(August 9, 2010) An initiative sponsored by government worker unions has qualified for the November ballot—and it may well be the most threatening issue facing businesses and taxpayers in 2010.

So what does it do? According to sponsors, Proposition 25, the “On Time Budget Act,” merely reduces the legislative vote requirement to pass the state budget from two-thirds to a simple majority, and stops paying legislators if the budget is late.

But when you think about it, why would the California Federation of Teachers, California Faculty Association, California School Employees Association, California Professional Firefighters, Professional Engineers in California Government, California Nurses Association and American Federation of State, County and Municipal Employees invest millions of dollars in a measure simply to reduce the vote on the state budget?

What else does it do that its sponsors are not talking about?

Eliminates Voter Referendum

A more accurate title for Proposition 25 would be the “Majority Vote for Everything and Bye-Bye Referendum Act.”

First, the measure eliminates—yes, eliminates—the ability to subject certain bills to voter referendum. That is, bills “providing for appropriations related to the budget bill” may be approved by a majority vote of the Legislature, and take effect immediately without voter recourse to using the referendum process.

Repeals Two-Thirds Vote

Second, Proposition 25 effectively repeals the protection of the legislative two-thirds vote requirement for certain bills that increase taxes, enact general obligation bonds and allow the Legislature to increase its living expenses, among others. That is, bills that likewise provide “for appropriations related to the budget bill” that would otherwise require a two-thirds vote to take effect would no longer be subject to that vote threshold.

Imagine the implications of this measure.

Substantive changes in statutes that have in the past been subject to voter referendum could be passed by a majority vote, as long as they include an appropriation that is related to the budget—certainly a minimally attainable threshold.

For example, in 2004 employers beat back a “pay-or-play” employer health care mandate with a voter referendum, Proposition 72. In 2000, employers rolled back the Legislature’s major expansion of tort liability with Propositions 30 and 31. It is highly likely that the measures repealed by these referenda would never have been subject to this voter accountability tool in the first place had the “On Time Budget Act” been in effect.

These are just the real world examples; many other measures devastating to various industries have been halted in the Legislature because of the legitimate threat of referendum. Top of the list would be new fees on products or business activities, which could be enacted by a majority vote of the Legislature—and take effect immediately without the threat of a referendum.

Rescinds Constitutional Protections

Even more insidious is the measure’s deft attempt to repeal important taxpayer procedural protections that are enshrined in the constitution. Proposition 25 states that “notwithstanding any other provision of law or of this constitution…bills providing for appropriations related to the budget bill” may be passed by a majority vote of the Legislature.

Consider these existing constitutional protections that currently require a two-thirds vote of the Legislature:

• If a tax measure also includes an appropriation related to the budget, it could be approved by a majority vote of the Legislature—in effect repealing a central tenet of Proposition 13.
• If a bill authorizing general obligation bonds, subject to voter approval also includes an appropriation related to the budget, it could be approved by a majority vote of the Legislature.
• If a bill to change the travel and per diem expenses of the Legislature also includes an appropriation related to the budget, it could be approved by a majority vote of the Legislature.
• If a bill to suspend a portion of the Proposition 98 school funding guarantee also includes an appropriation related to the budget, it could be approved by a majority vote of the Legislature.

More Deficit Borrowing

Proposition 25 also would legalize borrowing to cover budget deficits along the lines recently attempted (and abandoned) by Assembly Speaker John Perez (D-Los Angeles). If a bill authorizing deficit borrowing without a vote of the people also includes an appropriation related to the budget bill, it could be approved by a majority vote of the Legislature.

The majority vote for the budget is the tip of the iceberg—hidden just below the surface are higher taxes, the elimination of voters’ rights and even more spending by legislators.  You can be sure that proponents of Proposition 25 are holding their breath and hoping that California voters crash head-on into this iceberg.

More Information

For more information visit www.no25yes26.com.

Loren Kaye is president of the California Foundation for Commerce and Education, a non-partisan, non-profit corporation that functions as a “think tank” for the business community in California and is affiliated with the California Chamber of Commerce.