Harold Johnson- Columnist
Johnson is an attorney with Pacific
Legal Foundation. A Sacramento-based public-interest
law firm, PLF has a long history of litigating for tax restraint,
including in support of Proposition 13 following its enactment
If bonds are part of the budget, voters must have a say
[Harold Johnson] 6/27/03
For all the rancor in Sacramento over how to fashion a budget,
Gov. Gray Davis and Republican leaders are in accord on one element:
big borrowing. Both sides favor floating more than $10 billion
in bonds, to be paid off over five years or longer, to shrink
the state's mammoth deficit. The two sides differ only over the
source of the funding for this new debt. The GOP would use existing
revenues; Davis proposes a hike in the sales tax.
But even if this difference is reconciled, another, more significant
obstacle to closure exists, courtesy of Democratic Sen. Eugene
If the name doesn't
ring a bell, it's because Casserly died more than a century
ago. His influence extends across the decades,
however, through a plank he added to the California Constitution
at the drafting convention in 1879. The rule he sponsored --
Article XVI, section I of the Constitution -- prohibits the state
from borrowing more than $300,000 unless voters approve in a
of the blithe spenders in Sacramento today, Sen. Casserly and
other delegates to the 1879 Constitutional
Convention were no-nonsense folks, deeply skeptical of the
idea of government paying its bills by saddling future generations
with debt. Accordingly, the Constitution is quite restrictive
in the purposes for which multi-year borrowing is allowed.
Article XVI, debts of more than $300,000 are permitted only
for a specific, "single object or work." Borrowing to buy
parks or build schools passes this test. But long-term debt to
meet payroll and to keep government buildings open, does not;
clearly, the general operations of government do not constitute
a "single object or work."
Not surprisingly, the players in Sacramento don't seem eager
to acknowledge the electorate's role in the process. Neither
the governor nor legislators have stressed to the media that
they'll have to schedule a popular vote on a key element of their
budget. But if the final recipe includes debt financing on the
scale proposed, they have no alternative -- at least if they
want to avoid a lawsuit that could torpedo their handiwork.
To be sure, court
decisions allow the state to take out short-term loans, paid
back over several months (not years) with tax dollars
that will soon be in the pipeline. Such "revenue anticipation" instruments
are being used right now to keep the state operating through
the summer. But long-term borrowing on the scale currently being
contemplated has never been attempted by the state, for any purpose,
without an up or down vote at the polls.
increase, if enacted by the Legislature, would also be subject
to a vote of the people, at least indirectly.
If lawmakers approved a tax hike to pay off the deficit bonds
-- but the bonds themselves were rejected by voters -- there
would be a legal argument that the tax increase should be eliminated,
In short, if the governor and the Legislature want to pay down
the deficit today by taking out loans that will be due over many
tomorrows, they must ask voters not just to pass the proposed
bonds, but also to amend the constitution in order to permit
government to operate through deficit financing. A recent memo
from the Legislative Counsel's office concurs with this interpretation.
Legislators seeking such far-reaching changes would constitute
an ominous development. Voters have cause to pause before allowing
government to start paying its way by floating bonds. There are
already too few restraints on impulsive spending in Sacramento.
Giving lawmakers more opportunity to buy wish lists on credit
could put the state on a fast boat to bankruptcy.
The legal realities may not be comforting to legislators eager
to conclude work on the budget with a minimum of political pain,
but an unavoidable fact remains: the people have the constitutional
right to vote on any long-term bond strategy that ends up as
part of the deficit fix. If the budget includes a plan for major
borrowing, either it gets taken to the polls -- or it could well
get taken to court.