Governor wins support for 57, 58

Campus Times
March 5, 2004

by Matt Paulson
Special to the Campus Times
Kenneth Todd Ruiz
Editor in Chief

Mirroring the reluctant support voiced by politicians and newspaper editorials, voters throughout the state on Super Tuesday lent their support to the propositions Gov. Arnold Schwarzenegger declared will save California.

Propositions 57 and 58 both passed by wide margins.

“I think it’s the best of a bad situation,” said City of La Verne Mayor Jon Blickenstaff. “I don’t like the idea of that big of a bond to pay off debt, but I don’t think we have a choice at this time.”

Of the other two propositions facing California, Proposition 55 – which will float a bond for more than $12 billion to build and renovate facilities from public kindergarten to universities – barely slid by.

Proposition 56, designed to balance the budget with several novel approaches, was criticized for lowering the votes needed for the legislature to pass budgetary measures. The initiative died with two thirds of votes cast against it.

But most eyes are on Propositions 57 and 58, the fates of which are linked. If one fails, they both fail.

Proposition 57 is an attempt to stop the budgetary bleeding. It authorizes the State to issue up to $15 billion in bonds that would help California finance its budget deficit.

To repay the bonds, the State will take a larger portion of local governments’ sales tax revenue.

The State will cover this loss by increasing the city’s cut of local property tax. Then, to complete the circle, the State will reimburse schools for their contributions to the local governments by tapping into the State’s General Fund.

This debt juggling is referred to as the “triple flip.”

“Together Proposition 57 and Proposition 58 will provide California’s leaders the tools necessary to restore confidence in the financial management of the State,” said Dean Okimoto of the McGeorge School of Law at the University of Pacific.

Okimoto added, “However, out-of-control borrowing has made California the lowest credit rated state in the nation, which is on par with many Third World countries. Moreover, Proposition 57 will plunge California $15 billion deeper in debt, plus billions more in interest.”

Assistant City Manager Bob Russi said the council took an action to support propositions 57 and 58. Russi echoed Blickenstaff’s assessment of the bond measure.

City of La Verne Finance Officer Ron Clark is less enthusiastic. “I’m a little skeptical of the whole thing,” he said. “It’s a little convoluted.”

Clark said that one problem is that the City of La Verne receives sales tax revenue monthly and will only receive the reimbursement funds on a semi-annual to annual basis, which will definitely affect the City financially.

“We’re losing sales tax,” Clark said. “Are they going to give us back what we lose? Somehow, we’re supposed to be made whole.”

Proposition 58 is designed to balance General Fund budgets in the future.

The proposition also allows for midyear budget adjustments. This means the Governor can halt any current legislative activity throughout the fiscal year to declare a financial emergency and attempt to fix the problem.

It allows for a rainy day fund and also prohibits passing any further deficit bonds.

“It’s so they never have to do Proposition 57 again,” Clark said.

Fallout from the passage of these measures reaches the pockets of University of La Verne students receiving financial aid.

According to Leatha Webster, director of financial aid at ULV, although things do not look good for the Cal Grant program, Propositions 57 and 58 could mitigate the cuts.

“It will be a dreary situation if these bonds pass or not,” Webster said.

She said that the grants will be reduced from $9,708 to about $5,400 for new and returning students at public institutions, such as California State or University of California schools, but the impact at private schools will be less.

“For private institutions, it’s just for new students,” Webster said. “Continuing students have a leg up as it won’t affect them – at least this upcoming year.”

With the two propositions passed, she said there is some wiggle room that could lead to awards being raised, but not back to their previous levels.

“Because there is so much red ink, the Cal Grant program is going to change either way,” she said.