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
Johnson represents one of the Sea Scouts challenging Berkeley's
before the California Supreme Court. Mark S. Pulliam, a Pacific
Legal Foundation trustee, is an attorney in San Diego with sons
in the Boy Scouts.
Credit Card Torn Up -- Finally
An end to illegal bonds?...
his struggle to terminate overspending at the Capitol, Gov.
Arnold Schwarzenegger is receiving help from a politician of
the other party: Democratic Sen. Eugene
If the name
doesn’t ring a bell, it’s because Casserly died more than a
century ago. His influence survives, however, in a plank that
he added to the California Constitution in 1879. Article XVI,
Section I prohibits the state from borrowing more than $300,000
unless voters give their approval in a statewide election.
this rule should curb reckless spending binges. If legislators
want to indulge in deficit spending, they must ask voters for
permission - an often-intimidating prospect for many politicians.
One of the
highlights of the hard- headed state budget unveiled by the
Schwarzenegger administration last week is that it honors the
Casserly rule. Unlike some budgets of the recent past, it does
not rely on bond- market borrowing that has not been OK’d at
for the Constitution and the taxpayers is the result of protracted
political and legal struggles. Two years ago, the Legislature
and Gov. Gray Davis were so nervous about how voters would
respond to their scheme for nearly $11 billion in long-term
borrowing to cover the scandalous deficit that they had run
up that they tried to tiptoe around the Casserly rule. They
decided to take their massive bond issue straight to market
without submitting it to voters.
drew a courtroom challenge from
the Fullerton Association of Concerned Taxpayers and the Pacific
Legal Foundation (where I am an attorney) and was ultimately
scuttled when a self-styled fiscal conservative from Hollywood
was elected governor. At his first press conference after the
October 2003 recall vote, Arnold Schwarzenegger insisted that
any bonds must be done “the right way, the legal way.”
So he asked
voters to approve Proposition 57. It authorized, in the legally
correct manner, the deficit debt that Davis and the constitutional
scofflaws in the Legislature had tried to smuggle past the
electorate. Also on the March 2004 ballot and also receiving
a “yes” vote was Proposition 58, prohibiting any future bond
encumbrances to fund year-end deficits.
But the temptation
to try spend- and-borrow shenanigans continued. This past year,
the Legislature authorized $2 billion in long-term bonds to
cover current government pension costs without voter approval.
Surprisingly, the new governor signed on.
when another legal challenge ensued, Finance Director Tom Campbell
quickly waved the white flag or, more accurately, the banner
of fiscal responsibility. He announced that he would not rely
on the illegal bonds but would slice outlays instead. That’s
cause for applause, because state spending has been on a rocket
in recent years, and the responsible response is frugality,
not more bondage. (Yes, the new budget does include some back-and-forth
shifts among state accounts. Deeper cuts would be preferable,
but these internal borrowings don’t make the state a debtor
in the bond market, so they stay within constitutional bounds.)
The new budget moves us a significant way toward the “payas
you go” principle endorsed by the state Constitution’s authors.
The virtues of this approach were explained by the state Supreme
Court more than a century ago in Nogues v. Douglass:
framers of [the Constitution, with its debt limit] knew that
it was not the practice of governments, well-conducted, to
borrow money for the ordinary expenses of government. ... [They]
doubtless thought it unjust to throw the burden of paying the
present expenses of the government upon posterity, who would
be compelled, in addition, to pay their own expenses .”
and budgetary prudence concur: It is wrong to pay the normal
expenses of government today with debt that will burden new
generations of Californians tomorrow. The Sacramento pols must
have their credit cards taken away both to wean them from
their spending addiction and to protect our children from being
stuck with their bills. CRO
This piece first appeared in the Orange County Register.
2005 Pacific Legal Foundation