BILL ANALYSIS Ó
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Date of Hearing: May 17, 2011
ASSEMBLY COMMITTEE ON ELECTIONS AND REDISTRICTING
Paul Fong, Chair
ACA 6 (Gatto) - As Amended: May 10, 2011
AS PROPOSED TO BE AMENDED
SUBJECT : Initiative measures: funding source.
SUMMARY : Prohibits an initiative measure - if determined by
the Director of Finance (Director) and Legislative Analyst
(Analyst) to result in a net increase in state or local
government costs exceeding $5 million - from being submitted to
the electors or from having any effect until and unless it is
jointly determined by the Director and Analyst that the
initiative measure provides for additional revenues in an amount
that meets or exceeds the net increase in costs. Provides that
costs attributable to the issuance, sale, or repayment of bonds
do not apply to this prohibition.
EXISTING LAW :
1)Allows electors to propose statutes and amendments to the
Constitution and to adopt or reject them through the
initiative process.
2)Requires the Attorney General (AG), upon receipt of a draft of
a petition for a proposed initiative measure, to draft a title
and summary of the proposed measure.
3)Provides that if the AG determines that a proposed measure
would affect state or local revenues or expenditures, he or
she must include in the title and summary either the estimate
of the amount of change in state or local revenues or costs,
or an opinion as to whether or not a substantial net change in
state or local finances would result if the proposed
initiative is adopted.
4)Requires the Department of Finance (DOF) and the Joint
Legislative Budget Committee (JLBC) to jointly prepare the
fiscal estimate that is included in the title and summary.
5)Requires any ballot measure that appears on the statewide
ballot to receive a majority of the votes cast on the measure
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in order to be approved.
FISCAL EFFECT : Unknown
COMMENTS :
1)Proposed Author's Amendments : As noted below, ACA 6 is almost
identical to ACA 7 (Feuer). Given the similarities of the two
measures, the author has proposed an amendment to add
Assemblymember Feuer as a Joint Author to this constitutional
amendment. In addition, the author has proposed an amendment
to increase the cost threshold at which an initiative measure
is prohibited from being submitted to the electors unless it
identifies a funding source, from $3 million to $5 million.
This analysis is reflective of these proposed amendments.
2)Purpose of the Constitutional Amendment : According to the
author:
The fiscal crisis in which California finds itself today
was not created overnight. The state continues to face
structural budget deficits year after year for a variety of
reasons, some legislatively created, some created by
economic forces beyond the control of State officials, and
some created at the ballot box through voter initiatives.
Whatever the root cause, it has been difficult to balance
our budget in tough times, in part, because of unfunded
mandates placed on the State's general fund through voter
initiatives. Many of these initiatives have included
laudable policy goals, supported by Democrats and
Republicans alike over the years. Unfortunately there are
often unforeseen consequences to these initiatives when it
comes time to balance our budget, and there now exists a
patchwork of mandates that shackle the hands of legislators
in both parties to find appropriate and fair solutions to
balancing our budget during tough economic times.
Since 1911, when Californians gave themselves the right to
enact statutes and amend their constitution via initiative,
the electorate has wielded that power more than any state
in the union. There have been, however, unintended
consequences associated with this process in the form of
unfunded mandates on the legislature - enacting measures
without any way to pay for them.
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Free from the fiscal vetting process provided by the
Legislature, these measures pass by a majority vote of the
people and handcuff lawmakers to high spending without
providing them with the revenues to pay for the additional
programs. As a result, California's budget deficit has
increased and the state has been plunged into fiscal
crises. If California is to continue allowing the creation
of new fiscal mandates on the legislature by the
initiative, it is reasonable to expect the discipline that
voters so often demand from their legislative
representatives. Appropriations committees in both houses
of the legislature do their best each session to limit
bills based on what the state has in the current year to
pay for them. Neither initiatives, nor their proponents
carry such a burden or responsibility.
ACA 6 is an important step in relieving some of the
pressure on our general fund moving forward, by expecting
the same fiscal responsibility from initiatives as is
expected from the legislative process. It does so by
requiring that any initiative with a fiscal impact above
Ý$5 million] provides for additional revenues in an amount
that meets or exceeds the net increase in costs, as
certified by the Department of Finance and Office of the
Legislative Analyst, that deals with the net increase in
costs associated with the enactment of the measure.
3)Current Restrictions on Initiative Measures : The California
Constitution places certain restrictions on the content of
initiative measures. Specifically:
a) An initiative measure embracing more than one subject
may not be submitted to the electors or have any effect.
b) An initiative measure may not include or exclude any
political subdivision of the State from the application or
effect of its provisions based upon approval or disapproval
of the initiative measure, or based upon the casting of a
specified percentage of votes in favor of the measure, by
the electors of that political subdivision.
c) An initiative measure may not contain alternative or
cumulative provisions wherein one or more of those
provisions would become law depending upon the casting of a
specified percentage of votes for or against the measure.
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d) No initiative that names any individual to hold any
office, or names or identifies any private corporation to
perform any function or to have any power or duty, may be
submitted to the electors or have any effect.
This constitutional amendment does not restrict an initiative
measure from having a fiscal impact on state and local
governments; however by prohibiting a measure from being
submitted to the electors if it has an increase in costs
without a funding source, this constitutional amendment may
limit the number of such measures that are proposed.
3)Fiscal Disclosures Required Under Current Law : Current law
requires that the fiscal impact of a proposed measure be
analyzed and included in both the circulating title and
summary, prepared by the AG, and in the analysis, prepared by
the Legislative Analyst, printed in the state ballot pamphlet.
The intent of these fiscal disclosures is to provide voters
with all available information about a proposed measure's
potential impact. These disclosures allow voters to make
informed decisions about whether to approve or reject
measures, without limiting the ability of the electorate to
have a voice in government. This constitutional amendment
does not require additional disclosures regarding costs or
revenues; rather, it would prohibit specific measures from
being submitted to the electorate or from taking effect unless
the measure provides additional revenue.
4)Why Not Bonds ? The restrictions in this constitutional
amendment are only applicable to measures that would result in
a net increase in state or local government costs, other than
costs attributable to the issuance, sale, or repayment of
bonds. According to the author, initiative measures that pass
by a majority vote of the people handcuff lawmakers to high
spending without providing revenues to pay for the additional
programs. However, past measures that have been approved by
voters that authorized the issuance of general obligation
bonds have also put pressure on the state's general fund with
future debt.
In 2009, the Little Hoover Commission released a report
entitled, "Bond Spending: Expanding and Enhancing Oversight."
The report, in part, was in response to several statewide
measures that approved the issuance of bonds for specific
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purposes. In 2006, Californians approved $54 billion in
spending in the form of seven statewide general obligation
bonds for transportation, education, and water projects. In
2008, California voters approved another $10.5 billion in
bonds directed towards a high-speed rail system and
improvements for children's hospitals.
Given that the money to repay state general obligation bonds
comes from the general fund, the report notes that, "General
obligation bonds are guaranteed by the California
Constitution, as a result, repayment of bonds takes priority
over virtually all other state government expenses beyond
education?As Californians commit more to debt without revenue
increases, they limit the choices that future generations and
future lawmakers can make about spending priorities." If this
constitutional amendment were to pass, measures that would
result in a net increase in state costs due to the issuance of
general obligation bonds could still be submitted to the
electors and take effect without providing for additional
revenues.
5)Reduction in Revenues ? This constitutional amendment focuses
solely on initiative measures that would result in increased
costs; however, there are other types of measures that may
also have an impact on the state's general fund without
imposing new costs. For example, initiative measures that
propose to decrease taxes would, in turn, decrease state
revenues. Such a measure would not be restricted from
appearing on the ballot, under the provisions of this
constitutional amendment. The committee may wish to consider
if the disparate treatment of statewide initiative measures is
appropriate, given that the fiscal impacts may be similar.
6)Cost Threshold : This constitutional amendment only applies to
initiative measures that would result in increased costs
exceeding $5 million. The author's office notes that this
cost threshold will allow measures that have a relatively low
cost to still appear on the ballot without providing a funding
source. Although the Legislative Analyst's Office (LAO) does
its best to provide a fiscal estimate that is as accurate as
possible, based on the resources available, it is still an
estimate of actual costs, and, as such, an initiative measure
may result in significantly higher costs than initially
estimated at the time it was placed on the ballot.
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One of the most recent examples was the LAO's estimate of the
fiscal effect of Proposition 11, which created the Citizens
Redistricting Commission. The LAO estimated that the minimum
amount required for 2010 would be about $4 million. However,
in 2009, under the Proposition 11 process, the Legislature
approved $3 million from the state's general fund for
redistricting activities related to the 2010 census, and
another $3 million was spent from another state fund to
support the application and selection process for commission
members. These allocation totals far exceeded the original
fiscal estimate. Conversely, it may be possible for the LAO
to under-estimate actual costs of an initiative. Given the
uncertainty of estimates, imposing a cost threshold may
inadvertently allow some initiatives whose fiscal estimates
were under $5 million, but actual costs exceeded that amount,
to be submitted to the electors. Additionally, a cost
threshold may prohibit some measures from being placed on the
ballot due to an over-estimate of costs.
7)Current Procedure for Determining Initiative Fiscal Impact :
While the DOF and the JLBC are required to prepare the joint
estimate of the fiscal impact on state and local government
that is included in all titles and summaries for initiative
measures that are submitted to the AG's office, the actual
process differs. When the DOF and JLBC receive notice from
the AG requesting a fiscal analysis, the LAO typically takes
the lead and begins the process of investigative research,
including how programs would be affected and how possible
passage and implementation would impact the state as a whole.
Once the LAO has completed this investigative analysis, the
DOF is then contacted for review and concurrence. After the
DOF has signed off on the LAO's work, the estimate is then
returned to the AG for inclusion in the title and summary.
8)Implementation : This constitutional amendment provides that a
measure, as described, may not be submitted to the voters or
have any effect unless the Analyst and the Director jointly
make a determination regarding revenue. However, it is
unclear at what point in the initiative process the
determination would be made that a proposed measure will not
be placed on the ballot, and what entity will be responsible
for making that determination. Given that the fiscal estimate
is determined prior to the preparation by the AG of the
circulating title and summary, would the AG still be required
to prepare a circulating title and summary on a proposed
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initiative that would result in increased costs without
providing additional revenues? If the AG did prepare the
circulating title and summary, it is unlikely that proponents
would gather signatures if it is known that the proposed
measure would not be submitted to the electors, regardless of
whether enough signatures were collected.
In addition, after receipt of the fiscal estimate, the AG has 15
days to prepare the circulating title and summary. Within
those 15 days, proponents of an initiative measure may submit
amendments to the proposed initiative; however, it is unlikely
that 15 days is enough time for proponents to draft new
language that would provide for additional revenues. Further,
is it reasonable to require the AG to continue preparation of
a title and summary, if it is known that proponents may be
submitting substantial amendments to address fiscal concerns?
9)Planning Ahead : Current law requires the Secretary of State
(SOS), upon the request of the proponents of an initiative
measure, to review the provisions of the measure, prior to its
circulation, and provide an analysis, comments, and a
statement of fiscal impact prepared by the Legislative
Analyst. In the past, this process has not been widely
utilized, presumably because proponents receive a fiscal
impact estimate and an analysis from the AG once the measure
is submitted to the AG for circulating title and summary.
However, given the limited amount of time proponents have to
amend an initiative measure after receiving the fiscal
estimate from the AG, if this constitutional amendment were to
pass, it is reasonable to assume that the use of this review
process by the SOS would increase, as it would be beneficial
for proponents to have a statement of fiscal impact prior to
submitting a measure to the AG.
10)Other States . According to the National Conference of State
Legislatures (NCSL), as of 2006 the following eleven states
have restrictions on the use of the initiative with regard to
appropriations and funding mechanisms.
Alaska: No dedication of revenues or making or
repealing appropriations.
Arizona: If an initiative requires a reduction in
government revenue or a reallocation from currently funded
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programs, the initiative text must identify the program(s)
whose funding must be cut or eliminated to implement the
initiative. If the identified revenue source provided
fails in any fiscal year to fund the entire mandated
expenditure for that fiscal year, the legislature may
reduce the expenditure of state revenues for that purpose
in that fiscal year to the amount of funding supplied by
the identified revenue source.
Florida: Measures that propose a tax or fee not in
place in November 1994 require a 2/3rds vote to pass.
Maine: Expenditures in an amount in excess of available
and unappropriated state funds remain inoperative until 45
days after the regular legislative session, unless the
measure provides for raising new revenues adequate for its
operation.
Massachusetts: May not be used to make a specific
appropriation from the treasury. However, if such a law,
approved by the people, is not repealed, the legislature
must raise by taxation or otherwise and appropriate such
money as may be necessary to carry such law into effect.
Mississippi: Sponsor must identify in the text of the
initiative the amount and source of revenue required to
implement the initiative. Initiatives requiring a reduction
in government revenue or a reallocation from currently
funded programs must identify the program(s) whose funding
must be reduced or eliminated to implement the initiative.
Missouri: May not appropriate money other than new
revenues created and provided for by the initiative.
Montana: May not appropriate money.
Nebraska: No measure may interfere with the
legislature's ability to direct taxation of necessary
revenues for the state and its governmental subdivisions.
Nevada: No appropriations or other expenditures of
money unless such statute or amendment also imposes a
sufficient tax or otherwise constitutionally provides for
raising the necessary revenue.
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North Dakota: No appropriations for the support and
maintenance of state departments and institutions.
Wyoming: No dedication of revenues or making or
repealing appropriations.
NCSL further comments that initiative measures which mandate
the expenditures of large amounts of public revenue without
including a new dedicated revenue source (such as taxes or
fees) can make it difficult for the legislature to continue to
fund existing state services and programs. In addition,
initiatives that increase or create new taxes to fund new or
existing programs negatively affect the legislature's ability
to impose reasonable taxes to fund necessary programs for
citizens.
1)Arguments in Opposition : The California Taxpayers
Association, in opposition to this constitutional amendment,
writes:
ACA 6's "pay-as-you-go" provisions are biased against
constitutional amendments that are not proposed by the
Legislature: Initiatives proposed by the public must
identify new revenue to support new expenditures, while
ballot measures proposed by the Legislature are not held to
the same standard. A problem with the "pay-as-you-go"
approach is that proponents of an initiative will not have
an official fiscal analysis of their initiative until after
it enters circulation. If it does not meet the
"pay-as-you-go" requirements, it may be too late to submit
another version for a title and summary from the attorney
general, collect signatures, and then submit signatures to
the election officials for certification - a lengthy
process that requires months of planning. Also, virtually
all initiatives have some "costs," even proposals to
increase taxes have associated administrative costs.
Also in opposition to this constitutional amendment, the
Howard Jarvis Taxpayers Association argues that, "ACA 6 is a
theft of political power away from the people, gives it to
politicians, and removes an important 'check' voters have on
their government. It is not for our current political class
to dictate the substantive contents of proposed initiatives.
Their responsibility is to abide by the will of the people,
enforce voter approved initiatives, and ensure that those
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preferences are prioritized within available revenues."
2)Approval of Voters : As a constitutional amendment, this
measure requires the approval of the voters to take effect.
3)Previous Legislation : This constitutional amendment is
similar to SCA 14 (Ducheny) of 2009, which was placed on the
Senate inactive file by the author.
ACA 3 (Blakeslee) of 2009, would have required an initiative
measure that authorized the issuance of state general
obligation bonds of $1 billion or more to identify a funding
source. ACA 3 was approved by this committee, but was never
brought up for a vote on the Assembly Floor.
4)Related Legislation : This constitutional amendment is similar
to SCA 4 (DeSaulnier), which is pending in the Senate
Appropriations Committee, and ACA 7 (Feuer) which will also be
heard in this committee today.
ACA 5 (Portantino), which is pending in the Assembly Budget
Committee, establishes a "pay-as-you-go" requirement for ten
years that all voter initiatives, statutes, bond issuances and
bond sales costing more than $250,000 must provide additional
state revenue to be enacted.
AB 1021 (Gordon) requires additional fiscal information be
included in the circulating title and summary prepared by the
AG and the summary statements prepared by the Legislative
Analyst for a proposed initiative. AB 1021 was approved by
this committee on a 5-2 vote, and is pending in the Assembly
Appropriations Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file.
Opposition
California Taxpayers Association
Howard Jarvis Taxpayers Association
Analysis Prepared by : Maria Garcia / E. & R. / (916) 319-2094
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