Winter 2004

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Cal-Tax Commentary

Larry McCarthy is president of the California Taxpayers’ Association.

It's not an uncommon event: People out shopping see something they want, but know they can’t afford it.  So what do they do?  They charge it.  Paying for it later is much easier, and when you are out shopping, much more fun, than buying it later.

It may be more fun, but this is exactly why so many California families have credit and debt problems.  Such fiscally irresponsible spending behavior in Sacramento is exactly why our state government finds itself so deeply in debt.

Over the past five years, our politicians in Sacramento have gone nuts with California’s credit card.  In fact, spending was so out of control during this period that the minute Gov. Arnold Schwarzenegger was sworn into office, he inherited from the previous administration a $22 billion debt.  How on earth, you may ask, does a state rack up a debt this size?  It’s simply really.  Since 1999, revenue to our state’s coffers actually increased by 25 percent, but the politicians with the credit card increased spending by 43 percent.  Much like the shopper in the store, our politicians couldn’t help themselves and they spent us into the mess we are in today.

The problem with all of this, of course, is that the bill is about to come due.

In order to deal with this looming problem reasonably and responsibly, Gov. Schwarzenegger, a Republican, and State Controller Steve Westly, a Democrat, have teamed up to pass Propositions 57 and 58.  They are putting party differences aside in order to get California out of its fiscal mess because they understand that there is no Republican way, and no Democrat way, to solve this problem.  It is simply a question of doing what is right for the people of California.

That is why they have put together in support of 57 and 58 the most diverse and bipartisan coalition of elected officials and organizations in the history of California ballot measures.  When was the last time you saw a ballot measure, or anything for that matter, that was supported by both the California Chamber of Commerce AND the AFL-CIO?  Or something supported by Sen. Dianne Feinstein, as well as the entire legislative Republican leadership?

So what do Propositions 57 and 58 actually do?

Proposition 57 will refinance $15 billion in inherited debt at a time when interest rates are at an historic low.  This is no different from what a family does when they have spent themselves too deeply into a hole.  The first thing a credit counselor would tell that family to do would be to refinance all of their debt into one loan, at a low interest rate.

This is exactly what California needs to do to start over with a balanced budget and get the fiscal mismanagement of the past behind us.  By helping to put our state’s fiscal house back in order, Proposition 57 will also help to protect vital state programs like education and public safety.  It will prevent the state from running out of money, avoid a potential bankruptcy-like predicament and start us down the path to economic recovery, without raising taxes.

The second thing the credit counselor would tell the family to do is to cut up their credit cards to make sure they are never able to spend themselves into crushing debt again.

This is what Proposition 58 does for California.  Proposition 58 makes sure we never get in a deficit crisis again by requiring California politicians to balance the budget every year in the future, and prohibiting the kinds of reckless borrowing that helped to create this mess in the first place.  It also creates a “rainy day” savings account to be used for paying the bonds off early and helping the state through any future economic downturns.  In other words, while Proposition 57 helps get us out of our fiscal crisis, Proposition 58 makes sure that it never happens again.

The California Taxpayers’ Association urges Californians to join with Gov. Schwarzenegger, Controller Westly and the broad coalition backing 57 and 58 that includes the California Business Roundtable, the California State Sheriffs Association, the California State Firefighters Association, the California Teachers Association, Western Growers, and every major taxpayer advocacy group, among others .  All of these people and groups certainly do not always agree, but the one thing they all agree on is the need to pass Propositions 57 and 58.

Now is the time for California to clean up the budget mess, hold politicians accountable and require a long-term policy of fiscal responsibility.  The Proposition 57/58 Balanced Budget Package will restore California's economic stability, provide an environment for job growth and ensure the funding of essential services like education, public safety and assistance for the poor, elderly and disabled.

I urge all California voters to join me in voting YES on both Propositions 57 and 58.