California continues its essential role as the proving ground for bad ideas. The latest is the demolition of “popular” initiatives to decide important issues. Of the 11 initiatives on the ballot last November in the Golden State, 8 were funded primarily by multimillionaires, according to MapLight, which tracks election funding.
And Proposition 30, Gov. Jerry Brown’s $6 billion tax-increase initiative, passed after public-sector unions, led by the California Teachers Association, spent $67 million on it. The opposition spent $53 million, more than half of which came from GOP activist Charles Munger, Jr. The initiative boosts California’s top income-tax rate from 10.3 percent to 13.3 percent, leapfrogging Hawaii’s 11 percent to become the most punitive of any state.
“California voters gained the power of ballot measures a century ago to break the grip of wealthy interests controlling government,” explained Daniel G. Newman, MapLight’s president and cofounder, on its website. “Now, it’s largely rich individuals, wealthy companies, and unions that drive our money-dominated initiative system.”
In 1910, Republican Hiram Johnson won the governorship on a pledge to break the power held over state politics by the railroads, specifically the Southern Pacific Company. Along with the Progressive Republicans who swept into power in the legislature, Johnson could have reduced the railroad bosses’ power and stopped there. But the logic of Progressivism is that we always need more progress. Indeed, it was the era of Prohibition, the direct election of U.S. senators, the Federal Reserve Board, the national income tax, and suffragism.
So in 1911, the governor and the legislature gave California the tenth state initiative and referendum system in the country, along with the power to recall the governor and other state officers. The new system was ratified by voters in an October 10 Special Election.
The Progressives’ intent was to elevate a sober, industrious electorate into direct control of the machinery of government. It was the opposite of Edmund Burke’s contention that long-standing forms of government have arisen for purposes that should not be abandoned lightly.
As Russell Kirk explained in The Conservative Mind, the complex British system of the 18th century was superior to the leveling schemes of the Jacobins. “It was a proper balancing and checking of the several classes competent to exercise political influence—the crown, the peerage, the squirearchy, the middle classes, the old towns and the universities of the realm,” Kirk wrote.
Within one or another of these categories, the real interest of every person in England was comprehended. In good government, the object of voting is not to enable every man to express his ego, but to represent his interest, whether or not he casts his vote personally and directly.
. . . But reform, said Burke, needs a delicate touch. . . . Reform, achieved by patching and reinforcing the fabric of British society, he was willing to promote; but not the alleged reform of a brand-new suit of clothes, breaking the continuity of political development.
California’s “brand-new suit of clothes,” the initiative system, has become a sackcloth for the state’s citizens. In the last century, voters have decided an average of 120 initiatives per decade. The number was around 90 per decade in the 1940’s, 50’s and 60’s; it was higher in the other decades.
California’s best-known initiative remains Proposition 13, the June 1978 tax-limitation initiative that sparked a national tax revolt culminating in Ronald Reagan’s federal tax cuts. Even today, it remains the bedrock of conservative and Republican politics in the state. And liberals still hate it and seek to undermine it, blaming it for the supposed destruction of the state’s library and school systems.
In 1978, tax reduction was definitely needed, but the state legislature had failed to pass it. Property taxes had risen exponentially over the decade. Along with inflation, a major culprit was the passage in 1972 of Proposition 20, which set up the California Coastal Commission, a new bureaucracy that severely limited housing development along the coast. The supply shortage drove up property prices and, with them, property taxes.
Despite hefty budget surpluses in the mid-1970’s, the Democratic-controlled state legislature and Gov. Jerry Brown refused to cut tax rates. Led by Howard Jarvis, antitax activists took the initiative route. Borrowing the phrase of character Howard Beale in the 1976 movie Network, Jarvis shouted, “I’m as mad as hell, and I’m not going to take this anymore!”
Proposition 13 garnered 65 percent of the vote. Brown opposed the initiative. Ever the opportunist, after it passed he flip-flopped to back it in time for his November 1978 re-election victory. In 1978, he also backed Proposition 4, the Gann Limit Initiative, which limited increases in state spending proportionate to increases in population plus inflation.
Combined, Prop. 13 and Prop. 4 brought the state its only decade of budget stability in the past 50 years. In 1987, the state even rebated $1.1 billion in excess income taxes. But where the initiative process giveth, it also taketh away. In 1990, Proposition 111 effectively eliminated the Gann Limit on spending by tricking voters into believing it would promote building more highways.
As far as taxpayers go, it might have been better never to have had the initiative process. Without initiatives, voters would have faced down legislators and forced tax reform through the normal process. Adjustments would have been made. Although Prop. 13 remains an essential part of what’s left of middle-class prosperity, its major features were also its major flaws. It rolled back property taxes to 1976 levels and allowed a maximum yearly rate increase of only two percent. Property values rose, discouraging mobility. Although one could carry the low tax rate to another house of equivalent value in California, that low rate did not carry into other states.
Older Californians stayed put as their children grew up and were forced to leave the state for jobs and cheaper housing. The result has been the depopulation of the state’s schools, especially along the coasts—despite millions of immigrants with high birthrates. In Huntington Beach, where I live, two public schools are currently being converted into parks and 130 new houses.
By 1988, the initiative process had been warped by the rich and powerful.
That year, Proposition 98 barely passed, with 51 percent of the vote. It was heavily supported by the California Teachers Association, the state affiliate of the National Education Association and the most powerful political force in California. The initiative declared that 40 percent of general-fund spending must go to K-14 education (including community colleges). Thanks to complicated formulas in the initiative, by 2012 that amount rose to 43 percent, even though the state’s student population was already in decline.
Prop. 98 was the keystone of what editorialists brand “ballot-box budgeting,” which channels limited resources into mandated spending.
In June 1990, an incredible 15 of 17 initiatives passed. These included all seven bond measures: housing and homeless bonds, passenger-rail and clean-air bonds, similar rail-transportation bonds, prison-construction bonds, higher-education facilities bonds, earthquake bonds, and K-12 school bonds. The bond parade continued in subsequent decades. The bonds usually were for 30 years, meaning the cost doubled from that of a pay-as-you-go system.
As of December 2012, state voters had run up $79 billion in outstanding bond debt. State bond indebtedness in the current fiscal year is rising to 8.9 percent of the state budget. That’s almost double the five percent bond advisors deem prudent. No wonder California’s bond rating is the second worst of any state, after Illinois. A lower rating means higher repayment costs.
At ten percent of the budget, the bonds will cost $9.3 billion a year, far above the Prop. 30 tax increase. They are nothing but delayed tax increases.
In December 1990, Proposition 140 limited the terms of legislators to six years in the assembly and eight years in the state senate. The idea was to replace “career politicians” with “citizen legislators.” Although it seemed like a good idea at the time, it didn’t work. The main result has been to replace “old bull” Democratic leaders, who built up their own power bases over the years, with shortsighted legislators beholden to the unions. Current Assembly Speaker John Perez (D-Los Angeles) is a former union activist; and Senate President Pro Tem Darrell Steinberg (D-Sacramento) was a union lawyer.
Term limits also brought about musical-chairs politicians. Bill Lockyer, although a liberal, was a competent and sometimes reasonable senate president pro tem. In the mid-1990’s he tempered union demands for the pension spiking that occurred after he left office. When expelled from the senate by term limits, he became the state attorney general, is currently the state treasurer, and likely will run for secretary of state in 2014. Term limits also gave more power to the state bureaucracy, because no legislator stays around long enough to figure out what the functionaries are really doing.
In 1998, Proposition 10 raised cigarette taxes 50 cents per pack to fund meddling in early childhood development. It was one of the first “boutique initiatives” sponsored by rich and bored California millionaires and billionaires in Hollywood and Silicon Valley. Director Rob Reiner, who played “Meathead” on the 1970’s sitcom All in the Family, inhaled this one. Gov. Gray Davis then appointed him to head California First Five, the new bureaucracy the initiative set up to waste the money. After his election in 2003, Gov. Arnold Schwarzenegger kept his Hollywood buddy in the post.
Reiner was putting out feelers for a gubernatorial run when he resigned because of a scandal. He blew $23 million in First Five tax funds promoting the wonders of preschool education at the same time that another initiative was on the 2006 ballot to increase taxes $2.1 billion for yet more preschool programs. Proposition 82 lost, 61-39 percent.
In 2000, Proposition 39 dropped the threshold for passing local school bonds from two thirds to 55 percent. The higher threshold was crucial to keep the teachers’ unions and their allies from banding together to pass bonds in elections that sometimes had turnouts as low as 20 percent. The initiative was backed primarily by Reed Hastings, the Silicon Valley centimillionaire who started Netflix. Typical of so many of these tycoons, Hastings favored making it easier to raise taxes that would hit the middle class.
In 2002, Schwarzenegger was preparing for his run for governor and needed campaign experience. He sponsored Proposition 49, a boutique initiative funding after-school basketball and other programs that now slam-dunk the state treasury for $550 million each year. Unlike Reiner’s initiative, no funding mechanism was attached, so the money is siphoned from the general fund.
When Arnold ran for governor in 2003, I warned Republicans that, despite his free-market rhetoric about leaving socialist Austria to strike it rich in America, Prop. 49 showed he really was a socialist at heart, and that he would break his no-new-taxes pledge at the first sign of budget problems. They backed Arnold anyway. In 2009, he signed a record $13 billion tax increase.
In 2004, two terrible initiatives passed. Proposition 63 raised taxes on millionaires one percentage point to fund mental-health programs. Granted, you have to be a little batty to live in California. But the initiative was sponsored by the mental-health industry to pad its own bottom line.
And Proposition 71 passed six billion dollars in bonds to fund three billion dollars in high-tech cannibalism—stem-cell research on unborn children. It was backed by biotech companies and such groups as the Alzheimer’s Association California Council and the Sickle Cell Disease Foundation of California. Bay Area real-estate banker Robert Klein sponsored the initiative. Since it passed, he has been the only head of the bureaucracy the initiative set up, the California Institute for Regenerative Medicine.
Finally, in 2012, in addition to the Prop. 30 six billion dollar tax increase, voters passed Proposition 39, sponsored by hedge-fund honcho Thomas Steyer. It increases taxes on out-of-state businesses by one billion dollars. About half will go toward clean-energy projects. Perhaps it is purely coincidental that Steyer’s hedge funds involve clean energy.
Compared with the large number of negative initiatives, the number of recent positive ones is small.
In 1994, Proposition 187 passed, limiting public services for illegal aliens. A federal judge threw out the initiative. Gov. Pete Wilson appealed the ruling. But upon taking office, Governor Davis dropped the appeal. Since then, Prop. 187 has become a club with which to hit Republicans favoring restrictions on immigration. Even though Wilson won re-election the same year, Prop. 187 supposedly alienated Hispanics from the GOP. But as Steve Sailer has pointed out, Hispanics in California voted about one-third Republican before Prop. 187, and about one-third after, which lines up with the national average.
The main lesson of Proposition 187 was that, when it comes to real reform, the initiative process is irrelevant.
In the March 2000 primary, voters faced down a staggering 20 ballot measures. Proposition 22 passed, restricting marriage to those of the opposite sex, with 61 percent in favor. But Prop. 22 was only a statute, not a constitutional amendment. In May 2008, the state supreme court ruled that Prop. 22 was unconstitutional. So, in November 2008, voters passed Proposition 8 with 52 percent of the vote. It wrote the ban on same-sex “marriage” into the California Constitution. That ban is currently on appeal to the U.S. Supreme Court. (Interestingly, most Anglos voted against Prop. 8, as did most Asians. It passed only because Hispanic and black voters still hold traditional moral beliefs, despite voting overwhelmingly Democratic.)
Proposition 32, a good initiative in 2012, would have limited the power of unions to grab members’ dues directly for political purposes. It lost. The unions spent $73 million in opposition, compared with $61 million spent in favor, most coming from GOP activist Munger.
In sum, like everything else from the Progressive Era, the initiative process in California has produced results opposite of what was promised. The legislature has become so dysfunctional that it sloughs off tough decisions on voters. And now the rich and profiteering have figured out how, without accountability, to get their pet projects subsidized by taxpayers.
California needs to scrap the initiative process entirely. This may seem counterintuitive, considering the November election also brought a two-thirds supermajority of Democrats in both chambers of the legislature; they can pass tax increases at will and overturn any veto by the governor. But putting the legislature on the spot is exactly what’s necessary.
The state’s moribund Republican Party might be revived if its wealthy donors weren’t so focused on the initiative system. When the new tax increases kick in and make the state’s ailing economy falter even more, Republicans could give voters a reason to try an alternative.