BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | SCA 4| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: SCA 4 Author: DeSaulnier (D) Amended: As introduced Vote: 27 SENATE ELECTIONS & CONST. AMEND. COMMITTEE : 3-2, 5/3/11 AYES: Correa, De León, Lieu NOES: La Malfa, Gaines SENATE APPROPRIATIONS COMMITTEE : 6-3, 5/26/11 AYES: Kehoe, Alquist, Lieu, Pavley, Price, Steinberg NOES: Walters, Emmerson, Runner SUBJECT : Initiative measures: funding source SOURCE : Author DIGEST : This Constitutional Amendment prohibits an initiative measure that will result in a net increase in state or local government costs other than costs attributable to the issuance, sale, or repayment of bonds, from being submitted to the electors or having an effect unless and until the Legislative Analyst and the Director of Finance jointly determine that the initiative measure provides for additional revenues in an amount that meets or exceeds the net increase in costs. ANALYSIS : The California Constitution provides that the electors may propose statutes or amendments to the state constitution through the initiative process by presenting CONTINUED SCA 4 Page 2 to the Secretary of State a petition that sets forth the text of the proposed statute or amendment to the Constitution and is certified to have been signed by a certain number of electors. Background Current Procedure for Determining Initiative fiscal Impact . While the Director of Finance (DOF) and the Joint Legislative Budget Committee (JLBC) are required to prepare the joint estimate of the fiscal impact on state and local government that's included in all initiative titles and summaries submitted to the Attorney General's (AG's) office, the actual process differs. When the DOF and JLBC receive notice from the AG requesting a fiscal analysis, the Legislative Analyst's Office (LAO) usually always 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. Initiative Spending . According to the LAO, in recent years, there have been a number of approved propositions which have guaranteed that a certain portion of General Fund spending be dedicated to a specific purpose. These measures 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. The required General Fund contribution is roughly 40 percent of the State's Budget. Proposition 49 of 2002 required that the state spend a certain amount (currently $550 million) on after-school programs. 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. CONTINUED SCA 4 Page 3 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 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 2/3 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. CONTINUED SCA 4 Page 4 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. North Dakota: No appropriations for the support and maintenance of state departments and institutions. Wyoming: No dedication of revenues or making or repealing appropriations. The 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. Related Legislation This Constitutional Amendment is identical to SCA 14 (Ducheny) of 2009 which was approved by the Senate Elections and Constitutional Amendments Committee and the Senate Committee on Appropriations but was placed on the Senate inactive file by the author's office. This Constitutional Amendment is also similar to ACA 6 (Gatto) and ACA 7 (Feuer) which are pending in the Assembly Committee on Elections and Redistricting. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: No SUPPORT : (Verified 5/26/11) California State Association of Counties CONTINUED SCA 4 Page 5 OPPOSITION : (Verified 5/26/11) California Taxpayers Association Howard Jarvis Taxpayers Association ARGUMENTS IN SUPPORT : According to the author's office, in 1911, Californians created the state initiative process by approving a constitutional amendment placed on the ballot by Progressives in the State Legislature. Since 1911, Californians by way of the initiative process have dramatically changed the landscape of their state government by passing various ballot measures. Budget experts say that fiscal measures that pass on the ballot constrain the hands of the Legislature, especially during difficult budget times. Over the last 30 years, California voters have approved measures to not only dedicate tax revenues in certain ways, they've also approved initiatives that lock in state spending which restricts the Legislature from altering significant portions of General Fund spending. A number of states limit or forbid initiatives that appropriate money for any purpose. Still others such as Arizona, Maine, Mississippi, Missouri and Nevada allow for new programs that cost money, but only if the initiative creates and provides for the added resources. This Constitutional Amendment allows voters to continue to approve measures that cost state and local dollars to implement, but it requires such measures to identify the dollars needed for implementation. ARGUMENTS IN OPPOSITION : Opponents believe this Constitutional Amendment would "eliminate the power of the voters to reform government and change perceived inequalities" and that they support the current initiative process the way it is. DLW:do 5/27/11 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED SCA 4 Page 6 CONTINUED