To Raise Taxes, Some Pin Hopes on State Ballot Box

SACRAMENTO — Frustrated by state lawmakers who refuse to consider new taxes, advocates for spending more money on education and healthcare are taking a cue from Gov. Arnold Schwarzenegger by appealing directly to California voters.

Dismissing concerns that it might be bad policy to budget at the ballot box, activists are promoting at least three proposed tax increases that appear headed for the electorate:

* A tax on millionaires to pay for expanded mental health services.

* A hike in corporate property taxes to hire more teachers, pay them more and establish universal free preschool.

* A surcharge on telephone bills to support emergency room services.

“Voters are smart enough to do the math and recognize if an extra dollar or two on their phone bills can keep emergency rooms open, it’s probably a good value,” said Kelly Hayes-Raitt, spokeswoman for the Coalition to Preserve Emergency Care.

But it’s not just people outside state government who are behind this approach. Some key Democrats in the Assembly and the Senate -- including members of budget committees -- support the measures.

“It’s not the perfect way to do this,” said Assembly Budget Committee Chairman Darrell Steinberg (D-Sacramento), a leader of the mental health campaign. “But for all the talk there has been in the Legislature over the last few years about trying to raise taxes, it hasn’t exactly happened.”

Education boosters say it’s a matter of priorities. With every budget item under scrutiny this year, schools need a boost, said supporters of the corporate property tax increase.

“We’re not making education a priority in terms of the state’s investments,” initiative spokesman Jim Farrell said. “A handful of corporations at the top are able to game the system and duck taxes, leaving kids and schools holding the bag.”

Organizers of the proposed mental health expansion recently submitted their petition to the secretary of state’s office with twice as many signatures as required to qualify for the ballot. The two other campaigns are expected to follow close behind.

These campaigns are well financed, and organizers are optimistic. They point to public opinion polls suggesting that Californians might be willing to accept certain tax hikes -- provided that they are for a good cause. And it helps if the taxes don’t directly hit the average voter’s pocketbook.

The initiatives would join an already crowded November ballot. In addition to presidential, congressional and state legislative contests, other election issues will compete for voters’ attention. They include a push by businesses to repeal a law requiring large companies to provide employee healthcare, a $9.9-billion high-speed rail bond issue, and a proposal to prohibit the state from using money set aside for cities and counties to solve its budget problems.

Increasing taxes by popular vote raises some complicated policy questions. In essence, such moves reduce legislators’ ability to decide how best to spend the state’s money.

Some lawmakers worry that voters might tolerate only a limited number of new taxes -- if any -- and, as a result, budget priorities may be skewed.

Critics caution that money raised at the ballot box would be allocated not on the basis of need but on the basis of which groups can raise enough money to win a statewide campaign. Legislators would also be prohibited from transferring voter-approved money, even if more urgent needs arose.

Under the proposed corporate property tax increase, for instance, voters could create universal free preschool and increase teachers’ pay while freeways, healthcare and other services suffered in the ongoing budget crunch.

Schwarzenegger, despite his populist leanings and willingness to let voters decide issues, is holding off on official positions on the measures until they qualify for the ballot.

But spokeswoman Margita Thompson says the governor remains firmly against new taxes. “The governor ran against taxes and thinks new taxes would hurt the state’s economy,” she said.

Fiscal conservatives say Californians showed their distaste for higher taxes in March. Proposition 56, a ballot measure that would have reduced the number of legislative votes needed to pass them, failed overwhelmingly.

They say the same will happen with the tax proposals in November.

“The public doesn’t like tax increases on the ballot just to line the pockets of special interests,” said Allan Zaremberg, president of the California Chamber of Commerce.

Sponsors of the measures disagree. They prefer to look at another part of the March election results: local sales tax increases tied to specific programs that were approved by voters in six cities and counties. In Alameda County, 71% of voters supported raising the sales tax by 0.5% to fund trauma centers and mental health care for the poor.

In November 2002, Los Angeles County residents voted to increase property taxes to support the county’s emergency and trauma care system. It was the first time county voters had willingly increased the property tax since passage of California’s tax-slashing Proposition 13 in 1978.

In crafting their strategy for next November, supporters of the proposed tax hikes have stayed away from across-the-board increases. Instead, they have in some cases turned to taxes that are paid by small segments of the population and have no direct connection to the programs they would fund.

“Groups are looking for creative ways to match taxes that would not be viewed as particularly burdensome with attractive services,” said Mark Baldassare, an analyst at the Public Policy Institute of California. “They are thinking outside the box. Mixing and matching.”

A recent institute poll in Los Angeles County showed that 68% of likely voters would support a tax on millionaires to pay for mental health programs.

The November measure would raise roughly $600 million from a new 1% tax on every dollar earned over $1 million.

Opponents believe voter enthusiasm will fizzle.

“Californians are getting to the point where they understand that taxing somebody else is a failed policy because it ends up coming around to bite you sooner or later,” said Jon Coupal, president of the Howard Jarvis Taxpayers Assn. “Why punish our most innovative and entrepreneurial citizens? They can just move out of state.”

The Jarvis group is preparing to mount a vigorous campaign against another measure headed for the ballot: the California Teachers Assn.’s proposal to increase corporate property taxes by about $6 billion to raise teachers’ salaries, hire more of them, buy textbooks and offer free preschool.

The proposal would change the way property taxes were assessed and would eliminate some of the provisions of Proposition 13 affecting corporate property assessments.

Backers of the idea say their proposal fares well in public opinion polls.

“It’s a concept that has extremely strong support from voters,” said Gale Kaufman, a consultant who is helping organize the campaign for what has been named the Improving Classroom Education Act.

“They see how rates on commercial real estate have remained stagnant.”

But other groups question why the teachers association should have first claim on the money.

“If we have one shot at getting voters ... it’s really important to get it right,” said Kevin Gordon, executive director of the California Assn. of School Business Officials. “Taking almost all the marbles and putting them into teacher compensation, I think, is short-sighted.”

Some healthcare advocates privately raise similar concerns about the California Medical Assn.’s proposal to put a new tax of as much as 3% on telephone use to provide more money for emergency physicians, trauma centers and the 911 system.

Under the current proposal, a big chunk of the money would go to pay hospitals instead of directly helping Californians in need, they point out.

The medical association has a huge fight on its hands. SBC, the telecommunications giant, has already kicked in $5 million to campaign against the measure.

Those who favor new taxes acknowledge that going to the ballot with them is messy. But they say it might be their only option at this point.

Asking voters instead of lawmakers to make state budget decisions is not a popular notion in Sacramento.

But with the lack of momentum for taxes in the Legislature, said Sen. Sheila Kuehl (D-Santa Monica), a budget committee member, “it’s an act of desperation.”