Fall Ballot Is a $46-Billion Question

By Robert Salladay

June 29, 2006 12 AM PT

Times Staff Writer

SACRAMENTO — Already cranky about tax increases and big-ticket bonds, California voters now face a November ballot that would break records in government spending.

Never before has so much taxpayer money been at stake in a California election: a total of $46 billion in five bond measures and four tax increases.

Voters will face a fusillade of messages over who should carry the burden of public programs. Private groups, not elected officials, say the four tax increase measures. Each asks a specific entity-- property owners, cigarette smokers, corporations and oil producers -- to pay for projects designed to benefit the public at large.

Tobacco companies are expected to spend tens of millions of dollars to defeat a $2.60-a-pack increase in cigarette taxes. Oil companies so far have given $10 million to defeat a tax on drilling. Big business is planning a fierce and expensive fight against an initiative limiting their political contributions and, thus, influence.

Set to be finalized today, the November ballot requires some complicated political footwork. Gov. Arnold Schwarzenegger will lead conflicting campaigns -- arguing against tax increases favored by his Democratic challenger even as he asks voters to approve more than $37 billion in multiple bonds to fund the biggest government building project in four decades.

For its part, the powerful California Teachers Assn. is supporting Schwarzenegger’s bond package at the same time it backs Democrat Phil Angelides for governor. Almost every major Democratic politician faces the same awkward dance.

Already, there is concern in Sacramento that voters could revolt against the entire lineup of taxes and bonds, prodded by two unrelated developments shadowing the debate.

First, Schwarzenegger and the California Republican Party are running TV ads against Angelides, telling viewers that taxes proposed in the Democrat’s platform will lead to job losses. Angelides counters that his tax increase -- less than $5 billion to aid education and other state needs, he says -- is relatively modest and is required to balance Schwarzenegger’s chronically unbalanced budget.

In addition, social measures on the ballot may heighten turnout by conservatives. They are expected to embrace two November propositions -- tougher sanctions on child sex offenders and a law requiring parents to be notified when an underage daughter seeks an abortion -- but they traditionally recoil at major government spending.

Most of the campaigns are working against recent history. Voters in June rejected a library bond and a tax increase on the wealthy to fund preschools, seven months after they rejected a broad slate of Schwarzenegger-backed measures.

Voters are skeptical of big bonds to pay for school construction as well, a recent Field Poll shows, after approving $25 billion in school bonds in 2002 and 2004. Cigarette smokers are the most vulnerable targets: Voters have approved two surcharges on them since 1988.

David McCuan, an expert on initiatives and a political science professor at Sonoma State, predicted that the tax increases, if not the bonds, would fail this year in part because voters tend to take out their anger on politicians by rejecting government spending.

“California voters like to be asked their opinion and they like to be able to turn down their date,” McCuan said. “They like to say no.”

Schwarzenegger and the Legislature this year approved for the November ballot four bonds and one transportation spending initiative, Proposition 1A. The latter would make it harder for Sacramento politicians to raid gasoline sales tax profits for non-transit projects.

The bonds, which require approval from a majority of voters, would pay for freeways, port construction, housing, parks, schools, levees, flood-control projects and urban development. Worried about voters turning negative as they move down the ballot, Schwarzenegger and the Legislature stacked their bonds at the front, the same tactic used unsuccessfully in November.

A bond measure worth $5.4 billion to improve the state’s water infrastructure also will be on the ballot. Schwarzenegger and the Legislature failed to approve this measure on their own, after Republicans asked for new reservoirs that Democrats opposed, so a private group gathered signatures to qualify it.

Fiona Hutton, spokeswoman for the water bond campaign, said proponents plan to run “a separate stand-alone campaign on its merits with its own funding.” Voters will embrace the measure because relatively few recent bonds have focused on ocean protection and water projects, she said.

The previous record for bond measures on the ballot was March 2004, when voters approved about $27 billion worth. Fearing a revolt this November, elected officials have moved to lighten the load to favor their own measures. Lawmakers and Schwarzenegger this week removed from the ballot a $10-billion bond for high-speed rail construction.

As the bond debate goes on, the tax increases must fend for themselves before a skeptical public.

One of the loudest efforts could come from oil companies. A group of well-heeled Californians, including movie producer Steven Bing, is backing a measure to charge oil producers as much as $400 million a year to fund research into alternative fuels. Supporters hope that anger at oil companies for their record high profits and gas prices translates into a yes vote.

Under the banner of Californians Against Higher Taxes, oil companies plan a multilayered argument that goes beyond the notion that taxes are bad. They claim it would fund a government bureaucracy with 50 political appointees and reduce general fund and property tax revenues.

“Whether it’s the taxes or the bureaucracy created or higher fuel prices or the higher dependence on foreign oil, I think all of those things will come into play with voters,” said Allan Zaremberg, president of the California Chamber of Commerce.

Environmentalists, school and municipal officials announced their opposition Tuesday to yet another initiative that would curb the ability of local governments to seize property under eminent domain for development. Their argument looks like many others this November: It would cost taxpayers too much money.

At the same time, health groups will argue that cigarette smokers should pay an extra $2.60 a pack for disease research and other medical programs -- triple the existing 87-cent tax. David Metz, a pollster working for the campaign, said raising the tobacco tax is appropriate because “it’s not just a way to raise money, but it’s also a way to improve public health.”

The major tobacco companies are just now forming opposition campaigns, and they have the most difficult task because only about 15% of Californians smoke. They are expected to claim that a high tax would create a black market in cigarettes that would reduce revenue from existing cigarette taxes.

Another measure, brought by a group of public school reformers, would charge a $50 parcel tax on property owners to pay for smaller classes and new textbooks. But this will coincide with Schwarzenegger’s message that he has fully funded schools and Angelides’ touting of his tax hikes to benefit education.

A final tax initiative, which qualified for the ballot Monday, would require corporations to finance public electoral campaigns -- historically a long shot -- through a 0.2% increase in their income tax rate. The initiative would drastically reduce contribution limits to campaigns, from $22,300 to $1,000 for a governor’s race, for example. And for corporations, it would put a $10,000 cap on donations to ballot committees.

Jamie Court, president of the Foundation for Taxpayer and Consumer Rights, which is supporting the initiative, said outside events may heighten its chances. “To the degree that corruption and the power of cash-rich lobbyists stay in the headlines, that helps,” he said.

But Zaremberg, of the California Chamber of Commerce, said the initiative is a mortal threat to businesses because it “cuts off their ability to participate in the political process” by limiting campaign contributions.

“It’s a virtual ban on being able to defend yourself,” he said.

Zaremberg predicted a major campaign against this initiative. Amid all the clutter this November, one message might resonate more than others: “The public,” he said, “does not want to spend tax dollars on negative campaigns that politicians run.”

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Proposed bonds and taxes

California voters must decide in November whether to approve spending a record-breaking amount of taxpayer money. On the ballot are:

Bonds

Proposition 1B: $19.9 billion: freeway and port infrastructure

Proposition 1C: $2.85 billion: housing program, urban development, parks

Proposition 1D: $10.4 billion: school construction

Proposition 1E: $4.09 billion: levee and flood control

$5.4 billion: flood control, water projects, parks*

Total: $42.6 billion

Taxes

$2.1 billion: Increase tax on cigarettes by $2.60 per pack for health programs*