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California's Budget Mess and the Ballot Box

Brent Mead
February 2, 2012

In non-breaking news, California is going broke…again. State Controller John Chiang told legislators that without action, the state will be unable to make $730 million in payments on March 8. All told, the state must come up with about $3.3 billion by mid-April in order to cover a deficit of $5.2 billion.

The good news is that Controller Chiang is hopeful the state will not have to resort to IOU’s this time. The bad news is that by approaching private bond markets for a $1 billion or so bridge loan, taxpayers will be on the hook for interest payments associated with having an abysmally low bond rating.

In light of the new deficit, concerned taxpayers should note the massive boondoggle being placed on the June ballot. Proposition 29 would raise taxes by $850 million a year, by increasing the tax on cigarettes by a dollar per pack, to fund cancer research.

NTU echoes what the California Taxpayer Association had to say on the matter;

"There's no doubt that we all support cancer research. But like high-speed rail, stem-cell research and other ballot-box budget initiatives before it, Proposition 29's good intentions are overshadowed by the fact that California simply cannot afford another billion-dollar government boondoggle to create another wasteful spending program," California Taxpayers Association President Teresa Casazza said in a statement.

Prop 29 contains numerous flaws including evading the state’s constitutional requirement that 40 percent of new revenue go towards education. Additionally, the measure does not protect California taxpayers by ensuring the money will stay in state. Instead, an unelected board has the power to allocate around $575 million towards grantees, or purchasing real estate, without any requirement that such money go to California based groups. Finally, the measure recognizes that increasing taxes on cigarettes will have a negative impact on existing health programs tied to tobacco taxes and backfills $75 million of that revenue.

Of course, this is the underlying problem with the whole scheme. Tobacco tax hikes rarely produce the promised revenue. Not only will Prop 29 shortchange existing programs, but it will also add a new unpaid for spending program to the budget. California will then be left in the position of funding core areas such as K-12 education, road maintenance, etc. or funding expensive side projects such as this measure.

California’s multi-billion dollar deficits should be a wake-up call that the state cannot afford such spending programs. California is past due on getting back to the basic roles of government.




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