Sanity Prevails In California

If you’re curious about what happened in California’s special election last night, when voters roundly rejected a complex series of propositions aimed at extending taxes, borrowing, and spending, look no further than Assemblywoman Noreen Evans, chairwoman of the State Assembly Budget Committee.

“Obviously, it’s disappointing,” Evans told the AP, “but I think the voters are sending a message that they believe the budget is the job of the governor and Legislature. We probably need to go back and do our job.” Well, there’s a novel idea.

Imposing a fiscal Atkins Diet on California’s grotesquely obese budget has been the fervent hope of Californians for the past decade, but the legislature and successive governors have instead gone binging at the buffet—with a vengeance.

Over the past 11 years, the Golden State’s budget has ballooned by 80%, as the state’s labor unions have tightened their grip around Sacramento. Statewide, sales taxes now stand at 8.25%, the highest in the country (it’s 10.25% in some cities).

In the latest issue of span>Commentary<, Fred Siegel describes New York City’s fiscal woes thusly: “whereas city government was originally developed to serve the citizenry, the citizenry is now working in large part to serve government.”

The same can be said of California, where a bloated bureaucracy and its labor unions have begun to suck the life out of the residents they supposedly service.

Democrats dominate both the Assembly and State Senate, and all that’s prevented them from growing government even larger is span>Prop. 13<, a 1978 initiative that requires all tax increases to pass by two thirds of each legislative house.

This was the context for intensive negotiations over the state’s $42 billion deficit that took place in January and February of this year between Governor Arnold Schwarzenegger (a centrist Republican), the Democratic leadership in Sacramento, and a handful of Republicans necessary to give the others the two-thirds majority they needed to raise taxes to close the gap.

The increases passed by the narrowest of margins, but were only a temporary salve as the deficit continued to grow. The principals to the negotiation also called a special election to pass six separate ballot measures, all of them aimed at sustainably stanching the state’s chronic budget bleeding.

But these measures were deeply flawed. As span>I< and span>others< have explained in detail elsewhere, while the flagship measure, Proposition 1A, was billed as a “spending cap,” it was in fact a significant tax increase masquerading as a highly “flexible” restraint on Sacramento’s checkbook; the effectiveness of this restraint, such as it was, hinged on the interpretation of the term “unanticipated revenues,” and as the state’s non-partisan Legislative Analyst’s Office ominously put it, the measure’s “fiscal impact would depend on how current constitutional provisions would otherwise be interpreted.” Other propositions would have borrowed against future lottery revenues, diverted fees from special funds to the general fund, and inhibited legislator pay raises.

The politics of the initiatives proved interesting, as the Governator and the Democratic leadership vigorously promoted it, span>laying out doomsday scenarios< of understaffed fire and police departments if they failed, while the span>California Republican Party< and most, but not all, Republican legislators opposed the measure. California’s span>liberal activists< and span>organized labor< were split, with some span>unions< nearly coming to blows.

But in the end, the measures were crushed by an average of about 60%-40% with only the legislator pay hike initiative passing (easily). The main measures failed in every single county in the state, including the strongly liberal San Francisco Bay Area.

Jon Coupal, president of the Howard Jarvis Taxpayers Association—which spearheaded the grassroots opposition to the ballot measures and whose eponymous founder shepherded Prop. 13 to passage 30 years ago—told me that “this is a clear victory for fiscal conservatives… In conservative Orange County, the margin was a stunning 76%-24% rejection. There are no tea leaves to read here. This was angry conservatives opening a big can of whoop-ass on the tax-and-spend establishment.”

Echoing Coupal, San Diego County Republican Party Chairman Tony Krvaric told me that “when taxpayers are forced to tighten their belts while an arrogant, bloated state government asks them for a bailout, you eventually reach a point where voters—regardless of party affiliation—say ‘Enough is enough!’”

Indeed, at a time when Washington’s spending makes drunken sailors look thrifty, the defeat of these measures signals that Republican ideas of fiscal sanity are still compelling even to Democrats. The GOP needs to amplify this message and harness the energies of the “Tax Revolt” movement to its own engine.

Ron Nehring, chairman of the California Republican Party, underlined this point, arguing that “Republicans can and must actively demonstrate our support for solving California’s budget crisis through spending cuts that bring the size of government in line with reality, not through more tax increases that only hurt families and further compromise our state’s competitiveness.” We can only capitalize on this victory by transforming successful opposition into constructive ideas.

As for the Governator, his decline began four years ago, when a slew of center-right propositions he plumped for failed narrowly, and his fall seems to have arrived last night, when his slate of center-left measures crashed and burned.

So unpopular were these measures that Arnold actually fled the state on Election Day in favor of a White House photo-op for President Obama’s announcement of new span>CAFE standards<. The governor apparently couldn’t bear to watch the carnage.

A chastened Schwarzenegger span>said< in a prepared statement, echoing Evans’s conciliatory tone, “tonight we have heard from the voters, and I respect the will of the people who are frustrated with the dysfunction in our budget system. Now we must move forward from this point to begin to address our fiscal crisis with constructive solutions.”

So what now? What “constructive solutions” can emerge from a Sacramento in thrall to liberal interest groups? It’s difficult to imagine the bureaucracy effectively voting to shrink itself.

But the prospects for reform aren’t all bad. Krvaric told me that “when legislators go back to the drawing board, they should remember that… according to a recent poll, a majority of Californians—including Democrats—support the 2/3 requirement to raise taxes and balancing the budget ‘primarily with spending cuts.’”

Coupal observed that “simple principles work: spend no more money than you take in. Families and the private sector get it. Government should too.”

Assemblyman Nathan Fletcher (R-San Diego) told me that “there are going to be serious and substantial cuts to the state budget—the same type of cuts hardworking families are having to make.” Fletcher also said he and his colleagues will have to work hard to “help California become a more job-friendly state. We need to help the small businesses in our state that are overwhelmed with high taxation and regulatory burdens be in a position to grow again in California.”

In future articles, I hope to sketch out some innovative approaches in greater detail. But for now, Californians can take justifiable pride in last night’s results, while the governor and the rest of Sacramento should heed Evans’s advice and “go back and do [their] job.”