Questions and Answers

No on Proposition 51 Committee
926 J Street, Suite 710, Sacramento, CA 95814
Phone: 916·446·4300 – Fax: 916·444·6611

Proposition 51: Questions and Answers

1. What does Proposition 51 do?

Proposition 51 would re-allocate nearly $1 billion from the state’s General Fund every year to 45 specific projects and 17 categories of spending, administered by 8 different agencies, oriented generally toward transportation, school buses, and environmental projects. It would operate indefinitely, unless a subsequent ballot measure changes it.

The specific amount allocated for all these projects comes from earmarking 30% of the sales tax on motor vehicles. These funds currently go to the state’s General Fund, to be spent on a broad range of programs, including health, higher education, public safety, and children’s services.

2. Must this money be spent every year for these specific projects and programs?

With no effective exception, Proposition 51 requires the state spend this money every year, no matter how large the budget deficit may be, or how pressing other priorities are. It contains a mechanism which states that if revenue growth falls below the amount to be allocated, that amount will not be spent. But such a trigger would only have been pulled 4 times in the last forty years! In 2002-03, for example, when the state faced a $23 billion budget deficit, Prop. 51 would have been in effect and added nearly $1 billion to that deficit. (Source: California Budget Project)

While K-12 education programs (Proposition 98) are exempt, the $1 billion spent according to this initiative will have to come from public safety, higher education, environmental programs, health and human services. And it will make it more difficult for education to exceed their Proposition 98 floor.

3. Can the legislature override some of the specific projects or earmarked categories?

No. Proposition 51 is unprecedented in public policy insofar as the spending contained in it cannot be overridden, not even by 100% vote of the Legislature. The projects named in great detail in the measure cannot be changed, even as circumstances change. Only another ballot measure can override the specific funding requirements of the measure, no matter how bad or infeasible the project may be, or how pressing other state priorities may be.

4. How were the priorities for this measure determined?

Many of the projects in Proposition 51 appear to have been funded because of campaign contributions to the measure, and to projects which appear to poll well in high population areas. According to the sponsors, “there is no question that we picked projects where we thought people might contribute as a result…these things are expensive and we wanted to get contributions.” (LATimes, September 9, 2002)

Examples include a new train to an Indian casino, paying the developer fees for an overpass, and an interchange which would open a new development in Santa Clarita. We have additional materials which describe this nexus.

Undoubtedly, the Planning and Conservation League placed projects in the measure because they would prove to be politically popular. However, the vast majority of identified projects goes to the heavily urban centers of Los Angeles, Orange, and Riverside Counties. As a result, many counties get short shrift in the funding process.

5. Does the measure provide adequate protections in budget deficit years?

In 2002, when the budget deficit was a record $23.5 billion, the spending mandated by Proposition 51 would have continued, if Prop. 51 were in effect. The only time Prop. 51 would not require spending is when revenue growth declines, which, as noted, is very rare. Each year, just to keep even with inflation, population growth, and caseload growth (e.g. increased numbers of schoolchildren), revenues must grow by about $3 billion. So no matter how difficult budgetary circumstances may be, the projects in Proposition 51 must be funded.

The next few years, according to the Legislative Analyst, will face significant deficits every year, although revenues are projected to grow slowly. Proposition 51 will add the full $870 million to $1 billion to the deficit each of those years, without any alterations possible in their spending plan.

6. Does Proposition 51 provide effective help for the state’s transportation and infrastructure problem?

Proposition 51 runs counter to the trends in transportation planning, which is to permit project flexibility and the combination of diverse sources of funding. According to the chair of the California Transportation Commission, “The fragmentation of the new funding into 17 different programs to be administered by 8 different agencies limits the ability to focus these funds on programs and projects that will have the greatest impact on traffic congestion relief, mobility, economic growth and environmental benefits.”

Many local transportation planning agencies oppose Proposition 51, and the largest group of private transportation developers, Transportation California, refused to support it, despite the construction money available in the measure. Further, the measure includes funding for a broad range of projects which have little to do with transportation.

7. Does this measure reflect the state’s most pressing transportation priorities and needs?

The measure includes a number of projects that would be low on the list of priorities for the state budget and for local transportation planners. For example, one of the projects in San Bernadino County would fund grade crossings for one of the contributors, Hillwood Development (a Ross Perot Jr. development company), despite the opposition of San Bernadino planners, who argued that the funding is not necessary and would cause local costs to be incurred.

The State Transportation Improvement Plan (STIP) is the guide to the state’s transportation priorities. But according to a member of the State Transportation Commission, “None of these projects is in the STIP. Zero. That means that the regional and state agencies charged with prioritizing projects haven’t even put it on the map yet.”

Also, the initiative would fund a number of luxury projects, such as $120 million to fund a casino train from Los Angeles to Palm Springs, money for the Sacramento Railroad Museum, vintage rail cars at Fort Mason in San Francisco, and $40 million for a music concourse in Golden Gate Park. It is clear that the state budget process would be unlikely to fund these projects as a matter of priority.

8. Is the general fund an appropriate source for transportation?

Transportation projects already will receive nearly $8 billion yearly in earmarked funds. Currently, $3.2 billion is from the gas tax, with an additional $1.2 billion soon to be added from the sales tax on gasoline. In addition, vehicle license fees add another $2.1 billion, and local sales taxes, voted by the people, add another $1.2 billion.

General fund revenues have been allocated to capital projects, including transportation, when there has been a significant surplus in revenues, for use on a one-time basis. The measure is also tied to ACA 11, a measure that will be on the March 2004 ballot, which passed the legislature as part of the 2002 budget package. ACA 11 will allocate revenues to infrastructure in years of rapid revenue growth. However, if Proposition 51 passes, the money will be taken off the top for its programs, rather than permitting the legislature to put together an infrastructure plan which meets the needs of the state.

9. Is it appropriate tax policy to earmark sales tax on vehicles for transportation and other programs?

Earmarking the sales tax on vehicle purchases has no tax policy logic. For the gasoline tax and the sales tax on gasoline, driving provides a nexus. But earmarking the sales tax on vehicles has the same logic as earmarking the sales tax on books for libraries, or earmarking the sales tax on lumber for housing: none, from any standard of tax policy. All of the major taxpayer groups-the California Taxpayer’s Association (CalTax), the California Tax Reform Association, the Howard Jarvis Taxpayers’ Association, and local taxpayers groups-oppose Proposition 51.

Taxpayer groups also oppose the measure because it creates pressures for either higher taxes or cuts in priority programs. That view was confirmed by the sponsor of the measure, who stated, “My general feeling is that the state budget is not adequate to meet most of the needs of the state…and the fundamental reason is we don’t have enough revenue.” (LATimes, September 9, 2002)

The measure also provides direct taxpayer subsidies where developers are expected to pay the fees. For example, Kern County required Tejon Ranch, a developer of a large distribution center at the Grapevine, to pay for a share of transportation improvements for an overpass which their development requires. Instead, in exchange for a contribution, $5 million of taxpayer dollars will be used instead.

10. Is this a measure to improve the environment?

According to environmentalists, there are projects in this measure which will have detrimental impacts on the environment. In the Santa Clarita area, for example, environmentalists have fought an interchange which is necessary for a massive new development which would threaten the Santa Clarita river. That interchange is included in the measure, and the developer, Newhall Land Company, contributed $150,000 to put it on the ballot.

The influential League of Conservation Voters refused to support the measure, despite entreaties from the sponsors and the fact that there are some projects which environmentalists support. On balance, they decided that the negative aspects of this measure outweigh the environmental positives.

11. What is the policy justification for Proposition 51?

Supporters say that the legislature has failed to address these projects and issues. A bill had been introduced which created similar categories, and was rejected because it was too inflexible.

However, since the measure does not really help transportation or the environment, there must be some other logic. It would appear to be consistent with the Planning and Conservation’s League’s past record, which is to raise money and support the organization by doing ballot initiatives.