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California's Two-Thirds Legislative Vote Requirement and Its Role in the State Budget Process

Fred Silva is senior fiscal policy advisor for California Forward, a not-for-profit organization whose goal is to contribute to improving the quality of life for all Californians by creating more responsive, representative and cost-effective government. Silva has 40 years of experience in state and local government public policy development and has authored nearly two dozen publications and commentaries on government fiscal issues in California. He can be reached at fred.silva@sbcglobal.net. For more about California Forward, visit www.caforward.org.

When Californians debate the chronic problem of late state budgets, the two-thirds legislative vote requirement is often considered a prime suspect. As a matter of public policy, changing the two-thirds vote requirement would probably not solve the state’s most serious fiscal problems, nor has the public been willing to lower the threshold. Nevertheless, it is an issue worthy of keeping on the fiscal reform agenda. To provide perspective on the issue it may be helpful to examine the history of the two-thirds vote requirement, especially as California policy-makers look for ways to improve the state’s fiscal system.

Background

Also called the "supermajority vote requirement," the two-thirds law has been a requirement of parts of California’s governance for the past 75 years. Because the annual budget is the most important policy document produced by California’s elected leaders, it’s not surprising that the two-thirds vote requirement draws such heated debate.

In the world of fiscal affairs, vote requirements have always mattered. The 1849 state Constitution required a two-thirds vote of the Legislature to place a measure on the ballot to borrow money. At the 1879 constitutional convention, the requirement was extended to local voters under the general theory that asking future generations to pay for a particular public good should have a high threshold for approval.

Until 1933, appropriations from the state General Fund (in the form of the Budget Act) were treated like any other legislation and needed a simple majority to pass. But the Great Depression of the 1930s forced policy-makers to re-examine the rule.

Then as now, state and local finance were in crisis. The property tax, which supported local governments and schools, was a declining source of revenue. Proposition 9, a 1932 ballot measure, would have authorized an income tax and a sales tax. Under the initiative, the proceeds of the sales tax would support K-12 education. Dedicating the sales tax to education would free up property tax, primarily for county government. But the voters thought differently and killed Prop. 9 with a 67 percent majority; only 33 percent of voters supported the idea.

After Prop. 9 failed, the Legislature had a hard time reaching agreement on an alternative approach until then-State Controller Ray Riley joined forces with state Senator Frank Stewart to propose an idea that would change the fiscal landscape of California governance for the next 70 years. They crafted a constitutional amendment that authorized the Legislature to raise taxes and established a spending limit that triggered a vote requirement. If the budget grew by more than 5 percent, the approval of the budget required a two-thirds vote of each house of the Legislature. This requirement excluded K-12 education, which maintained its status requiring a mere majority vote for education funding --- as it does to this day. Prop. 1, also known as the Riley-Stewart Tax Plan, was passed by voters in a June 1933 special election.

The ballot argument for Prop. 1 was telling. It read in part: This measure further provides for a limitation upon governmental expenditures ? The state itself is limited in its General Fund expenditures, other than for schools, to 5 percent for a two-year period.

The ballot argument failed to mention that the spending limit could be lifted with a two-thirds vote of the Legislature. The voters bought the argument and passed the measure, and so was born California’s attempt to limit spending by increasing the vote threshold. It was not constructed for the purpose of involving the minority party in the fiscal affairs of the state, but simply as a method of requiring broader consensus when expenditures rose over a normal rate of budget growth.

Time passed and budgets routinely grew by more than 5 percent through the end of the 1930s and the post-World War II period as California’s population grew dramatically. The Legislature was changing as well, with the majority party changing hands frequently from 1935 to 1964. But even with political power shifting between parties, the state budgets passed by overwhelming majorities.

It wasn’t until the great budget crises of the mid-1960s that things ground to a halt over education spending. At the time, the Republican minority vote mattered. The issue was not that the two-thirds vote would limit spending, but rather whether the voting requirement could be used as leverage by the minority party to get more money for education.

In a move to clean up an otherwise cluttered Constitution, the Legislature placed Prop. 16 on the 1962 ballot to "eliminate obsolete" language. The measure deleted the spending-limit portion of the Riley-Stewart Act and left in the two-thirds vote requirement. If the provision had remained as originally approved in 1933, only nine budgets out of the past 30 --- about one-third --- would have met the test for approval by a majority vote. Most of the budgets that grew by less than 5 percent were during recessions or economic slowdowns.

Reviewing Other States’ Practices

Forty-two states allow budgets to be adopted by a majority vote of legislators. Eight states have some form of supermajority requirement, but they have various rules for the application. California, Rhode Island and Arkansas generally require a two-thirds vote for most General Fund spending. The remaining five states have a variety of supermajority vote requirements:

  • Connecticut requires a simple majority vote of the Legislature unless the General Fund expenditure ceiling is exceeded, in which case the Legislature must obtain a three-fifths majority.
  • Hawaii ’s approach is similar to the Connecticut model except that the vote requirement for exceeding its expenditure limit is a two-thirds vote.
  • Illinois requires a majority vote until June 1. After that, budget adoption requires a three-fifths vote.
  • Maine and Nebraska also require a majority vote until specific dates. Beyond those dates the budget requires a two-thirds vote.

A Message From the Voters

The issue of reforming the budget process in California has generated a variety of proposals. Over the past 30 years, a variety of commissions and task forces were formed to review the state budget process. In the mid-1990s, legislation established a Constitution Revision Commission to recommend, among other things, changes to the state budget process. The commission’s final report included a variety of recommendations to overhaul the process, including reducing the vote requirement for budget adoption to a majority; the vote requirement for raising taxes would remain at two-thirds.

The most recent reform effort was an initiative measure that appeared on the 2004 Primary Election ballot as Prop. 56. It would have changed the vote requirement to 55 percent for budget adoption and raising taxes. Prop. 56 contained seemingly popular provisions, including a requirement that the Legislature and the governor permanently lose salary and expenses for each day the budget is late and a stipulation requiring 25 percent of certain state revenue increases to be deposited in a reserve fund, which could not be used to increase spending.

Even with the sweeteners thrown in, the voters --- thoroughly convinced that the two-thirds vote requirement would save them from excessive state spending --- voted the measure down with 66 percent of voters opposed. Further analysis suggests that the voters were more interested in maintaining a two-thirds requirement for raising taxes than passing the budget.

Still, a May 2008 public opinion survey by the Public Policy Institute of California showed a strong desire by the voters to maintain the supermajority requirement for budget adoption.

When asked, "How about replacing the two-thirds vote requirement with a 55 percent majority vote for the state Legislature to pass a budget?" 40 percent of all respondents thought it was a good idea while 48 percent thought it a bad idea. The breakdown of likely voters was more telling: 39 percent thought it was a good idea and 53 percent believed it was a bad idea.

The Timeliness Problem

Many people think that having a budget written and adopted by the majority party in the Legislature would result in timely budgets. After all, a majority of each house of the Legislature would craft a budget to its liking and send it to the governor. While this might provide timely action by the Legislature, it would not guarantee a timely enacted budget. Currently, the budget hot potato is in the hands of the Legislature and remains there until a two-thirds vote passes it. During this time, the governor can work with the Legislature to craft a final budget that is more to his or her liking.

If the vote requirement is lowered to a majority or even 55 percent, as was proposed in Prop. 56, and the Legislature sent the governor a budget not to his or her liking, the governor would have to decide whether to veto it and be blamed for a late budget. The use of the governor’s blue pencil to reduce the expenditure plan may not be sufficient to bring the budget into balance and, in such a situation, the governor would have little choice but to veto the budget and toss the hot potato back to the Legislature --- a process not used by California governors, but one that is familiar to other states.

The Urgent Need for Reform

Reforming the state budget process needs to be a priority. These improvements should produce a greater focus on the long-term fiscal impacts of policy decisions, encourage both efficiencies and better results from government programs, and restore public confidence that taxpayers’ money is well spent. The vote threshold is one part of that process, but alone is not significant enough to yield the improvements that are needed.

In addition, reforming the budget process is really only the first step in modernizing the state’s fiscal systems. California also needs to rethink its revenue system and the fiscal relationship between the state and local governments. Careful and comprehensive budget process reforms should stop the series of short-sighted decisions and create a basis for addressing these more challenging issues.

 

 

California Forward Focuses on Better Government

The mission of California Forward, a not-for-profit organization, is to transform the state’s government through citizen-driven solutions to provide better representation, smarter budgeting and fiscal management, and high quality public services so all Californians have the opportunity to be safe, healthy and prosperous in the global economy.

For California to achieve its economic, social and environmental goals, government agencies must manage revenues to continuously improve the quality and efficiency of education, transportation, public safety and other programs. This will require comprehensive changes to the fiscal system and how key decisions are made.

To begin a public dialogue on fiscal reforms, California Forward distilled analyses of the state’s budget process into a set of problems and principles. Those concepts were refined by examining the best practices in other states, then informed and validated by conversations with scores of community leaders and day-long meetings with randomly selected Californians.

For more information, visit www.caforward.org.