HomeMy WebLinkAboutStaff Report 361-06TO:
FROM:
City of Palo Alto
City Manager’s Report
HONORABLE CITY COUNCIL
CITY MANAGER DEPARTMENT: CITY MANAGER’S
OFFICE
DATE:
SUBJECT:
SEPTEMBER 18, 2006 CMR: 361:06
RECOMMENDATION TO DIRECT STAFF TO PREPARE
RESOLUTIONS IN SUPPORT OF PROPOSITIONS 1C, 1E, 84, 86, AND
89, CALIFORNIA BALLOT MEASURES FOR NOVEMBER 7, 2006
ELECTION
RECOMMENDATION
Staff recommends that Council direct staff to prepare resolutions of support for the following
California ballot measures:
Proposition 1C - Housing and Emergency Trust Fund Act of 2006
Proposition 1E - Disaster Preparedness and Flood Prevention Act of 2006
Proposition 84 ~ Safe Drinking Water, Water Quality and Supply, Flood Control,
River and Coastal Protection Bond Act of 2006
Proposition 86 - Local Government Resolution Supporting the Tobacco Tax Act of
2006
Proposition 89 - California Clean Money and Fair Elections Act of 2006
BACKGROUND
Staff has prepared a summary of the propositions on the State ballot for the November 7, 2006
election relevant to the City of Palo Alto. A brief description of each proposition along with the
position of the League of California Cities follows. Summaries of the proposition prepared by
the Secretary of State and the Legislative Analyst’s Office are attached. Additional information
and analysis can be obtained by visiting the Secretary of State’s website at www.ss.ca.gov or the
Legislative Analyst’s Office website at www.lao.ca.gov(.)
DISCUSSION
There are 13 various ballot measures that will be placed before the people of California during
the November election. Staff is presenting Council with information on six ballot measures,
which have relevance for cities, and recommending that Council direct staff to prepare
resolutions of support for five of the measures.
CMR: 361:06 Page 1 of 4
Proposition 1C- California Clean Water, Clean Air, Safe Neighborhood Parks, and Coastal
Protection Act of 2002
Per the official title and summary from the state Attorney General’s Office, this measure would:
¯Allow the state to issue bonds totaling $2.85 billion.
o Funds may be used for the purpose of providing shelters for battered women and their
children, clean and safe housing for low-income senior citizens; homeownership
assistance for the disabled, military veterans, and working families; and repairs and
accessibility improvements to apartments for families and disabled citizens.
Requires reporting and publication of annual independent audited reports showing use
of funds, and limits administration and overhead costs.
Appropriates money from the State General Fund to pay off bonds.
The League of California Cities supports this measure. Prior clean water and parks bonds have
proven beneficial to the City of Palo Alto.
Proposition 1E - Disaster Preparedness and Flood Prevention Bond Act of 2006
Per the official title and summary from the state Attorney General’s Office, this measure would:
Allow the state to issue bonds totaling $4.09 billion dollars.
Rebuild and repair California’s most vulnerable flood control structures to protect
homes and prevent loss of life from flood-related disasters, including levee failures,
flash floods, and mudslides.
Protect California’s drinking water supply system by rebuilding delta levees that are
vulnerable to earthquakes and storms.
Appropriate money from the State General Fund to pay off bonds.
The League of California Cities supports this measure. This measure is consistent with Council’s
priority on emergency and disaster preparedness.
Proposition 84 - Water Quality, Safety and Supply, Flood Control, River and Coastal
Protection Bond Act of 2006
Per the official title and summary from the state Attorney General’s Office, this measure would:
Allow the state to issue bonds totaling $5.388 billion dollars, to be repaid from the
state’s General Fund.
Fund projects relating to safe drinking water, water, quality and supply, flood control
waterway and natural resource protection, water pollution and contamination control,
state and local park improvements, public access to natural resources, and water
conservation efforts.
Provide funding for emergency drinking water, and exempts such expenditures from
public contract and procurement requirements to ensure immediate action for public
safety.
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The League of California Cities supports this measure. This measure is consistent with Council’s
priority on emergency and disaster preparedness.
Proposition 86 - Local Government Resolution Supporting the Tobacco Tax Act of 2006
Per the official title and summary from the state Attorney General’s Office, this measure would:
Impose additional 13 cent tax on each cigarette distributed ($2.60 per pack), and
indirectly increase tax on other tobacco products.
Provide funding to qualified hospitals for emergency services, nursing education and
health insurance to eligible children.
Revenue also allocated to specified purposes including tobacco use prevention
programs, enforcement of tobacco related laws, and research, prevention, treatment of
various conditions including cancers (breast, cervical, prostate, colorectal), heart
disease, stoke, asthma and obesity.
¯Exempt recipient hospitals from antitrust laws in certain circumstances.
¯Revenue excluded from appropriation limits and minimum education funding
(Proposition 98) calculations.
The League of California Cities supports this measure.
Proposition 89 - California Clean Money and Fair Elections Act of 2006
Per the official title and summary from the state Attorney General’s Office, this measure would:
Provide that candidates for state elective office meeting certain eligibility
requirements, including collection of a specified number of $5.00 contributions from
voters, may voluntarily receive public campaign funding from the Fair Political
Practices Commission, in amounts varying by elective office and election type.
Increase income tax rate on corporations and financial institutions by .0.2 percent to
fund program.
Impose new limits on campaign contributions to state-office candidates and campaign
committees, and new restrictions on contributions by lobbyists, state contractors.
Limit certain contributions and expenditures by corporations.
The League of California Cities has not taken a position on this measure.
Proposition 90 - Government Acquisition, Regulation of Private Property
Per the official title and summary from the state Attorney General’s Office, this measure would:
Limit government’s authority to adopt certain land use, housing, consumer,
environmental and workplace laws and regulations, except when necessary to
preserve public health or safety.
Void unpublished eminent domain court decisions
Define "just compensation"
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Require government to occupy condemned property or lease that property for public,
not private, use.
Require that condemned private property must be offered for resale to prior owner or
owner’s heir at current fair market value if government abandons condemnation’s
objective.
Exempt certain governmental actions.
Th,e League of California Cities opposes this measure. Staff recommends that the City take no
action related to this measure at this time because the measure has many detailed components
and the Secretary of State and Legislative Analyst websites listed above provide more thorough
information and analysis
ENVIRONMENTAL IMPACT
This staff report does not represent a project under the California Environmental Quality Act
(CEQA).
ATTACHMENTS
Attachment A: California Legislative Analyst’s Office Ballot Measure Reviews
PREPARED BY:
Chris Mogensen, Assistant to the City l~nager
CITY MANAGER APPROVAL:
Assistant City Manager
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Attachment A
Legislative Analyst’s Office
7/20/2006 3:00 PM
FINAL
Proposition 1C
Housing and Emergency Shelter Trust Fund Act of 2006
Background
About 200,000 houses and apartments are built in California each year. Most of these
housing units are built entirely with private dollars. Some units, however, receive
subsidies from federal, state, and local governments. For instance, the state provides
low-interest loans or grants to developers (private, nonprofit, and governmental) to
subsidize housing construction costs. Typically, the housing must be sold or rented to
Californians with low incomes. Other state programs provide homebuyers with direct
financial assistance to help with the costs of a downpayment.
While the state provides financial assistance through these programs, cities and
counties are responsible for the zoning and approval of new housing. In addition, cities,
counties, and other local governments are responsible for providing infrastructure-
related services to new housing such as water, sewer, roads, and parks.
In 2002, voters approved Proposition 46, which provided a total of $2.1 billion .of
general obligation bonds to fund state housing programs. We estimate that about
$350 million of the Proposition 46 funds will be unspent as of November 1, 2006.
Proposal
This measure authorizes the state to sell $2.85 billion of general obligation bonds to
fund 13 new and existing housing and development programs. (See "An Overview of
State Bond Debt" for basic information on state general obligation bonds.) Figure 1
describes the programs and the amount of funding that each would receive under the
measure. About one-half of the funds would go to existing state housing programs. The
development programs, however, are new--with details to be established by the
Legislature. The major allocations of the bond proceeds are as follows:
Development Programs ($1.35 Billion). The measurewould fund three new
programs aimed at increasing development. Most of the funds would be
targeted for development projects in existing urban areas and near public
transportation. The programs would provide loans and grants for a wide
variety of projects, such as parks, water, sewage, transportation, and housing.
Homeownership Programs ($625 Million). A number of the programs funded
by this measure would encourage homeownership for low- and moderate-
income homebuyers. The funds would be used to provide downpayment
assistance to homebuyers through low-interest loans or grants. Typically,
eligibility for this assistance would be based on the household’s income, the
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Legislative Analyst’s Office
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FINAL
cost of the home being purchased, and whether it is the household’s first
home purchase.
Multifamily Housing Programs ($590 Million). The measure also would fund
programs aimed at the construction or renovation of rental housing projects,
such as apartment buildings. These programs generally provide local
governments, nonprofit organizations, and private developers with low-interest
(3 percent) loans to fund part of the construction cost. In exchange, a project
must reserve a portion of its units for low-income households for a period of 55
years. This measure gives funding priority to projects in already developed areas
and near existing public services (such as public transportation).
Other Housing Programs ($285 Million). These funds would be used to
provide loans and grants to the developers of homeless shelters and housing
for farmworkers. In addition, funds would be allocated to pilot projects
aimed at reducing the costs of affordable housing.
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Figure 1
Proposition 1C
Uses of Bond Funds
Amount
(In Millions)
Development in
urban areasa
Development near
public
transportationa
Parksa
Grants for various projects--including parks,$850
water, sewer, transportation, and
environmental cleanup--to facilitate urban
"infill"
deveiopment.
Grants and loans to local governments and 300
developers to encourage more dense
development near public transportation.
Grant funding for parks throughout the state.200
$1,350
Low-income
households
Downpayment
assistance
Local governments
Self-help
construction
Variety of homeownership programs for low-$290
income households.
Deferred low-interest loans upto 6 percent of 200
home purchase price for first-time low- or
moderate-income homebuyers.
Grants to local governments which reduce 125
barriers to affordable housing. Funds would be
used for homebuyer assistance.
Grants to organizations which assist low- or 10
moderate-income households in building or
renovating their own homes.
$625
Multifamily housing
Supportive housing
Homeless youth
Low-interest loans for housing developments
for low-income renters.
Low-interest loans for housing projects which
also provide health and social services to low-
income renters.
Low-interest loans for housing projects which
provide housing for homeless young people.
$345
195
5O
$590
Farmworker
housing
Pilot programsa
Homeless shelters
Low-interest loans and grants for developing
housing for farmworkers.
Grants and loans for pilot projects to develop
housing at reduced costs.
Grants for developing homeless shelters.
$135
100
5O
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The funds would be allocated over a number of years. The measure provides the
Legislature broad authority to make future changes to these programs to ensure their
effectiveness.
Fiscal Effect
Bond Costs. The cost to pay off these bonds would depend primarily on the
following two factors.
Payment Period. The state would likely make principal and interest
payments on the bonds from the state’s General Fund over a period of about
30 years.
Interest Rate. Usually, the interest on bonds issued is exempt from both state
and federal taxes because the bonds are for public purposes. This results in
lower debt service payments for the state. Some programs proposed by this
measure, however, would not be eligible for the federal tax exemption--
resulting in a higher interest rate. This is because the housing programs
provide funds for private purposes. (We estimate this would be the case for
about 60 percent of. the bonds.)
If the federally taxable bonds were sold at an average rate of 6.5 percent and the
remaining bonds at an average rate of 5 percent, the cost to the state would be about
$6.1 billion to pay off both the principal ($2.85 billion) and the interest ($3.3 billion). The
average payment would be about $204 million each year.
Administrative Costs. The Department of Housing and Community Development
and the California Housing Finance Agency would experience increased costs to
administer the various housing and urban development programs. A portion of the
programs’ allocations--probably between $100 million and $150 million of the total
bond funds--would be used to pay these administrative costs over time.
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Proposition 1 E
Disaster Preparedness and Flood Prevention Bond Act of 2006
Background
State Role. Multiple agencies at each level of government (state, federal, and local)
have some responsibilities for flood management. In addition, private entities own and
operate some flood control facilities. The state carries out a number of programs
designed to provide flood management. Some of these programs are operated directly
by the state, while others provide grants to local agencies for similar purposes.
The state is primarily responsible for flood control in the Central Valley. As shown
in Figure 1, the state Central Valley flood control system includes about 1,600 miles of
levees, as well as other flood control infrastructure such as overflow weirs and
channels. The state directly funds the construction and repair of flood management
structures such as levees, typically with a federal and local cost share. For
approximately 80 percent of the levees in the Central Valley flood control system, the
state has turned over the operations and maintenance to local governments (primarily
local flood control districts), although the state retains ultimate responsibility for these
levees and the system as a whole.
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Figure 1
Central Valley Flood Control System
Sacramento--~,~ Chico
River l ~,~~ -- Feather RiverCity
Yolo Bypassm/~ID Sacramento
Rio Vista ~
¯Stockton
River
LosBanos. ~~
River I Mendota ¯ ~I
Not to Scale
Outside the Central Valley system, the state’s role in flood management generally
consists of providing financial assistance to local governments for flood control projects
located throughout the state. For example, the state has provided funding for the Santa
Ana River Mainstem flood control project that spans Orange, Riverside, and San
Bernardino Counties. In the Sacramento-San Joaquin River Delta region (Delta), as
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another example; the state has no oversight role with respect to local levee construction
or maintenance (a majority of Delta levees--about 700 miles--are located outside the °
state system). Because a significant portion of the state’s population depends on water
supplies that come through the Delta, there is a state interest in the continued operation
of the Delta levee system. Given this, the state has provided financial assistance over
many years to local flood control districts in the Delta region to rehabilitate and
maintain levees.
Funding. In general, state flood management programs have been funded from the
General Fund, with some use of bond funds. Since 1996, the voters have authorized a
number of state general obligation bonds, of which about $400 million has been
allocated specifically for flood management purposes. Most of these bond funds for
flood management have already been spent.
State funding levels for flood management have varied substantially on a year-to-
yearbasis, largely depending on the availability of General Fund and bond monies for
this purpose. For example, since 2000-01, annual state funding for flood management
has Varied from a low of about $60 million (2002-03) to a high of about $270 million
(2000-01). In addition to state flood management programs, local governments,
including flood control districts and other public water agencies, operate their own
flood management programs and projects. Funding for these local programs comes
from various sources, including property assessments and, in some cases, financial
assistance from the state.
A law passed earlier this year provides $500 million from the General Fund for
emergency levee repairs and other flood management-related costs.
The Department of Water Resources (DWR) has made rough estimates of the cost to
repair and upgrade the Central Valley flood control system and levees in the Delta of
between $7 billion and $12 billion.
Proposal
This measure authorizes the state to sell about $4.1 billion in general obligation
bonds for various flood management programs. (See "An Overview of State Bond
Debt" for basic information on state general obligation bonds.) Figure 2 summarizes the
purposes for which the bond money would be available to be spent by DWR and for
grants to local agencies. In order to spend these bond funds, the measure requires the
Legislature to appropriate them in the annual budget act or another law.
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Figure 2
Proposition 1 E
Uses of Bond Funds
State Central Valley flood control system repairs and improvements;$3,000
¯ Delta levee repairs and maintenance.
Flood control subventions (local projects outside the Central Valley).500
Stormwater flood management (grants for projects outside the 300
Central Valley).
Flood protection corridors and bypasses; floodplain mapping.290
Total $4,090
Specifically, the bond includes about $4.1 billion for various flood management
activities, allocated as follows:
State Central Valley Flood Control System and Delta LeveesN$3 Billion. To
evaluate, repair, and restore existing levees in the state’s Central Valley flood
control system; to improve or add facilities in order to increase flood
protection for urban areas in the state’s Central Valley flood control system;
and to reduce the risk of levee failure in the Delta region through grants to
local agencies and direct spending by the state.
Flood Control Subventions--S500 Million. To provide funds to local
governments for the state’s share of costs for locally sponsored, federally
authorized flood control projects outside the Central Valley system.
Stormwater Flood Management--S300 Millionl For grants to local agencies
outside of the Central Valley system for projects to manage stormwater.
Statewide Flood Protection Corridors and Bypasses--S290 Million. To
protect, create, and enhance flood protection corridors, including flood
control bypasses and setback levees; as well as for floodplain mapping.
Fiscal Effects
Bond Costs. The costs of these bonds would depend on interest rates in effect at the
time they are sold and the time period over which they are repaid. The state would
likely make principal and interest payments from the state’s General Fund over a
period of about 30 years. If the bonds were sold at an average interest rate of 5 percent,
the cost would be about $8 billion to pay off both the principal ($4.1 billion) and interest
($3.9 billion). The average payment would be about $266 million per year.
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Property Tax-Related Impacts. The measure provides funds for land acquisition by
the state for flood management, including the development of bypasses and setback
levees. Under state law, property owned by government entities is exempt from
property taxation. To the extent that this measure results in property being exempted
from taxation due to acquisitions by governments, local governments would receive
reduced property tax revenues. Because the measure does not specify what portion of
the bond funds will be used for acquisitions, the impact on local property tax revenues
statewide is unknown, but is potentially up to several million dollars annually.
Operational Costs. To the extent that bond funds are used by state and local
governments to purchase property or develop a new flood control project, these
governments would incur unknown additional costs to operate or maintain the
properties or projects.
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Proposition 84
Water Quality, Safety and Supply. Flood Control. Natural Resource
Protection. Park Improvements. Bonds. initiative Statute.
Background
State Spending on Resources Programs. The state operates a variety of programs to
conserve natural resources, protect the environment, provide flood control, and offer
recreational opportunities for the public. The state also operates a program to plan for
future water supplies, flood control, and other water-related requirements of a growing
population. In addition to direct state expenditures, the state also provides grants and
loans to local governments and nonprofit organizations for similar purposes. These
programs support a variety of specific purposes, including:
Natural Resource Conservation. The state has provided funds to purchase,
protect, and improve natural areas--including wilderness and open-space
areas; wildlife habitat; coastal wetlands; forests; and rivers, lakes, streams,
and their watersheds.
Safe Drinking Water. The state has made loans and grants to public water
systems for facility improvements to meet state and federal safe drinking
water standards.
Flood Control. The state has funded the construction and repair of flood
control projects in the state Central Valley flood control system. The state has
also provided financial assistance to local agencies for local flood control
projects in the Sacramento-San Joaquin River Delta and in other areas outside
the Central Valley.
Other Water Quality and Water Supply Projects. The state has made
available funds for various other projects throughout the state that improve
water quality and/or the reliability of water supplies. For example, the state
has provided loans and grants to local agencies for the construction and
implementation of wastewater treatment, water conservation, and water
pollution reduction projects.
State and Local Parks. The state operates the state park system, and has
provided funds to local governments for the acquisition, maintenance, and
operation of local and regional parks.
Funding for Resources Programs. Funding for these various programs has
traditionally come from General Fund revenues, federal funds, and general obligation
bonds. Since 1996, voters have authorized approximately $11 billion in general
obligation bonds for various resources purposes. Of this amount, approximately
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$1.4 billion is projected to remain available for new projects as of June 30, 2006,
primarily for water-related purposes. Legislation enacted earlier this year provides
$500 million from the General Fund for emergency levee repairs and other flood
control-related expenditures.
Proposal
This initiative allows the state to sell $5.4 billion in general obligation bonds for safe
drinking water, water quality, and water supply; flood control; natural resource
protection; and park improvements. (See "An Overview of State Bond Debt" for basic
information on state general obligation bonds.) Figure I summarizes the purposes for
which the bond money would be available for expenditure by various state agencies
and for loans and grants, primarily to local agencies and nonprofit organizations. In
order to spend most of these bond funds, the measure requires the Legislature to
appropriate them in the annual budget act Or other legislation.
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Figure 1
Proposition 84
Uses of Bond Funds
Amounts
(In Millions)
¯Integrated regional water management.1,000
¯ Safe drinking water.380
¯Delta and a~jriculture water quality.145 ....
¯Regional conservancies.279
° Other projects--public access, river parkways, urban stream 189
restoration, California Conservation Corps.
° Delta and coastal fisheries restoration.180
° Restoration of the San Joaquin River.100
¯ Restoration projects related to the Colorado River.90
90
° State flood control projects--evaluation, system improvements,315
flood corridor program.
° Flood control projects in the Delta.275
¯ Local flood control subventions (outside the Central Valley flood 180
control system).
3O
¯Local and regional parks.400
¯ Urban water and energy conservation projects.90
° Incentives for conservation in local planning.90
¯Protection of various coastal areas and watersheds.360
¯ Clean Beaches Program.90
° California Ocean Protection Trust Fund--marine resources,90
sustainable fisheries, and marine wildlife conservation.
¯State park system--acquisition, development, and restoration.400
° Nature education and research facilities.100
¯Wildlife habitat protection.225
¯ Forest conservation.180
¯Protection of ranches, farms, and oak woodlands.45
Planning for future water needs, water conveyance systems, and 65
flood control ects.
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Fiscal Effects
Bond Costs. The cost of these bonds would depend on interest rates in effect at the
time they are sold and the time period over which they are repaid. The state would
likely make principal and interest payments from the state’s General Fund over a
period of about 30 years. If the bonds were sold at an average interest rate of 5 percent,
the cost would be about $10.5 billion to pay off both the principal ($5.4 billion) and
interest ($5.1 billion). The average payment would be about $350 million per year.
Property Tax-Related Impacts. The initiative provides funds for land acquisition by
governments and nonprofit organizations for various purposes. Under state law,
property owned by government entities and by nonprofit organizations (under
specified conditions) is exempt from property taxation. To the extent that this initiative
results in property being exempted from taxation due to acquisitions by governments
and nonprofit organizations, local governments would receive reduced property tax
revenues. We estimate these reduced property tax revenues would be several million
dollars annually.
Operational Costs. State and local governments may incur additional costs to
operate or maintain the properties or projects, such as new park facilities, that are
purchased or developed with these bond funds. The amount of these potential
additional costs is unknown, but could be tens of millions of dollars per year.
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Proposition 86
Tax on Cigarettes.
initiative Constitutional Amendment and Statute.
BACKGROUND
Tobacco Taxes
Current state law imposes certain taxes directly on cigarettes and other tobacco
products that are known as excise taxes. Excise taxes are taxes collected on selected
goods or services. Currently, the excise taxes total 87 cents per pack of cigarettes (with a
similar tax on other types of tobacco products). The total tax of 87 cents per pack
consists of:
50 cents to support early childhood development programs, enacted by the
voters as Proposition 10 in 1998.
25 cents to support tobacco education and prevention efforts, tobacco-related
disease research programs, health care services for low-income uninsured
persons, and environmental protection and recreational programs, enacted by
the voters as Proposition 99 in 1988.
10 cents for the state General Fund.
2 cents to support research related to breast cancer and breast cancer
screening programs for uninsured women.
Current taxes on cigarettes and other tobacco products are estimated to raise about
$1.1 billion in 2006-07.
Children’s Health Care Coverage
Medi-Cal. The Medi-Cal Program (the federal Medicaid Program in California)
provides health care services to low-income persons, including eligible children
(depending on the age of the child). Families with incomes up to 133 percent of the
federal poverty level (FPL) (about $27,000 per year for a family for four) are generally
eligible for coverage. The program is administered by the state Department of Health
Services (DHS).
Under the Medicaid Program, matching federal funds are available for the support
of comprehensive medical services for United States citizens and to "qualified aliens"--
that is, immigrants who are permanent residents, refugees, or a member of certain other
groups granted the legal right to remain in the United States. Federal matching funds
are also available for nonqualified aliens, but only for emergency medical services.
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The Medi-Cal Program currently serves about 3.2 million adults and 3.2 million
children.
Healthy Families. The Healthy Families Program (HFP) offers health insurance to
eligible children in families who generally have incomes below 250 percent of FPL
(about $50,000 per year for a family of four) who do not qualify for Medi-Cal. (Children
in some families with higher incomes are also eligible.) Funding is generally on a two-
to-one federal/state matching basis. Children in HFP must be eligible United States
citizens or qualified aliens. The HFP is administered by the Managed Risk Medical
Insurance Board (MRMIB).
The HFP provides medical coverage for about 781,000 children.
Local Health Coverage Programs. The County Health Initiative Matching (CHIM)
Fund program, which is administered by MRMIB and counties, provides health
coverage for children in families with an income between 250 percent and 300 percent
of FPL (between $50,000 and $60,000 per year for a family of four). The CHIM program
relies on county funds as the match required to draw down federal funds to pay for this
health coverage. This program has a caseload of about 3,000 children.
In addition to the CHIM program, some counties have established their own health
coverage programs for children that are ineligible for Medi-Cal or HFP. These programs
are primarily supported with local funding. These programs serve about 69,000
children.
PROPOSAL
This measure increases excise taxes on cigarettes (and, as discussed below, indirectly
on other tobacco products) to provide funding for hospitals for emergency services as
well as programs to increase access to health insurance for children, expand nursing
education, support various new and existing health and education activities, curb
tobacco use and regulate tobacco sales. Major provisions of the measure are described
below.
New State Tobacco Tax Revenues
A pack of cigarettes now costs roughly $4.00 in California, including 87 cents in
excise taxes. This measure increases the existing excise tax on cigarettes by $2.60 per
pack effective January 2007. Existing state law requires the Board of Equalization (BOE)
to increase taxes on other tobacco products--such as loose tobacco and snuff--in an
amount equivalent to any increase in the tax on cigarettes. Thus, this measure would
also result in a comparable increase in the excise tax on other tobacco products. All of
the additional tobacco revenues (including those on other tobacco products) would be
used to support various new and existing programs specified in this measure.
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How Additional Tobacco Revenues Would Be Spent
Revenues from the excise tax increase would generally be deposited in a new fund
called the Tobacco Tax of 2006 Trust Fund and would be allocated for various specified
purposes, as shown in Figure i later in this analysis.
Backfill of Proposition 10 Programs. An unspecified amount of the additional excise
tax revenues would be used to fully backfill Proposition 10 programs for early
childhood development for a loss of funding that Would result from the enactment of
the new tax measure. This is because the tax increases contained in this measure are
(1) likely to result in reduced sales of tobacco products anc~ (2) could result in more sales
of tobacco products for which taxes would not be collected, such as for smuggled
products and out-of-state sales. This, in turn, would reduce the amount of revenues
collected through the excise taxes imposed under Proposition 10. The amount of backfill
payments needed to offset any loss of funding for the Proposition 10 program would be
determined by BOE.
Health Treatment and Services Account. Under the measure, 52.75 percent of the
funds that remain after providing the Proposition 10 backfill funding would be
allocated to a Health Treatment and Services Account. This funding would be used for
the purposes outlined below:
Hospital Funding. Nearly three-fourths of the funds in this account would be
allocated to hospitals to pay their unreimbursed costs for emergency services
and to improve or expand emergency services, facilities, or equipment.
Allocations would be based largely on the number of persons that hospitals
treat in their emergency departments and their costs for providing health care
for patients who are poor. Private hospitals and certain public hospitals,
including those licensed to the University of California (UC), would be
eligible to receive funding. Hospitals licensed to other state agencies or the
federal government would not be eligible for funding.
Nursing Education Programs. These funds would be used to expand nursing
education programs in UC, California State University, community college,
and privately operated nursing education programs.
Additional Allocations. Funding would be allocated for the support of
nonprofit community clinics; to help pay for uncompensated health care for
uninsured persons provided by physicians; for college loan repayments to
encourage physicians to provide medical services to low-income persons in
communities with insufficient physicians; to provide prostate cancer
treatment services; and for services to assist individuals to quit smoking.
Health Maintenance and Disease Prevention Account. Under the measure,
42.25 percent of the funds that remained after providing the Proposition 10 backfill
funding would be allocated to a Health Maintenance and Disease Prevention Account.
This funding would be used for the purposes outlined below:
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Children’s Health Coverage Expansion. Almost one-half of these funds would
be allocated to expand the HFP to provide health coverage to include
(1) children from families with incomes between 250 percent and 300 percent
of the FPL and (2) children from families with incomes up to 300 percent of
the FPL who are undocumented immigrants or legal immigrants not now
eligible for HFP. This measure requires MRMIB and DHS to simplify the
procedures for enrolling and keeping children in HFP and Medi-Cal coverage
and creates a pilot project to provide coverage for uninsured children in
families with incomes above 300 percent of the FPL.
Tobacco-Related Programs. These funds would support media advertising
and public relations campaigns, grants to local health departments and other
local organizations, and education programs for school children to prevent
and reduce smoking. Funding would also go to state and local agencies for
enforcing laws and court settlements which regulate and tax the sale of
tobacco products. Also, some funds would be used to evaluate the
effectiveness of these tobacco control programs.
Health and Education Programs. Part of these funds would be set aside for
various new or existing health programs related to certain diseases or
conditions, including colorectal, breast, and cervical cancer; heart disease and
stroke; obesity; and asthma.
Health and Disease Research Account. Under the measure, 5 percent of the funds
that remained after providing the backfill funding discussed above would be allocated
to a Health and Disease Research Account. This funding would be used to support
medical research relating to cancer in general and breast and lung cancer in particular.
In addition, it would support research into tobacco-related diseases, as well as the
effectiveness of tobacco control efforts. Part of these funds would be used to support a
statewide cancer registry, a state program that collects data on cancer cases.
Other Major Provisions
In addition to the provisions that raise tobacco excise taxes and spend these same
revenues, this measure contains a number of other significant provisions, which are
described below.
Existing Funding for Physician Payments Continued. In recent years, the state has
spent almost $25 million per year in Proposition 99 funds for allocations to counties to
reimburse physicians for un.compensated medical care forpersons who are poor. This
measure requires that this same level of Proposition 99 funds be allocated annually in
the future for this purpose.
Expenditure Rules. The funds allocated under this measure would not be
appropriated through the annual state budget act and thus would not be subject to
change by actions of the Legislature and Governor. The additional revenues would
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generally have to be used for the services noted above and could not take the place of
existing state or local spending. The state and counties could not borrow these new
revenues to use for other purposes, but they could be used to draw down additional
federal funds. Contracts to implement some of the new programs funded by this
measure would be exempted from state contracting rules for the first five years.
Oversight Provisions. This measure requires DHS to prepare an annual report
describing the programs that received additional excise tax funding and how that
funding was used. This information would be made available to the public by DHS on
its Web site. Programs receiving these funds would be subject to audit. New state
committees would be established to oversee the expansion of children’s health coverage
and antiobesity programs.
Hospital Charges and Bill Collections. Hospitals that are allocated funds under this
measure for emergency and trauma care services would be subject to limits on what
they could charge to certain patients in families with incomes at or below 350 percent of
the FPL. These hospitals would also have to adopt written policies on their bill
collection practices and, under certain circumstances, could not send unpaid bills to
collection agencies, garnish wages, or place liens on the homes of patients as a means of
collecting unpaid hospital bills.
Coordination of Medical Services by Hospitals. Subject to the approval of certain
local officials, hospitals receiving funding under this measure would be allowed to
coordinate certain medical services, including emergency services, with other hospitals.
For example, hospitals would be permitted to jointly share the costs of ensuring the
availability of on-call physicians who provide emergency services. The measure seeks to
exempt such coordination of emergency services from antitrust laws that might limit or
prohibit such coordination efforts.
FISCAL EFFECTS
This measure would have a number of fiscal effects on state and local governments.
The major fiscal effects we have identified are discussed below.
Impacts on State and Local Revenues
Revenues Affected by Consumer Response. Our revenue estimates assume that the
excise tax increase of $2.60 per pack is passed along to consumers by the distributors of
tobacco products who actually pay the excise tax. In other words, we assume that the
prices of tobacco products would be raised to include the excise tax increase. This
would result in various consumer responses. The price increase is likely to result in
consumers reducing the quantity of taxable tobacco products that they purchase.
Consumers could also shift their purchases so that taxes would not be collected on
tobacco products, such as through Internet purchases or purchases of smuggled
products.
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The magnitude of these consumer responses is uncertain given the size of the
proposed tax increase. There is substantial evidence regarding the response of
consumers to small and moderate tax increases on tobacco products in terms of reduced
tobacco consumption. As a result, for small-to-moderate increases in price, the revenue
impacts can be estimated with a reasonable degree of confidence. However, the increase
in taxes proposed in this measure is substantially greater than that experienced
previously. As a result, we believe that revenue estimates based on traditional
assumptions regarding this consumer response would likely be overstated. Therefore,
our revenue estimates below assume a greater consumer response in terms of reduced
tobacco consumption to this tax increase than has traditionally been the case. These
estimates are subject to uncertainty, however, given a variety of factors, including the
large tax changes involved.
Revenues From Tax Increase on Tobacco Products. We estimate that the increase in
excise taxes would raise about $1.2 billion in 2006-07 (one-half year effect from January
through June 2007). It would raise about $2.1 billion in 2007-08 (first full-year impact).
This excise tax increase would raise slightly declining amounts of revenues thereafter.
Effects on State General Fund Revenues. The measure’s increase in the excise tax
would have offsetting effects on state General Fund revenues. On the one hand, the
higher price and the ensuing decline in consumption of tobacco products would reduce
state General Fund revenues from the existing excise taxes. On the other hand, the
state’s General Fund sales tax revenues would increase because the sales tax is based on
the price of the tobacco product plus the excise tax. The decreases in revenues would
approximately equal the increases in revenues.
Effects on Local Revenues. Local governments would likely experience an annual
increase in sales tax revenues of as much as $10 million.
Effects on Existing Tobacco Excise Tax Revenues. The decline in consumption of
tobacco products caused by this measure would similarly reduce the excise tax
revenues that would be generated for Proposition 99 and 10 programs and for the
Breast Cancer Fund. We estimate that the initial annual revenue losses are likely to be
about $180 million for Proposition 10, about $90 million for Proposition 99, and less
than $10 million for the Breast Cancer Fund. However, these losses would be more than
offset in most cases by additional tax revenues generated by this measure, as discussed
below.
Impacts of New Programs on State and Local Expenditures
State and local government expenditures for the administration and operation of
various programs supported through this measure would generally increase in line
with the proposed increase in excise tax revenues. Figure I shows the main purpose of
the accounts established by the initiative, the percentage of funds allocated to each
purpose, and our estimate of the funding that would be available for each account in
the first full year of tax collection. These allocations would probably decline in
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subsequent years as excise tax revenues also declined, potentially resulting in a
corresponding decrease in state and local expenditures for these new programs.
The state administrative costs associated with the tax provisions of this measure
would be minor.
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Figure 1
How Tobacco Tax Funds Would Be Allocateda
Backfill of California Children and Families First Trust
Fund--Proposition 10
Unspecified amount determined
by Board of Equalization
$180
Hospital emergency and trauma care
Nursing education programs
Nonprofit community clinics
California Healthcare for Indigents Program--
reimbursement of emergency care physicians
Tobacco cessation services
Prostate cancer treatment
Rural Health Services Program--reimbursement of
emergency care physicians
College loan repayment program to encourage
physicians to serve low-income areas lacking
physicians
74.50 percent of account $756
9.00 percent 91
5.75 percent 58
5.75 percent 58
1.75 percent 18
1.75 percent 18
0,75 percent 8
0.75 percent
Children’s health coverage
Heart disease and stroke program
Breast and cervical cancer program
Obesity, diabetes, and chronic diseases programs
Tobacco control media campaign
Tobacco control competitive grants program
Local health department.tobacco prevention program
Asthma program
Colorectal cancer program
Tobacco prevention education programs
Tobacco control enforcement activities
Evaluation of tobacco control programs
45.50 percent of account $367
8.50 percent 69
8.00 percent 65
7.75 percent 63
6.75 percent 55
4.50 percent 36
4.25 percent 34
4.25 percent 34
4.25 percent 34
3.50 percent 28
2.25 percent 18
0.50 percent 4
Tobacco control research 34.00 percent of account $32
Breast cancer research 25.75 percent 24
Cancer research 14.75 percent 14
Cancer registry 14.50 percent 14
Lung cancer research 11.00 percent 10
Total Allocations $2,100
a Because the overall revenues from the tobacco tax increase are subject to uncertainty, the actual allocations to programs could be greater or
less than the amounts shown here.
Totals may not add due to rounding.
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Impacts on Other Tobacco Tax-Funded Programs
This measure would have a number of significant fiscal effects on the three existing
programs supported by tobacco excise taxes--Proposition 99 (which supports various
health and public resources programs), Proposition 10 (which supports early childhood
development programs), and the Breast Cancer Fund (which supports breast and
cervical cancer screening and breast cancer research programs).
Proposition 99. This measure does not directly backfill any Proposition 99 accounts
for the loss of revenues that would be likely to occur as a result of the excise tax increase
proposed in this measure. Specifically, we estimate that this measure would initially
result in an annual funding reduction of about $5 million for the public resources
account and initially almost $25 million for an account that can be used to support any
program eligible for Proposition 99 funding.
However, while this measure would reduce revenues for other Proposition 99
accounts, it would also initially provide significant increases in funding in the new
accounts created under this measure for activities comparable to those now funded
through Proposition 99. This includes health education and tobacco research, hospital
services, and physician services. In the aggregate, these activities could initially
experience a net gain in funding of almost $950 million if this measure were enacted.
Proposftfon 10. Proposition 10 would receive full backfill funding under the terms
of this measure. We estimate that this backfill would initially amount to about
$180 million annually.
Breast Cancer Fund. No backfill funding would be provided for the Breast Cancer
Fund to offset the loss of revenues resulting from the tax increases proposed in this
measure. However, this measure would allocate a set portion of the new tax revenues
for breast cancer research and breast cancer early detection services, with the result that
these activities initially would likely experience a net gain of about $80 million
annually.
Revenues and Costs From Provisions Affecting Public Hospitals
Some of the hospital emergency services funding provided under this measure
could be allocated to public hospitals licensed to state and local agencies, such as those
¯ run by UC, counties, cities, and health care districts. This and certain other provisions of
the measure could potentially result in increased revenues and expenditures for
support of these hospital operations. The magnitude of the fiscal effects of all of these
provisions is unknown, but is likely to result in a net financial gain for hospitals
operated by state and local government agencies up to the low hundreds of millions of
dollars annually on a statewide basis.
Fiscal Impact on State and Counties From Children’s Coverage Provisions
Long-Term Increase in State Costs for Increased HFP Enrollment. In the short term,
the revenues allocated by this measure to expand HFP would probably exceed the costs
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to make additional children eligible for health coverage. This would particularly be the
case in the early years as enrollment gradually increased. Any excess revenues for
expanding children’s health coverage would be reserved to support this same purpose
in future years.
Over time, however, as the excise tax revenues allocated for this purpose declined
(for the reasons mentioned above) and the number of children enrolled in HFP grew,
the costs of the expanded HFP could eventually exceed the available revenues. Current
state law would permit MRMIB to limit enrollment in the program to prevent this from
occurring. If actions were not taken to offset program costs at that point, however,
additional state financial support for the program would be necessary. These potential
long-term state costs are unknown but could be significant.
State and County Savings From Shift in Children’s Coverage. This measure allows
some children now receiving health coverage in local health coverage programs, such as
CHIM, to instead be enrolled in the expanded HFP. Also, some children in low-income
families receiving health care from counties without local health initiatives would be
likely to become enrolled in HFP. These changes would likely result in unknown, but
potentially significant, savings on a statewide basis to local governments, particularly
for counties.
The Medi-Cal Program could also experience some state savings for emergency
services as some children would instead receive their coverage for these and other
services through HFP. These savings to the state could reach the tens of millions of
dollars annually unless the state decided, as this measure permits, to have these
children continue to receive emergency services through Medi-Cal.
Net Increase in State Costs From Pilot Projects and Simplified Enrollment. This
measure requires MRMIB and DHS to simplify the procedures for enrolling ~and
keeping children in HFP and Medi-Cal coverage. For example, among other changes,
these provisions could allow applicants to "self-certify" their income and assets on their
applications for coverage without immediately providing employer or tax documents to
verify their financial status. From an administrative perspective, some changes that
simplified enrollment rules would reduce state costs, while others, such as changes in
computer systems for enrollment activities, would likely increase state costs. As regards
caseloads, these changes are likely to increase program enrollment and, therefore, costs
for the state. This would occur because children who are eligible for, but not enrolled in,
Medi-Cal and HFP would be signed up for medical benefits and existing enrollees
continued to be served in these programs.
As noted earlier, this measure also directs the state to establish a pilot project to
provide health coverage for uninsured children in families with incomes above
300 percent of the FPL. This would also increase state caseload costs.
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The net fiscal effect of these provisions is an increase in state costs that could exceed
$100 million annually after a few years. Some of these costs could be paid for using the
new excise tax revenues generated under this measure.
Potential State and Local Savings on Public Health Costs
Currently, the state and local governments incur costs for providing (1) health care
for low-income persons and (2) health insurance coverage for state and local
government employees. Consequently, changes in state law that affect the health of the
general populace would affect publicly funded health care costs. Because this measure
is likely to result in a decrease in the consumption of tobacco products which have been
linked to various adverse health effects, it would probably reduce state and local health
care costs over the long term.
Some of the health programs funded in this measure are intended to prevent
individuals from experiencing serious health problems that could be costly to treat. To
the extent that these prevention efforts are successful and affect publicly funded health
care programs, they are likely to reduce state and local government health care costs
over time. In addition, the proposed expansion of these state health programs could
reduce county costs for providing health care for adults and children in low-income
families.
The magnitude of state and local savings from these factors is unknown but would
likely be significant.
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Proposition 89
Political Campaigns. Public Financing. Corporate Tax Increase.
Contribution and Expenditure Limits. Initiative Statute.
OVERVIEW OF THE MEASURE
This proposition makes major changes to the way that political campaigns for state
candidates and ballot measures are funded. Candidates could choose to receive public
funding for the costs of their campaigns. For those candidates choosing not to receive
public funding, existing limits on the amount of political donations ("contributions")
would be lowered. Figure I shows the main provisions of the measure, which are
discussed in more detail below.
Figure 1
Proposition 89: Main Provisions
Public Funding for Political Candidates
A candidate for state office meeting certain requirements could receive
state funds to pay for the costs of a political campaign.
¯The amount of state funds that a candidate would receive would go up
if an opponent spent more in private funds.
Lower Contribution Amounts for Privately Funded Candidates
¯ For candidates choosing not to receive public funding, the amount of
money that could be collected from each individual, corporation, or
other group would be lower than is currently the case.
I// Contribution Restrictions for State Ballot Measures
¯Places new limits on contributions to candidates’ efforts to support or
oppose ballot measures.
¯Places new limits on contributions from corporations to support or
oppose ballot measures.
Higher Corporate Taxes
¯ Increases tax rate on corporations and financial institutions. For
corporations, tax rate would increase from 8.84 percent to 9.04 percent.
For financial institutions, tax rate would increase from 10.84 percent to
11.04 percent.
o Raises over $200 million each year to implement the measure.
BACKGROUND
Current Limits on Political Contributions. Candidates for state offices collect
private donations from individuals, corporations, political parties, and other
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organizations (such as labor unions and nonprofit organizations) to pay for the costs of
their political campaigns. The maximum amount of money that each person or group
can give to a candidate is determined by state law. The limits were last changed when
voters approved Proposition 34 at the November 2000 general election. Current limits
on the amount of money that can be given depend on the office being sought and who
is giving the donation. For instance, an individual can give a candidate for the state
Assembly a donation of up to $3,300. On the other hand, a political party can give that
same candidate as much money as it chooses. A candidate can accept donations any
time before an election and can spend without limit any money that is collected.
Role of Committees and Independent Expenditures. Rather than make donations
directly to candidates, some individuals and groups choose to make political donations
to "committees." These committees take donations and then decide which candidates to
give money. For instance, one type of committee--a small contributor committee--
accepts donations of up to $200 from more than 100 individuals and then distributes the
funds to candidates. Other individuals, groups, and committees choose to spend money
on political campaigns without giving money directly to candidates. Instead, they make
"independent expenditures" without coordinating with the candidate. These
independent expenditures, such as television commercials or newspaper
advertisements, may encourage voters to support or oppose a candidate. There are no
limits on the amount of money that can be donated for or spent on independent
expenditures.
Ballot Measures. There are no limits on the amount of money that can be collected
or spent for and against state ballot measures (propositions).
State Government’s Responsibilities. The state’s campaign finance laws are
administered by the Secretary of State (SOS) and the Fair Political Practices Commission
(FPPC). Under state law, individuals and groups must tell SOS how much money has
been given, received, and spent on political campaigns. This information is available to
the public--generally on the Internet. The FPPC is in charge of enforcing the laws to
make sure candidates and donors obey the rules. The FPPC can assess fines on
candidates violating election laws.
PROPOSAL
This measure makes significant changes to state laws regarding the financing of
campaigns for elected state offices and state ballot measures. The measure’s provisions
regarding candidates for office generally affect only state elected officials (see Figure 2).
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Figure 2
State Elected Officials Covered by
Proposition 89
Statewide Officials
Governor
Lieutenant Governor
Attorney General
Secretary of State
Treasurer
Controller
Insurance Commissioner
Superintendent of Public Instruction
Legislature
Senators (40)
Assembly Members (80)
Board of Equalization Members (4)
Public Funding for Political Candidates
The measure establishes a system for candidates to receive public funds to pay for
the costs of campaigning for state offices.
Requirements to Receive Money
In order to receive public funding for a campaign, a candidate would have to meet
certain requirements:
$5 Donations and Signatures. A candidate would be required to collect a
number of $5 donations ("qualifying contributions") and signatures from
residents prior to a primary election. As shown in Figure 3, the required
number of donations would range from 750 to 25,000 depending on the office
sought. The measure requires that these donations be paid to the state.
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Figure 3
Proposition 89
Public Financing Provisions for Major Party Candidates
Assembly 750 $]0,000 $250,000 $400,000
Senate ],500 .20,000 500,000 800,000
Boar6 o! Equalization 2,000 a0,000 250,000 400,000
Statewide officials 7,500 75,000 2,000,000 2,000,000
Governor 25,000 250,000 10,000,000 15,000,000
Private Contributions. To receive public funding, a candidate could not
receive private campaign funding, with two main exceptions. First, beginning
up to 18 months prior to a primary election, the measure allows candidates to
collect and spend start-up contributions, or "seed money." (These funds
could be used, for instance, to pay costs for collecting the qualifying
contributions and signatures.) The measure restricts these types of donations
to $100 each. Total donations would be limited to between $10,000 and
$250,000 depending on the office (see Figure 3). These funds could only be
spent until 90 days prior to a primary election. Second, ~andidates would
continue to be able to receive donations from political parties. Donations from
political parties would be subject to the same limits as for candidates
choosing not to receive public funds (described below).
Other Requirements. By accepting public funding, a candidate would be
subject to some additional requirements. For example, candidates would be
required to participate in public debates before each election. In addition,
candidates could not use their personal funds to pay for campaign costs.
Public Funding Provided
Those candidates meeting the requirements described above would become eligible
to receive public funds. As shown in Figure 3, the amount of funding would vary based
on (1) the office sought and (2) whether it was a primary or general election. For
instance, for a primary election, a candidate running for the Assembly could receive
$250,000 for the primary election and an additional $400,000 for the general election (if
successful in the primary election). A candidate for Governor could receive $10 million
in the primary election and an additional $15 million in the general election. The FPPC
would administer the funds and make disbursements using a debit card system.
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Additional Public Funds. In cases where a candidate’s opponent chose not to
participate in the public financing system, the measure allows a participating candidate
to receive additional funds in some cases. Specifically, if an opponent spent more in
private funds than the amount of public .funds available, additional .public funds would
be provided to the candidate on a dollar-for-dollar basis. Similarly, a participating
candidate would receive additional public funds if independent expenditures were
made in support of an opponent. The maximum amount of additional public funds that
a candidate could receive is capped under the measure (generally five times the original
amount provided to a candidate and four times the amount for a candidate for
Governor). For instance, the maximum amount of additional public funds that a
candidate for the Assembly could receive for a primary election would be $1.25 million.
Funds for Expenses While in Office. Under current law, state elected officials
generally may use leftover campaign funds to pay for some expenses while in office.
Under the measure, those candidates who accept public financing and win their election
would be eligible to receive annual payments to cover similar expenses. Members of the
Legislature would receive $50,000 each year while in office and other state officials
would receive $100,000 each year.
Minor Party and Independent Candidates
The amounts shown in Figure 3 are for candidates representing major parties
(generally, parties whose nominee for Governor in the last election received at least
10 percent of the vote). Under the measure, candidates from minor parties and
independent candidates are eligible to receive smaller amounts of public funds.
Depending on the situation, a minor party or independent candidate could receive as
much as one-half of the amount that a major party candidate receives.
Lower Contribution Amounts for Privately Funded Candidates
Lower Campaign Contributions. For those candidates who choose not to participate
in the public financing of campaigns, the measure imposes new limits for campaign
donations to candidates. The measure’s limits generally are much more restrictive than
is now the case. For instance, currently individuals, corporations, and other groups can
donate $3,300 per election to a candidate for the Legislature. This measure would
restrict contributions to $500 for legislative candidates. Currently, political parties can
give unlimited amounts to candidates. Under the measure, a political party’s donations
would be limited. For example, a political party could give a privately funded candidate
for Assembly up to $20,000 for a general election. These new limits are summarized in
Figure 4.
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Figure 4
Campaign Contribution Limits for Privately
Funded Candidates
(For Each Election)
Assembly $3,300 $500 $6,700 $2,500 No limit $20,000
Senate 3,300 500 6,700 2,500 No limit 40,000
Board of Equalization 5,600 500 11,100 2,500 No limit 20,000
Statewide officials 5,600 1,000 11,100 2,500 No limit 200,000
Governor 22,300 1,000 22,300 2,500 No limit 750,000
a Amounts shown are for general elections. Prima~j election limits are between one-half and two-thirds
of the amounts shown. Political party limits would apply to both privately and publicly funded
candidates.
Other Restrictions on Campaign Contributions. The measure also adds other types
of restrictions on campaign contributions related to privately funded candidates, which
are summarized in Figure 5.
Independent Expenditure Contribution Limit. The measure restricts donations
to $1,000 each year to a committee for independent expenditures. As under
current law, individuals could make unlimited independent expenditures if
they spent the money on their own, without the use of a committee.
Overall Donation Limit. The measure also adds new limits on theoverall
amount of political contributions that a person or group can make to
candidates and committees in a year. The total amount that could be donated
to all types of committees to support or oppose state candidates would be
limited to $15,000. Of this total, however, any contributions over $7,500
would be required to go for independent expenditures.
Lower Political Party Contribution Limit. The measure lowers an existing
limit on annual contributions to political parties from $27,900 to $7,500.
Lobbyist Restrictions. Under existing law, lobbyists are prohibited from
making contributions to candidates. The measure also forbids lobbyists from
making donations to political parties and committees.
State Contractor Restrictions. Under existing law, those individuals and
entities receiving state contracts are not subject to any special restrictions on
political contributions. The measure forbids, in some instances, those
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receiving state ’contracts from making donations to candidates, political
parties, and committees.
Figure 5
Other Changes Under Proposition 89
Candidate-Related Contributions
¯Total annual contribution to an independent
expenditure committee to support or oppose a
candidate.
¯Total annual contributions to political parties for
candidate-related expenditures.
°Total annual contributions to all types of
committees for candidate-related expenditures.
No limit $1,000
$27,900 7,500
No limit 15,000a
Ballot Measure Contributions
¯ Contributions for or against a ballot measure No limit
where a candidate is significantly involved.
¯Contributions for or against a ballot measure by a No limit
corporation,
a Contributing more than $7,500 is allowed only for independent expenditures~
$10,000
10,000
Contribution Restrictions for State Ballot Measures
Unlike donations for candidates, the amount of money donated by entities to
support or oppose state ballot measures currently is not subject to contribution limits.
This measure places two new restrictions on donations for ballot measures:
First, when a candidate for state office is significantly involved with a
committee that supports or opposes a ballot measure, individuals,
corporations, and other groups would be limited to a $10,000 contribution to
that committee.
Second, corporations would be prohibited from making contributions or
spending more than $10,000 to support or oppose a ballot measure. (Non-
profit corporations meeting certain requirements would not be subject to this
restriction.) Corporations, however, could establish special committees to
collect voluntary donations from .employees for additional expenditures.
Fiscal Provisions
Higher Corporate Taxes. In order to pay for the measure’s provisions (primarily for
the public financing of campaigns), the measure increases taxes on corporations and
financial institutions beginning in 2007. The measure increases the income tax rates paid
by corporations from 8.84 percent to 9.04 percent. For financial institutions, the rate
would rise from 10.84 percent to 11.04 percent.
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Other Revenues. In addition, the measure would result in other, small sources of
revenues, primarily the collection of candidates’ $5 contributions and fines on
candidates violating election laws. (Under current law, fines for violating election laws
are deposited into the state’s General Fund.)
Total Amount of Funds. The total amount of funds that could be held by the state at
any time for the measure’s purposes would be limited to about $900 million. (The
formula determining this amount would be adjusted for inflation every two years.) Any
amount over this limit would be transferred to the state’s General Fund. If there were
not enough money to fully fund the measure’s provisions, the measure authorizes FPPC
to proportionately reduce the amount of funds available to each candidate.
Other Provisions
Administration Costs. The measure provides that a minimum of $3 million
(adjusted for inflation every two years) of the new funds would go to FPPC to pay for
the administration of the measure. The SOS would also be required to use some of the
funds for a voter education campaign.
Election Procedures. The measure makes a number of other changes to election
procedures. For instance, the measure prohibits any candidate (whether receiving
public financing or not) from collecting campaign donations earlier than 18 months
prior to a primary election. Also, the measure changes what counts as independent and
political expenditures prior to an election. These changes would result in more
spending being subject to donation limits and disclosure requirements.
FISCAL EFFECTS
New Revenues. We estimate that the measure would raise over $200 million
annually. Virtually all of this amount would come from the increased taxes on
corporations and financial institutions. Small amounts would come from the collection
of candidates’ $5 contributions and fines on candidates violating election laws. Since
fines for violating election laws are currently deposited in the state’s General Fund, the
measure would slightly reduce General Fund revenues (by about $1 million annually).
New Spending. The new funds would pay for costs associated with the measure. We
estimate costs to administer the provisions of the measure and pay for voter education
would be in the range of several million dollars each year. (There would be additional
one-time costs, largely for computer systems and voter education, to set up the public
financing of campaigns for the first time.) The remaining funds would be available for
candidates who choose to receive public funds for their political campaigns. The
amount of spending on the public financing of election campaigns would depend on a
number of factors and vary from election to election. Among the factors affecting
spending would be:
The number of candidates accepting public funds.
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The amount of money spent by candidates not receiving public financing
(which would determine the level of any additional public funds).
The measure provides that total spending could not exceed the amount of money
available from the increased revenues. Assuming that the number of candidates in each
election does not increase significantly from current levels, there probably would be
sufficient funds available to provide all candidates with the amounts allowed under the
measure.
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Proposition 90
Government Acquisition, Regulation of Private Property.
Initiative Constitutional Amendment.
SUMMARY
This measure amends the California Constitution to:
Require government to pay property owners for substantial economic losses
resulting from some new laws and rules.
Limit government authority to take ownership of private property.
This measure applies to all types of private property, including homes, buildings,
land, cars, and "intangible" property (such as ownership of a business or patent). The
measure’s requirements apply to all state and local governmental agencies.
PAYING PROPERTY OWNERS FOR ECONOMIC LOSSES
State and local governments pass laws and other rules to benefit the overall public
health, safety, or welfare of the community, including its long-term economy. (In this
analysis, we use the term "laws and rules" to cover a variety of government
requirements, including statutes, ordinances, and regulations.)
In some cases, government requirements can reduce the value of private property.
This can be the case, for example, with laws and rules that (1) limit development on a-
homeowner’s property, (2) require industries to change their operations to reduce
pollution, or (3) restrict apartment rents.
Proposal
This measure requires government to pay property owners if it passes certain new
laws or rules that result in substantial economic losses to their property. Below, we
discuss the types of laws and rules that would be exempt from the measure’s
requirements and those that might require government compensation.
What Laws and Rules Would Not Require Compensation?
All existing laws and rules would be exempt from the measure’s compensation
requirement. New laws and rules also would be exempt from this requirement if
government enacted them: (1) to protect public health and safety, (2) under a declared
state of emergency, or (3) as part of rate regulation by the California Public Utilities
Commission.
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What Laws and Rules Could Require Compensation?
While the terms of the measure are not clear, the measure provides three examples
of the types of new laws and rules that could require compensation. These examples
relate to land use and development and are summarized below.
Downzoning Property. This term refers to decisions by government to reduce
the amount of development permitted on a parcel. For example, a
government action to allow construction of three homes on an acre where five
homes previously had been permitted commonly is called "downzoning."
Limitations on the Use of Private Air Space. This term generally refers to
actions by government that limit the height of a building. For example; a
government rule limiting how tall a building may be to preserve views or
maintain historical character often is called a limitation of "air space."
Eliminating Any Access to Private Property. This term could include actions
such as closing the only public road leading to a parcel.
In addition to the examples cited above, the broad language of the measure suggests
that its provisions could apply to a variety of future governmental requirements that
impose economic losses on property owners. These laws and rules could include
requirements relating, for example, to employment conditions, apartment prices,
endangered species, historical preservation, and consumer financial protection.
Would Government Pay Property Owners for All Losses?
Under current law and court rulings, government usually is required to compensate
property owners for losses resulting from laws or rules if government’s action deprives
the owners of virtually all beneficial use of the property.
This measure specifies that government must pay property owners if a new law or
rule imposes "substantial economic losses" on the owners. While the measure does not
define this term, dictionaries define "substantial" to be a level that is fairly large or
considerable. Thus, the measure appears to require government to pay property owners
for the costs of many more laws and rules than it does today, but would not require
government to pay for smaller (or less than substantial) losses.
Effects on State and Local Governments
The measure’s provisions regarding economic losses could have a major effect on
future state and local government policymaking and costs. The amount and nature of
these effects, however, is difficult to determine as it would depend on how the courts
interpreted the measure’s provisions and how the Legislature implemented it. Most
notably:
How Many Laws and Rules Would Be Exempt From the Requirement That
Government Pay Property Owners for Losses ? The measure does not require
government to compensate property owners under certain circumstances
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(such as actions to protect public health and safety). If these exemptions were
interpreted broadly (rather than narrowly), fewer new laws and rules could
require compensation.
How Big Is a Substantial Economic Loss? If relatively small losses (say, less
than a 10 percent reduction in fair market value) to a property owner
required compensation, government could be required to pay many property
owners for costs resulting from new laws and rules. On the other hand, if
courts ruled that a loss must exceed 50 percent of fair market value to be a
substantial economic loss, government would be required to pay fewer
property owners.
Under the measure, state and local governments probably would modify their
policymaking practices to try to avoid the costs of compensating property owners for
losses. In some cases, government might decide not to create laws and rules because of
these costs. In other cases, government might take alternative approaches to achieving
its goals. For example, government could:
o Give property owners incentives to voluntarily carry out public objectives.
,Reduce the scope of government requirements so that any property owners’
losses were not substantial. ¯
Link the new law or rule directly to a publi~ health and safety (or other
exempt) purpose.
There probably would be many cases, however, where government would incur
additional costs as a result of the measure. These would include situations where
government anticipated costs to compensate property owners at the time it passed a
law--as well as cases when government did not expect to incur these costs. The total
amount of these payments by government to pro.perty owners cannot be determined,
but could be significant on a statewide basis.
LIMITING GOVERNMENT AUTHORITY TO TAKE PROPERTY
Eminent domain (also called "condemnation") is the power of local, state, and
federal governments to take private property for a public use so long as government
compensates the property owner. (In some cases, government has given the power of
eminent domain to private entities, including telephone and energy companies and
nonprofit hospitals. In this analysis, these private entities are included within the
meaning of "government.")
Over the years, government has taken private property to build roads, schools,
parks; and other public facilitie.s. In addition to these uses of eminent domain,
government also has taken property for public purposes that do not include
construction of public facilities. For example, government has taken property to: help
develop higher value businesses in an area, correct environmental problems, enhance
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tax revenues, and address "public nuisances" (such as hazardous buildings, blight, and
criminal activity).
Proposal
This measure makes significant changes to government authority to take property,
including:
Restricting the purposes for which government may take property.
o Increasing the amount that government must pay property owners.
¯Requiring government to sell property back to its original owners under
certain circumstances.
Below, we discuss the major changes proposed by the measure, beginning with the
situations under which government could--and could not--take property.
Under What Circumstance Could Government Take Property?
Under the measure, government could take private property to build public roads,
schools, parks, and other government-owned public facilities. Government also could
take property and lease it to a private entity to provide a public service (such as the
construction and operation of a toll road). If a public nuisance existed on a specific
parcel of land, government could take that parcel to correct the public nuisance. Finally,
government could take property as needed to respond to a declared state of emergency.
What Property Takings Would Be Prohibited?
Before taking property, the measure requires government to state a "public use" for
the property. The measure narrows the definition of public use in a way that generally
would prevent government from taking a property:
To Transfer it to Private Use. The measure specifies that government must
maintain ownership of the property and use it only for the public use it
specified when it took the property.
To Address a Public Nuisance, Unless the Public Nuisance Existed on That
Particular Property. For example, government could not take all the parcels
in a run-down area unless it showed that each and every parcel was blighted.
As Part of a Plan to Change the Type of Businesses in an Area or Increase
Tax Revenues. For example, government could not take property to promote
development of a new retail or tourist destination area.
In any legal challenge regarding a property taking, government would be required
to prove to a jury that the taking is for a public use as defined by this measure. In
addition, courts could not hold property owners liable to pay government’s attorney
fees or other legal costs if the property owner loses a legal challenge.
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How Much Would Government Have to Pay Property Owners?
Current law requires government to pay "just compensation" to the owner before
taking property. Just compensation includes money to reimburse the owner for the
property’s "fair market value" (what the property and its improvements would sell for
on an open market), plus any reduction in the value of remaining portions of the parcel
that government did not take. State law also requires government to compensate
property owners and renters for moving costs and some business costs and losses.
The measure appears to increase the amount of money government must pay when
it takes property. Under the measure, for example, government would be required to
pay more than a property’s fair market value if a greater sum were necessary to place
the property owner "in the same position monetarily" as if the property had never been
taken. The measure also appears to make property owners eligible for reimbursement
for a wider range of costs and expenses associated with the property taking than is
currently the case.
When Would Government Sell Properties to Former Owners?
If government stopped using property for the purpose it stated at the time it took
the property, the former owner of the property (or an heir) would have the right to buy
back the property. The property would be assessed for property tax purposes as if the
former owner had owned the property continuously.
Effects on State and Local Governments
Government buys many hundreds of millions of dollars of property from private
owners annually. Relatively few properties are acquired using government’s eminent
domain power. Instead, government buys most of this property from willing sellers.
(Property owners often are aware, however, that government could take the property
by eminent domain if they did not negotiate a mutually agreeable sale.)
A substantial amount of the property that government acquires is used for roads,
schools, or other purposes that meet the public use requirements of this measure--or is
acquired to address specific public nuisances. In these cases, the measure would not
reduce government’s authority to take property. The measure, however, likely would
increase somewhat the amount that government must pay property owners to take their
property. In addition, the measure could result in willing sellers increasing their asking
prices. (This is because sellers could demand the amount that they would have received
if the property were taken by eminent domain.)The resulting increase in government’s
costs to acquire property cannot be determined, but could be significant.
The rest of the property government acquires is used for purposes that do not meet
the requirements of this measure. In these cases, government could not use eminent
domain and could acquire property only by negotiating with property owners on a
voluntary basis. If property owners demanded selling prices that were more than the
amount government previously would have paid, government’s spending to acquire
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property would increase. Alternatively, if property owners did not wish to sell their
property and no other suitable property was available for government to purchase,
government’s spending to acquire property would decrease.
Overall, the net impact of the limits on government’s authority to take property is
unknown. We estimate, however, that is it likely to result in significant net costs on a
statewide basis.
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