BILL ANALYSIS Ó SENATE COMMITTEE ON ELECTIONS AND CONSTITUTIONAL AMENDMENTS Senator Lou Correa, Chair BILL NO: AB 732 HEARING DATE:6/21/11 AUTHOR: BUCHANAN ANALYSIS BY:Frances Tibon Estoista AMENDED: 5/10/11 FISCAL: YES SUBJECT Bond measures: ballot pamphlet: Legislative Analyst: table DESCRIPTION Existing law establishes a process for the Attorney General (AG) to prepare a title and summary for each state measure. Requires the ballot title and summary to include a summary of the Legislative Analyst's estimate of the net state and local government fiscal impact. Existing law requires the Legislative Analyst to prepare an impartial analysis of each proposed measure describing the measure and including a fiscal analysis of the measure showing the amount of any increase or decrease in revenue or cost to state or local government. Provides that if a proposed measure is estimated to result in increased costs to the state, the estimate of those costs shall be set out in boldface print in the ballot pamphlet. Existing law requires the statewide ballot pamphlet to include information, in a specific order, for each state measure to be voted upon including, but not limited to: 1.Upon the top portion of the first page, and not exceeding one-third of the page, shall appear: a) Identification of the measure by number and title; and, b) The official summary prepared by the AG. c) The total number of votes cast for and against the measure in both the State Senate and Assembly, if the measure was passed by the Legislature. 1.Beginning at the top of the right page, the analysis prepared by the Legislative Analyst. 2.Arguments for and against the measure. This bill requires the summary prepared by the AG for state bond measures that are submitted to the voters for their approval or rejection to include an explanatory table summarizing the Legislative Analyst's estimate of the net state and local government fiscal impact. This bill provides that the space used for the explanatory table in the title and summary prepared by the AG not be included when measuring the amount of space provided for the summary, thus keeping summary information within the one-third of the page restriction. BACKGROUND Say It Again : Current law already requires that the fiscal impact of a proposed measure be analyzed and included in both the circulating title and summary and in the analysis printed in the state ballot pamphlet. In addition, existing law requires the state ballot pamphlet, for each statewide election at which state bond measures will be submitted to the voters, to include a discussion prepared by the Legislative Analyst of the state's current bonded indebtedness situation. COMMENTS 1. According to the author : AB 732 attempts to decrease California's future debt obligations by improving voter clarity on bond measures and their future fiscal implications. The bill would require the Legislative Analyst's Office to prepare a simple and easy to understand graph, chart, or report card for each statewide bond measure, illustrating the information discussed in the Overview of State Bond Debt section of the Voter Information Guide. AB 732 stems from a recommendation from the Little Hoover Commission's 2009 report, Bond Spending: Expanding and Enhancing Oversight. AB 732 (BUCHANAN) Page 2 Nearly two-thirds of California voters know very little or nothing about how the state pays for bond measures. This makes it very difficult for a majority of voters to know exactly what they are authorizing at the ballot box and how it contributes to the state's General Fund obligations. In addition to voters' limited knowledge on bond financing, many organizations mislead voters to think that enormous projects won't cost taxpayers. As more general obligation bond measures are enacted, the debt service on bonds consumes a larger portion of the General Fund. General obligation bond measures typically do not have a dedicated revenue source outside the General Fund. Ads promoting the bonds often tout that a measure can be implemented without new taxes. While these bond measures may not specifically require new taxes, they are not without cost. In the current budget climate, money to pay for a bond measure may displace money for another program that derives its funds from the General Fund. As our state's deficit continues to grow and the Legislature is being forced to cut funding to school districts and public safety organizations, Californians must do something to control future debt obligations. In 2007, the Legislative Analyst's Office reported that General Fund debt payments for already authorized general obligation and lease-revenue bonds for infrastructure-related purposes will total about $4.7 billion in 2007-08, rising to a peak of $7.5 billion in 2014-15. Unless the state does more to educate voters on the impacts of ballot-box budgeting, California's debt obligations could take up an even greater portion of the General Fund and fiscally impact the state for years to come. 2. Little Hoover Report : In 2009, the Little Hoover Commission (LHC) released a report entitled, "Bond Spending: Expanding and Enhancing Oversight." In the report, the LHC made several recommendations to the Legislature aimed at increasing the oversight and accountability of bond measures that have already passed, as well as increasing the clarity and transparency for bond measures that will be proposed to AB 732 (BUCHANAN) Page 3 voters in the future. One of the recommendations included in the report was for the state to establish fundamental criteria for ballot measures and to have the criteria evaluated and included as a simple and easy-to-understand report card in the voter guide for all bond measures placed on the ballot. In the discussion for this recommendation, the LHC described a comprehensive report that reflected established standards or fundamental criteria for bond measures. However, given that the Legislative Analyst is required by law to be impartial in their analysis, and that creation of a report card based on established standards would create a new mandate on the Legislative Analyst, this bill requires that the fiscal summary, already required under current law, be displayed in a table form. 3. Bond Spending Only : The requirement in this bill is only applicable to state bond measures, and will not change the title and summary for measures that do not include bonds. This is likely because, as noted by the author, the bill is based on the LHC report which focused solely on bonds. The LHC report noted that, "As Californians cast their ballots for bond measures, they set priorities that tie the hands of lawmakers when it comes time to trim the budget." However, since the implementation of the initiative process, there have been a number of approved non-bond measures which have required a certain portion of General Fund spending be dedicated to a specific purpose. These measures also restrict the Legislature's ability to alter the relative shares of General Fund spending provided to program areas in any given year. For instance, Proposition 98 of 1988, provided for a minimum level of total spending (General Fund and local property taxes combined) on K-14 education in any given year. Proposition 98 accounts for over 40 percent of annual state General Fund spending. Proposition 49 of 2002, requires that the state spend a certain amount on after-school programs, which exceeded $540 million in the 2009-10 Fiscal Year. Given that the money to repay state general obligation bonds comes from the General Fund, this committee and the author may wish to consider if the information AB 732 (BUCHANAN) Page 4 required by this bill would be beneficial for all statewide measures with a fiscal impact, rather than focusing on bond measures only. 4. Related and Previous Legislation : AB 1021 (Gordon) requires additional fiscal information to 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 measure. AB 1021 is also on today's agenda. PRIOR ACTION Assembly Elections and Redistricting Committee: 7-0 Assembly Appropriations Committee: 17-0 Assembly Floor: 75-0 POSITIONS Sponsor: Author Support: CalTax Little Hoover Commission State Controller Oppose: None received AB 732 (BUCHANAN) Page 5