coverage for Californians. As costs go up significantly, fewer businesses will provide coverage and many that do will be forced to cut benefits.

Proposition 217

Top Income Tax Brackets. Reinstatement. Revenues to Local Agencies.

Initiative Statute

Sponsor: California Tax Reform Association

Major Provisions:

• Retroactively imposes a 10% personal income tax rate for California taxpayers with taxable income over $111,695 and an 11% rate for taxable income over $223,390, effective January 1, 1996. (Joint filers would pay at incomes over $223,390 and $446,780, respectively.)
• Approximately half of the increased revenue would be allocated to schools through the Proposition 98 guarantee; the remainder would be allocated to local governments based on their proportionate share of property tax revenue being transferred to local schools and community colleges since 1992 and 1993 law changes.
• Would prohibit any reduction in a local agency's proportionate share of property tax, without respect to future growth patterns.
• Future changes in rate base or burden of state personal income tax would need to maintain, as a minimum, the dollar amount and proportion of income tax paid by taxpayers in the new 10% and 11% brackets.

At 9.3%, California's top personal income marginal tax rate bracket is among the highest in the nation.

In 1991, as part of a budget-balancing compromise between Governor Pete Wilson and the Legislature, the 10% and 11% brackets were temporarily added. They were in effect through 1995, when they automatically expired. In the past two-year session of the Legislature, efforts to make the higher brackets permanent were unsuccessful. Also defeated was Governor Wilson's proposal to phase the rates back down to 9.3% - a 15% reduction - over three years, along with the same reduction in all other rates.

Lenny Goldberg, executive director of the California Tax Reform Association, authored Proposition 217 to retroactively and permanently impose the 10% and 11% rates. It is his second major tax-hike initiative in four years. Voters in 1992 soundly rejected his Proposition 167, a $5-billion increase in taxes on businesses.

California's current six-bracket structure is designed to tax people with more income at higher rates because of their greater ability to pay. Each additional increment of income is subject to a higher tax rate, and these increments are called brackets.

Under California's extremely progressive system, the top 10% of income earners pay 67% of the income tax and the top 1% pay 31% of the total tax.

Fiscal Impact:

Taxpayers: The Legislative Analyst estimates that this proposition would increase taxes approximately $700 million annually. This estimate is based on a static estimate that assumes no changes in taxpayer behavior to minimize the additional taxes the proposition would impose.

Schools: The Legislative Analyst estimates that approximately one-half of the increased revenue generated by the higher tax rates would go to schools. There are no provisions providing how the money is to be spent.

It is likely that not all school districts would receive new revenue under this proposition. There are about 50 "basic aid" school districts, that do not receive more than a constitutional fixed amount of state revenue due to a Supreme Court decision (in the Serrano case) requiring the state to equalize the spending of school districts.

Cities, Counties and Special Districts: These local agencies would receive any remaining new tax revenues, allocated based on the property tax shift formula.

Support Arguments:

• Sacramento politicians shifted property tax away from local governments, and this would help locals recover from those shifts.
• This shouldn't be considered a tax increase, because it continues a temporary tax.
• This only affects the wealthiest 1.2% of taxpayers, who should pay more rather than "ordinary taxpayers."
• It would provide money for schools.

Opposition Arguments:

• This would be a retroactive tax increase and California would have the highest effective income tax rate in the country, harming the economic recovery.
• It would hurt small businesses, because many taxpayers in these upper brackets are small business owners.
• This measure messes up property taxes, penalizing growing cities or causing double taxation on residents of new cities.
• There is no guarantee how the money would be spent.

Proposition 218

Initiative Constitutional Amendment

Sponsor: Howard Jarvis Taxpayers Association, Paul Gann's Citizens Committee, and Alliance of California Taxpayers and Involved Voters

Major Provisions:

• Finds and declares that taxes should not be imposed on Californians without their consent and that, in order to protect from unreasonable tax increases, limitations should be placed on the methods by which local governments exact revenue.
• Requires majority voter approval for all local general taxes. Because this is a constitutional amendment, that requirement would clearly apply to charter cities.
• Defines a general tax as any tax imposed for general governmental purposes.
• Requires two-thirds voter approval for all local special taxes.
• Defines a special tax as any tax imposed for specific purposes, even if placed into a general fund.
• Requires voter approval of existing local taxes enacted after January 1, 1995.
• Provides that the initiative power shall not be restricted with respect to reducing or repealing local taxes, assessments or fees.
• Requires majority property owner approval, by mail-in ballot, of benefit assessments. Votes would be weighted by the financial obligation each property would incur if the assessment were to pass.
• Specifies that government-owned property is not exempt from benefit assessments, unless an agency can show that it receives no special benefit.
• Prohibits property-related fees from exceeding costs of service provided. Except for fees for sewer, water and refuse collection services, property-related fees would require either majority approval of the fee payers or two-thirds approval of voters.

The measure seeks to address two main concerns: reinforcing voter approval requirements for local taxes and controlling the growth of surrogates for property taxes.

In 1986, voters approved Proposition 62 by a 58% margin. Proposition 62 required majority voter approval of local general taxes and two-thirds voter approval of local special taxes. The special tax provision was not controversial, because it largely restated current constitutional law enacted in Proposition 13. The general tax provision, however, underwent considerable legal scrutiny.

At the time this initiative was drafted, Proposition 62's general tax vote requirement was considered invalid, because appeals courts had labeled it unconstitutional. Since then, the state Supreme Court has reinstated Proposition 62's vote requirement on general taxes (Santa Clara County Local Transportation Authority v. Guardino), but many believe it does not apply to charter cities, since Proposition 62 was only a statute, not a constitutional amendment. This measure would apply to charter cities, because it is a constitutional amendment.

Since Proposition 13 was passed in 1978, local governments have increasingly turned to surrogate financing mechanisms to extract revenue from property. Benefit assessments, also called special assessments, are the most prominent property-related surrogate.

Assessments are not considered by the courts to be taxes. They are treated more like fees, since they are assumed to relate closely to benefit received from a specific government project or service. Because they are not considered taxes, local governments have been able to increase assessments without voter approval. The resulting growth in assessment revenues has been tremendous. Although growth has been high, assessments are still a small portion of local government budgets.

Benefit assessments are applied on a per-parcel basis, but the amounts levied can vary by many factors except for the value of the property. Although not allowed to be based on property value, many potential factors approach an ad valorem basis in practice. For example, assessments can vary by lot size, type of property use, square footage of buildings on the property, size of lot frontage to a street, proximity of the property to a project funded by the revenues, etc.

In theory, the amount of the assessment must bear some relationship to the amount of benefit a property owner receives from the funded project or service. However, in 1991, the state Supreme Court significantly loosened that requirement by declaring that "indirect" benefits are assessable, and a local government's determination of benefit will usually be assumed correct, unless very unusual circumstances exist, such as fraud on the part of the jurisdiction (Knox v. Orland). That decision has led to an increase in the use of benefit assessments as local governments have assessed more owners for projects that only indirectly or theoretically benefit them.

Because assessments can vary by so many factors, some have called the use of benefit assessments a "de facto split roll." Often business property is assessed a much greater amount than residential property. For example, a proposed assessment in the City of Sacramento which would have funded police services was to charge $25 per parcel for single-family homes and up to $2,000 per parcel for retail stores or warehouses. Many times these assessment proportions do not seem related to benefit as much as they are related to political expediency and revenue-raising capacity.

Fiscal Impact:

The Legislative Analyst's Office has estimated these impacts:

State Government: Potential costs of tens of millions annually to pay assessments on state or school property that is in local assessment districts.

Local Government: Revenue losses potentially exceeding $100 million annually, due to restrictions on local taxes, fees and assessments. If voters do not ratify existing taxes that must be placed on ballots, additional existing revenue could be reduced. Future revenue growth is likely to be lower by requiring voter approval. Local costs could increase several millions of dollars to review existing taxes and assessments and place them on ballots.

Following are Cal-Tax comments on fiscal impact:

Taxpayers: Potential tax savings exceeding $100 million annually, because voters may repeal some existing taxes or defeat future tax and assessment proposals. Some individual business and residential taxpayers would experience significant savings because the measure would require more stringent determination of benefit before assessments may be levied. This could lead to more equitable assessments when taxpayers do not derive much benefit from a specific project.

Support Arguments:

• Proposition 218 guarantees the right to vote on taxes, even when they are called something else, like assessments. It does not prevent raising money for vital services - it merely requires voter approval to do so.
• Politicians opened a loophole in Proposition 13, allowing expansion of benefit assessments which have grown by huge percentages since then.
• Local governments have abused their authority and created strange new taxes, like the beachfront assessment that charged more if you had a good view of the ocean.

Opposition Arguments:

• Funding would be cut off for vital services like police, fire, and schools.
• Schools would have to pay new "taxes" on their property, reducing funds for education.
• Non-citizens and corporations would get voting rights on assessments and businesses could have greater voting power than homeowners.

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