ARGUMENT in Favor of
Proposition 58

State government spending in California is out of control. Over the past three years, state spending has significantly exceeded state revenues.

Proposition 58 will require the Governor and the California State Legislature to ENACT a BALANCED BUDGET. Right now, the Governor is only required to propose, not enact, a balanced budget. This loophole has led to the huge budget deficits that plague California.

The California Balanced Budget Act:

WILL require a BALANCED BUDGET;

WILL require that SPENDING NOT EXCEED INCOME each fiscal year;

WILL require general funds to be put in a "Rainy Day" fund to build a RESERVE to protect California from future economic downturns. The Budget Stabilization Account will also be used to pay off the California Economic Recovery Bond early;

WILL allow the Governor to call a fiscal emergency if revenues drop below expenditures or if expenditures exceed revenues; and

WILL prohibit the Legislature from acting on other legislation or adjourning if they fail to pass legislation to address the crisis.

California faces unprecedented budget deficits. Overspending has led to serious shortfalls which threatens the state's ability to pay its bills and access financial markets. This proposition is a safeguard against this EVER HAPPENING AGAIN. Proposition 58 will prevent the Legislature from ENACTING BUDGETS THAT SPEND MORE MONEY THAN WE HAVE.

The California Balanced Budget Act will require, for the first time, the Governor and the Legislature to pass a BALANCED BUDGET. This proposition, along with the California Economic Recovery Bond Act, will give us the tools we need to resolve California's budget crisis.

As California faced unprecedented budget deficits for the last 3 years, the problem was ignored, spending exceeded revenues, and there was no process in place to address the fiscal crisis. Proposition 58 will allow the Governor to call a Special Session of the Legislature to deal with future fiscal crises. If the Legislature fails to act within 45 days, then they will not be able to recess and they will not be able to pass any other legislation. This will force the Governor and the Legislature to work together to find a solution to the problem BEFORE IT IS TOO LATE.

The California Recovery Bond, Proposition 57, and the California Balanced Budget Act, Proposition 58, together will give California's leaders the tools necessary to restore confidence in the financial management of the State.

Please join Governor Arnold Schwarzenegger, State Controller Steve Westly, Superintendent of Public Instruction Jack O'Connell, the California Chamber of Commerce, the California Taxpayers' Association, and all 80 members of the California State Assembly—both Republicans and Democrats—and support Proposition 58.

ARNOLD SCHWARZENEGGER, Governor
State of California

HERB J. WESSON, JR., Speaker
California State Assembly

JENNY OROPEZA, Chairwoman
Assembly Budget Committee

ARGUMENT Against
Proposition 58

The same legislature that created the biggest budget deficit in California's history now wants to paper over that deficit by borrowing $15 billion, at a total cost of over $2,000 per California family.

Our California Constitution prohibits them from doing so. Since 1849, the "single object or work" provision of the Constitution has limited long-term borrowing to projects like schools, parks, or water projects that will serve coming generations. Prop. 58 sweeps that provision aside, and allows them to do what no generation in California's history has ever done—steal from the future.

At a time when our state has the lowest credit rating in the nation—challenging Singapore and Malaysia—they want to borrow $15 billion more to pay for their own mistakes—AND STICK YOU WITH THE BILL. Our Constitution won't let them. But Prop. 58 shreds that provision, making it possible for them to plunge us $15 billion deeper into debt. That is the real purpose of Prop. 58.

They have the audacity to call it a "Balanced Budget Act." How can they do that? Simple. They suspended the law that guarantees you an unbiased ballot title and summary—instead literally writing it themselves. Daniel Weintraub, perhaps the most respected newspaper columnist in California, writes that "the balanced-budget requirement doesn't actually require that lawmakers approve a balanced budget."

Don't be fooled. California's Constitution already prohibits long-term borrowing from being used to balance the budget. That's the part they're suspending! We've gotten into this mess because of short-term borrowing—and short-term borrowing is exempt from Prop. 58. As Weintraub says, Prop. 58 "does not outlaw borrowing to paper over a deficit."

California already has a prudent reserve requirement in current law—legislatures and governors have ignored it. Prop. 58 allows them to continue to ignore it. Weintraub: "The governor could suspend transfers into the reserve at any time. And the Legislature could transfer money out of the reserve... at any time." It is no protection at all!

The Governor ALREADY has the power to call the Legislature into session to address a developing budget shortfall. This initiative requires the Legislature to take action before it can move on to other business. But it is LOOPHOLE-RIDDEN. Weintraub writes: "As long as they passed any bill to address the shortfall, they could continue as usual, even if the governor vetoed their approach. In practice, such a provision is unlikely to yield anything very different from the stalemates we see today."

If they were serious about a balanced budget, they'd restore the Governor's power to make mid-year spending reductions to keep the budget in balance. If they were serious about spending restraint, they'd restore the Gann Spending Limit that produced a decade of balanced budgets and prudent reserves from 1979 until 1990.

But they're only serious about one thing—they want to borrow more money, and this amendment gives them the power to do so.

RICHARD RIDER, Chair
San Diego Tax Fighters

BRUCE HENDERSON, President
Association of Concerned Taxpayers

JOE ARMENDARIZ, Executive Director
Santa Barbara County Taxpayers Association