California Proposition 1A, Tax Increase Extensions Amendment (May 2009)

California Proposition 1A
Election date May 19, 2009
Topic Taxes and State and local government budgets, spending and finance
Status d Defeated
Type Constitutional amendment	Origin State legislature

California Proposition 1A was on the ballot as a legislatively referred constitutional amendment in California on May 19, 2009. It was defeated.

A "yes" vote supported amending the constitution to do the following: increasing the Budget Stabilization Fund (rainy day fund) from 5% to 12.5% of the state's General Fund; extending the state sales tax for one year through 2011-12; extending the state's Vehicle License Fee (increased from 0.65% to 1.15% of a vehicle’s value) for two additional years through 2012-13; and extending the increase of 0.25% in the state's Personal Income Tax on every tax bracket for two more years through the 2012 tax year.

A "no" vote opposed extending the February 2009 tax increases and opposed increasing the size of the state's rainy day fund.

Election results

California Proposition 1A
Result		Votes	Percentage
Yes		1,668,216	34.61%
No		3,152,141	65.39%

Results are officially certified.

Overview

Measure design

If Proposition 1A had passed, the sales, income, and vehicle taxes imposed as part of the 2009-2010 budget agreement would each have been extended for one or two years, resulting in an increase in tax revenue of $16 billion.

Proposition 1A would have:

• extended the state sales tax for one year through 2011-12;
• extended the state's Vehicle License Fee (increased from 0.65% to 1.15% of a vehicle’s value) for two additional years through 2012-13; and
• extended the increase of 0.25% in the state's Personal Income Tax on every tax bracket for two more years through the 2012 tax year.

Proposition 1A would have required any annual state revenue increase that was above historic trends plus an increase for the rate of inflation and population growth, up to a maximum of three percent of annual revenues, to be deposited into the state budget stabilization fund (BSF or "rainy day fund") each year until the fund reached an increased target balance equal to 12.5 percent of the state general fund. Deposits would only have occurred once education spending levels mandated by Proposition 98 (1988) had been attained.

If BSF deposits were made under the measure, some or all of the money would have been paid out from the fund in the same year according to a specific schedule. If Proposition 1B also passes, then approximately the first $1.5 billion deposited in a given year (specifically, an amount equivalent to 1.5 percent of state revenues) would have been earmarked for a payment to schools and community colleges. These mandated payments would continue each year until $9.3 billion had been paid. (This figure is the difference between the amount actually appropriated to education in recent budgets, and the amount that, under some interpretations of Proposition 98 (1988), should have been spent. See Proposition 1B.)

The next 1.5 percent deposited into the BSF in any year would be expended to pay off debts accumulated from past government infrastructure project borrowing and past deficit spending (authorized by California Proposition 57 (2004)).

The measure would have also revised other rainy day fund details. Until the target fund balance was reached, BSF withdrawals could have been made only to increase state spending to the amount of the previous year plus inflation and population growth, and for natural disasters. The measure would have also increased the governor's authority to reduce purchases or capital projects by state departments, and to limit some cost-of-living increases mandated for certain programs (but not ones for government employee pay raises).

If Proposition 1A had passed, it would not have limited the amount of revenue the state could take in, but would have affected the annual allocation of that revenue, primarily by shifting more spending to education, infrastructure, and debt payments.

2009 budget propositions

Six statewide ballot propositions concerning the California state budget were referred to the May 2009 ballot by the California State Legislature. The six measures were designed to close a $42 billion gap between state spending and expected revenues. The measures were supported by Governor Arnold Schwarzenegger (R). Five of the six measures (Propositions 1A, 1B, 1C, 1D, and 1E), were defeated with an average of 65% of voters voting against each measure. Proposition 1F, which was designed to prohibit pay raises for state legislators in years when there is a state budget deficit, was approved by a vote of 74% in favor to 26% opposed.

Text of measure

Ballot title

The ballot title for Proposition 1A was as follows:

“

STATE BUDGET. Changes CALIFORNIA BUDGET PROCESS. LIMITS STATE SPENDING. INCREASES “RAINY DAY” BUDGET STABILIZATION FUND.

”

Ballot summary

The ballot summary for this measure was:

“

Increases size of state “rainy day” fund from 5% to 12.5% of the General Fund. A portion of the annual deposits into that fund would be dedicated to savings for future economic downturns, and the remainder would be available to fund education, infrastructure, and debt repayment, or for use in a declared emergency. Requires additional revenue above historic trends to be deposited into state “rainy day” fund, limiting spending

”

Full Text

The full text of this measure is available here.

Fiscal impact

See also: Fiscal impact statement

The fiscal estimate provided by the California Legislative Analyst's Office said:

• Higher state tax revenues of roughly $16 billion from 2010-11 through 2012-13 to help balance the state budget.
• In many years, increased amounts of money in state "rainy day" reserve fund.
• Potentially less ups and downs in state spending over time.
• Possible greater state spending on repaying budgetary borrowing and debt, infrastructure projects, and temporary tax relief. In some cases, this would mean less money available for ongoing spending.

Ballot title lawsuit

Health Access California and the Howard Jarvis Taxpayers Association filed a lawsuit against the California Secretary of State arguing that the ballot language for Proposition 1A was misleading and included language that advocated for its approval.

A Sacramento judge ruled in favor of the plaintiffs on March 5. His ruling provided that where the original ballot title said reforms, it must say changes the budget process and the title must say Proposition 1A could limit deficits and spending, not that it will or does limit them.

Supporters

Budget Reform Now, a coalition of groups assembled by then-Governor Arnold Schwarzenegger (R) to support the six budget measures on the 2009 ballot, led the Yes on 1A campaign.

A full list of supporters of all six measures can be found here. The following is a list of Proposition 1A supporters.

Supporters

• Arnold Schwarzenegger (R)
• California Teachers Association
• California Fire Chiefs Association
• California Police Chiefs Association
• California Chamber of Commerce
• California State Council of Laborers
• California Senior Advocates League
• California Taxpayers Association
• California State Conference of the NAACP

Arguments

• Then-Attorney General Jerry Brown said, "If Prop 1A does not pass, we will face an even more difficult budget that could lead to massive cuts to law enforcement, education, healthcare and transportation."

• Former San Francisco Mayor Willie Brown said, "Propositions 1A through 1F would end the erratic budget cycles we face year after year and restore accountability to how our tax dollars are spent. Establishing these fiscal policies makes great sense and would prevent devastating cuts to the valuable services that millions of people depend on in the future."

• Jeannine English, President of AARP in California, said, "Props 1A through 1F are absolutely critical to provide the short-term revenues we need to get our state through the devastating economic downturn we currently face. By establishing a rainy day fund that will require lawmakers to save, these measures also provide the lasting reforms we need to end the volatile budget cycles we experience every year and stabilize funding for healthcare, public transportation and other vital services."

• David A. Sanchez, president of the California Teachers Association, said, "The repayment of some of the money cut from education will allow local school districts to restore student programs, reduce class sizes and rehire educators who have been laid off. Many of these initiatives, especially Propositions 1A and B, are dependent on each other and if they fail, the state is back to square one in trying to balance the budget and our schools could face even deeper cuts."

• Alameda County Fire Chief Sheldon D. Gilbert, President of the California Fire Chiefs Association, said, "Year after year, fire districts and local governments are left wondering if the state budget is going to short-change fire protection services. We’ve got to provide stability and save during good years so we don’t always face such drastic cuts in bad years."

• According to an MSNBC report on March 13, "People in the Santa Maria Bonitia School District say the May election is their last hope. They say if the propositions do not pass, more cuts could be on the way....'The outcome of the May special election can really help school districts or it can be extremely detrimental', said Maggie White, spokesperson for the Santa Maria-Bonita School District."

Arguments

Official arguments

The following supporting arguments were presented in the official voter guide:

“ YES ON 1A: WE HAVE TO TAKE ACTION NOW TO START REFORMING OUR BROKEN BUDGET SYSTEM. We’re all frustrated by California’s broken budget system. Year after year, politicians deliver late budgets that harm our schools, healthcare system, police and fire services and more. The perpetual budget problems also hurt taxpayers as we see our taxes raised or services cut because of the legislature’s failure to budget responsibly. By voting Yes on 1A, we can take a strong step in reforming the budget process so we don’t continually face the type of budget disaster that plagues our state year after year. YES ON 1A WILL FORCE ACCOUNTABILITY AND STABILITY OVER THE BUDGET PROCESS. Proposition 1A is meaningful, long-term reform. It will help stabilize future state spending and create an enhanced rainy day fund to save during good times so money is available when the economy falters. Prop. 1A: STABILIZES CALIFORNIA’S BUDGET. It forces politicians to set aside money every year into a special “rainy day” fund. And Prop. 1A increases the size of our rainy day reserve from 5% to 12.5% of the overall budget. STOPS OUT-OF-CONTROL SPENDING. Prop. 1A puts restrictions on the amount the state can spend each year. It also prevents the politicians from spending onetime spikes in revenue on ongoing programs. PROP. 1A PROTECTS TAXPAYERS. Without accountability, every time we face budget deficits the politicians raise our taxes or make deep cuts to services we care about. The rainy day fund will allow us to use savings to mitigate the need for future tax increases and harmful cuts. In fact, if this budget reform had been in place 10 years ago, the rainy day reserve would have allowed us to avoid $9 billion in tax increases and deep cuts that were part of this year’s budget. PROP. 1A MEANS LONG-TERM BUDGET STABILITY. By limiting spending using a formula based on historic revenues and economic growth, by forcing an enhanced rainy day fund and by preventing spending of one-time money on programs that we can’t afford in the future, Proposition 1A will help stabilize the budget process and prevent the wild peaks and valleys that cause budget dysfunction. PROP. 1A PROTECTS SCHOOLS, PUBLIC SAFETY AND OTHER VITAL SERVICES. Prop. 1A’s reforms will help provide a stable, consistent level of funding for vital services such as education, public safety and healthcare. Prop. 1A will prevent the types of massive budget deficits we faced this year which force crippling cuts to vital services. And the rainy day fund will help ensure we have money in bad times to reduce cuts to these vital services. YES ON 1A: ACT NOW TO REFORM OUR BROKEN BUDGET SYSTEM. We’ve got to act now to start reforming our broken budget system. Vote YES on 1A for budget stability and accountability. www.CaBudgetReformNow.com ”

Opponents

Logo of the No on Prop 1A campaign

• California Republican Party
• Howard Jarvis Taxpayers Association (HJTA)
• Americans for Prosperity
• Americans for Tax Reform
• People's Advocate
• Spending Cap
• SEIU
• AFSCME
• California Federation of Teachers
• Hank Lacayo (State President, Congress of California Seniors)
• Lillian Taiz (President, California Faculty Association)
• Richard Holober (Executive Director, Consumer Federation of California)

Arguments

• The California Faculty Association said Proposition 1A "is a flawed measure filled with fine print and loopholes."

• The Peace and Freedom" Party said Proposition 1A would "force cuts in social programs and hurt the neediest Californians."

• Jon Fleischman, a Republican Party of California vice-chairman and website publisher, said, "At the end of the day, what voters need to understand is to put this plan on the ballot, the Legislature passed the largest tax increase in California history."

• Paul Hogarth, the managing editor of "Beyond Chron," an online website that primarily covers San Francisco news, said, "A spending cap would give California a permanent fiscal straitjacket - which is precisely what the right-wing extremists in the legislature have always wanted."

Official arguments

The following opposing arguments were presented in the official voter guide:

“ Proposition 1A is a flawed measure filled with fine print and loopholes. For years, the Governor has promised one solution after another to clean up the fiscal mess in Sacramento. Now he wants to sell us yet another “solution” that will fall short of his promises. Read the text of 1A for yourself. You will see a proposed Constitutional Amendment filled with complex formulas and convoluted language that was hastily drafted behind closed doors, without public hearings or independent analysis of how it will actually work. Instead of making our budget process more transparent and accountable, 1A does the opposite. Its complex formulas and fine print will invite unintended consequences and behind the scenes manipulation. As a result, the effects of 1A will be far different than its supporters promise: The expanded “Rainy Day Fund” will become a slush fund. The fine print allows unlimited “Rainy Day” funds to be spent on borrowing and Pork Barrel spending. More borrowing means more funds will have to be diverted into the slush fund to reach the 12.5 percent goal—that’s more than $13,000,000,000. 1A could even require money to be diverted from the budget and deposited into the “Rainy Day” slush fund in bad years when we are in the depths of a recession and State revenues are falling. 1A is so poorly written that it could force service cuts even in good times. Its “one size fits all” approach ignores basic realities such as our aging population with more and more baby boomers retiring, rising health care costs, and dealing with the effects of global warming. 1A will encourage unlimited tax increases—not stop them. 1A’s fine print limits what the Governor and Legislature can spend from existing tax revenues, but places no limit on spending when they raise taxes. And diverting more and more funds from existing taxes into the slush fund will cause increased pressures to raise taxes. Prop. 1A also gives the Governor extraordinary unilateral power over the budget. The Director of Finance—a political appointee of the Governor—makes all the critical decisions determining when revenues are “excessive” and can be diverted into the “Rainy Day” slush fund, with no checks and balances from the Legislature. And if 1A is adopted by voters, another law that was part of the budget deal gives the Governor more power to make unilateral cuts to the budget after it is signed into law, again with no oversight by the Legislature. We all want our state’s fiscal and economic nightmare to end, never to be repeated again. But political promises and real solutions are not always the same thing. Proposition 1A is not the solution it is promised to be. It will only add to our fiscal woes. Tell the Governor and Legislature to go back to the drawing board and draft a new proposal in the light of day, with ample opportunity for public input and independent analysis. VOTE NO ON PROPOSITION 1A ”

Media editorials

Support

Newspapers endorsing a "yes" vote on Proposition 1A included:

• The Los Angeles Times, which wrote, "...we cannot be as cheerful as the campaign ads that began running last week...but the good outweighs the bad....A larger reserve, with restrictions on when money could be released to pay for new programs, would help protect California from the kind of budgeting disaster that hit last year and will linger at least into next year."

• The San Francisco Chronicle, which said Proposition 1A, "Buffers California's budget against boom-and-bust economic cycles by channeling 3 percent of general fund revenues into a 'rainy day' account each year"

• The Santa Cruz Sentinel wrote that they "support 1A because by eliminating swings in state revenue, it will end the budget crises endangering vital services year after year"

• The Modesto Bee said "If voters choose wisely, they could help close the state's deficit, an essential step for selling bonds, investing in public works and helping to stimulate the economy."

• The Fresno Bee said that a vote in favor of Prop 1A is important and that "If you think it would be better to allow the state to go off the financial cliff, you are living in a fool's world."

• The Mercury News, which said, " Tuesday's ballot measures were designed to get the state out of an immediate crisis and to provide services residents need and demand."

• The Ventura County Star, which said, "Because the budget shortfall is currently so large, continuing the increased taxes for an additional two years will help California get through these tough times."

Opposition

Media endorsing a "no" vote on Proposition 1A included:

• The San Diego Union-Tribune, which said, "We offer three compelling reasons to reject it. The first reason is the grossly dishonest, ends-justifies-the-means manner by which the Sacramento political establishment is trying to force Proposition 1A down voters' throats... The second reason is the high likelihood that Proposition 1A wouldn't achieve its ostensible goal of forcing the state to live within its means... The third reason to reject Proposition 1A is to send a message to the Sacramento political establishment that voters are fed up with its trickery – the same lesson the establishment should have drawn from the 2003 recall election but didn't."

• La Prensa San Diego, which said, "Instead of looking for the easy way out by adding more taxes onto the working man, our State Legislatures need to go back to work and close obvious corporate and rich tax loop-holes."

• The North County Times, which said, "The state's broken fiscal system desperately needs reform, not the complex and expensive "kick the can down the road" these measures provide. The argument that this is the best voters can hope for, given the Legislature's irresponsibility in budgeting, isn't an answer."

• The Santa Clarita Signal, which said, "The Legislature should be setting aside money for a rainy day. But it should be doing it with windfall tax dollars such as the surplus revenues it received during the dot-com bubble — not with a tax hike in lean times."

• KSBW-TV, which said that Prop 1A and 1B are "no more than a hocus-pocus twosome of unintended consequences waiting to happen."

• The Clarion Online, a student newspaper at Citrus College, which said, "Linking the two propositions [1A and lB] to pressure voters into passing 1A, along with hiding the idea of more taxes is unacceptable behavior on the part of our state government."

• The Taft Independent, a weekly community newspaper located in Western Kern County, which said, "We suggest that the State of California is in big trouble, not so much because we have such huge deficits and massive debt. It’s because we lack leadership in the legislature or the Governor’s office. California is suffering from an existential lack of leadership." www.taftindependent.com

Polls

See also Public opinion polling for all May 2009 statewide ballot propositions

• The Field Poll conducted a public opinion research survey between February 20 and March 1 on Proposition 1A and the other five budget-related measures that will appear on the May 19 ballot. A Sacramento Bee story reported that the poll question on Prop 1A "omitted the fact that it would trigger $16 billion in tax hikes."

• The Los Angeles Times reported that when those polled were told that Prop 1A extends the tax increase, support dropped from 57% of likely voters to 34% of likely voters.

• A Public Policy Institute of California conducted a poll that concluded in late March 2009.

• On April 20-21, SurveyUSA conducted a poll of 1,300 California adults for KABC-TV Los Angeles, KPIX-TV San Francisco, KGTV-TV San Diego, and KFSN-TV Fresno.

• Field conducted a second poll between April 16-26.

• PPIC conducted its second poll on the propositions between April 27-May 4.

• SurveyUSA conducted a poll between May 8-10.

Poll results are detailed below.

Date of Poll	Pollster	In favor	Opposed	Undecided
February 20-March 1	Field	57 percent	21 percent	22 percent
March 10-17	PPIC	39 percent	46 percent	15 percent
March 11-12	SurveyUSA	27 percent	29 percent	44 percent
April 20-21	SurveyUSA	29 percent	42 percent	29 percent
April 16-26	Field	40 percent	49 percent	11 percent
April 27 - May 4	PPIC	35 percent	52 percent	13 percent
May 8-10	SurveyUSA	38 percent	51 percent	11 percent
May 15-17	SurveyUSA	32 percent	57 percent	10 percent

Path to the ballot

See also: Amending the California Constitution

A two-thirds vote was needed in each chamber of the California State Legislature to refer the constitutional amendment to the ballot for voter consideration.

The California State Legislature voted to put Proposition 1A on the ballot via Senate Constitutional Amendment 13 of the 2007–2008 Regular Session (Resolution Chapter 144, Statutes of 2008) and Assembly Constitutional Amendment 1 of the 2009–2010 Third Extraordinary Session (Resolution Chapter 1, 2009–2010 Third Extraordinary Session). Vote totals are displayed below.

Votes in legislature to refer to ACA1 to ballot
Chamber	Ayes	Noes
Assembly	74	6
Senate	30	8

Votes in legislature to refer to SCA13 to ballot
Chamber	Ayes	Noes
Assembly	64	6
Senate	39	0

See also

2009 Measures

• 2009 Measures
• Taxes on the ballot
• State and local government budgets on the ballot
• spending on the ballot
• and finance on the ballot
• 2009 legislative sessions

California

• California ballot measures
• California ballot measure laws

News and analysis

• Ballot measure lawsuits
• Ballot measure readability
• Ballot measure polls

External links

• May 2009 Special Election Voter Guide
• May 19, 2009 ballot proposition election returns
• Summary of donors to and against Proposition 1A from Cal-Access
• Donors for and against Proposition 1A from Follow The Money
• Text of Senate Constitutional Amendment 13
• California Secretary of State's announcement about May 19 ballot measures

Support

• Budget Reform Now, official website in favor of Prop 1A (archived)
• Campaign finance reports of Budget Reform Now

Opposition

• No on Proposition 1A
• Californians Against New Taxes
• The New California Tax Revolt, official website opposing Prop 1A
• "No on Prop 1A" Facebook Group
• Vote No on 1A