BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SCA 6| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: SCA 6 Author: DeSaulnier (D) and Wolk (D) Amended: As introduced Vote: 27 SENATE ELECTIONS & CONSTITUTIONAL AMEND. COMM. : 3-1, 3/19/13 AYES: Correa, Hancock, Yee NOES: Anderson NO VOTE RECORDED: Padilla SENATE APPROPRIATIONS COMMITTEE : 5-2, 5/23/13 AYES: De León, Hill, Lara, Padilla, Steinberg NOES: Walters, Gaines SUBJECT : Initiative measures: funding source SOURCE : Author DIGEST : This bill, if approved by the voters, prohibits future initiatives from being placed on the ballot if the measure results in a net increase in state or local government costs as determined by the Legislative Analyst Office (LAO) and the Director of the Department of Finance (DOF). ANALYSIS : Existing law: 1. Requires the Attorney General (AG), upon receipt of a draft of a petition for a proposed initiative measure, to draft a CONTINUED SCA 6 Page 2 title and summary of the proposed measure. 2. Provides that if the AG determines that a proposed measure will affect state or local revenues or expenditures, he/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 will result if the proposed initiative is adopted. 3. Requires the DOF and the Joint Legislative Budget Committee (JLBC) to jointly prepare the fiscal estimate that is included in the title and summary. 4. Allows an initiative measure to propose changes to law that will result in a net increase in state government or local government costs. This bill provides that when an initiative measure results in a net increase in state or local government costs, as jointly determined by the LAO and Director of DOF, it may not be submitted to the electors or have any effect unless and until the LAO and the Director of DOF jointly determine that the initiative measure provides for additional revenues in an amount that meets or exceeds the net increase in costs. This requirement does not apply to costs attributable to the issuance, sale, or repayment of bonds authorized by the initiative measure. Background 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's included in all initiative titles and summaries 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 usually always takes the lead and begins the process of investigative research, including how programs are affected and how possible passage and implementation impacts 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. CONTINUED SCA 6 Page 3 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% of the state's budget. Proposition 49 of 2002 required that the state spend a specified amount on after-school programs. Other States . According to the National Conference of State Legislatures, as of 2006 the following eleven states have restrictions on the use of the initiative with regard to appropriations and funding mechanisms. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: No According to the Senate Appropriations Committee: One time ballot printing/mailing costs of approximately $198,000 - $264,000 depending on the number of pages and based on an estimated cost per page of $66,000. (General) Unknown potentially significant future savings in state and local government costs. SUPPORT : (Verified 5/23/13) Rural County Representatives of California OPPOSITION : (Verified 5/23/13) 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 CONTINUED SCA 6 Page 4 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. This bill 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. A number of states limit or forbid initiatives that appropriate money for any purpose. However, 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. In recent years, propositions were approved that have appropriated a certain portion of General Fund spending to be dedicated to a specific purpose. These measures restrict the Legislature's ability to adjust the General Fund spending in any given year, in order to carry out the purpose of the measure. This bill is identical to SCA 4 (DeSaulnier) of 2011 and SCA 14 (Ducheny) of 2009 both of which were approved by this committee but failed passage on the Senate floor. ARGUMENTS IN OPPOSITION : According to the California Taxpayers Association, "SCA 6's "pay-as-you-go" provisions are biased: Initiatives 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 would not have an official fiscal analysis of their initiative until after it enters circulation. If the initiative failed to meet the "pay-as-you-go" requirements, it likely would be too late to submit another version for a title and summary to the CONTINUED SCA 6 Page 5 attorney general, collect signatures, and then submit signatures to election officials for certification - a lengthy process that requires months of planning. If SCA 6 had been in effect nearly 25 years ago, it would have removed from the ballot Proposition 98, "Jessica's Law", and "Three Strikes Law," among others. "Although requiring a mechanism to pay for new programs is appealing, giving power to either a legislative appointee (the legislative analyst) and/or gubernatorial appointee (the director of finance) to remove an initiative from the ballot sets a dangerous precedent. It has the potential to disregard important policy measures for manipulative political purposes. The initiative process is intended to be a resource for the people - a means of checks and balances when the legislative process falls short. Further, if a measure CONTINUED SCA 6 Page 6 is removed from the ballot, an initiative's proponents would be given the nearly impossible task of refuting empirical evidence and statistical modeling provided by state officials." RM:d 2/19/14 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED