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SacBee Article on the Spending Cap Proposal

December 6, 2011

California fiscal conservatives file spending-cap proposal

A day after Gov. Jerry Brown asked voters for $7 billion in additional taxes, a trio of fiscal conservatives said Tuesday they filed a ballot initiative to cap state spending.

The proposal would reconfigure the Gann Limit, a 1979 spending restriction established on the heels of tax-limiting Proposition 13. Voters later softened the limit, and the state is now $17 billion below the spending cap.

The California Taxpayers Association, Howard Jarvis Taxpayers Association and Small Business Action Committee want to reset the Gann Limit at the 2010-11 spending level. They would limit spending based on a formula driven generally by population and inflation growth.

In years where tax revenues are greater than the limit, the state would first have to pay down debt and then divide up to $2 billion between schools and a rainy-day fund. If money is left over, the state would return funds to taxpayers.

The proposal could potentially blunt any tax increase that voters may pass in the same November 2012 election. For instance, if voters pass Brown’s $7 billion tax hike on sales and the wealthy and they also approve this spending cap, the state may be required to devote most of that money toward long-term debt repayment rather than the state’s fiscal-year deficit.

GOP lawmakers sought a new spending cap as part of budget negotiations with Brown this year before talks dissolved this spring and summer.

The state general fund spent $91.5 billion in 2010-11. That is down 11 percent from the $103.0 billion peak in 2007-08. Officials at the three organizations said state leaders need a constitutional restriction to limit spending in the future.

“We believe it has been out-of-control spending that has created the budget problems in California,” said Joel Fox, president of the Small Business Action Committee. “Yet the Legislature and special interests have no desire in controlling spending.”

The measure does not modify Proposition 98, which establishes a minimum amount the state must spend on K-12 schools and community colleges. If the state’s education obligation grows faster than inflation factors in the initiative, other programs such as health care, social services, corrections or universities could face steeper cuts than would otherwise be the case.

Another part of the measure would add stronger language defining what tax-related laws require a two-thirds vote of the Legislature. Democrats proposed majority-vote bills this year that would not directly raise taxes but would make it easier for other governing bodies, such as cities, to pass taxes. California Taxpayers Association president Teresa Casazza said the new initiative would require that such proposals get a two-thirds vote of lawmakers.

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