California Voters Pass Simple-Majority Budget Rule

California voters approved a ballot measure to lower the threshold for the state Legislature to pass a budget and revoking lawmakers’ pay when a budget is late. Voters also said yes to making it harder to raise fees.

The budget measure, Proposition 25, won 55 percent to 45 percent yesterday, according to the California Secretary of State’s elections office. It lowers the margin needed to pass a budget from a two-thirds majority to simple majority. It doesn’t change the two-thirds vote needed to increase taxes.

California, the most populous U.S. state, has required supermajorities to approve budgets since 1933. Neither Republicans nor Democrats currently hold enough seats to meet the threshold alone, a situation that helped create a record 100-day delay in the approval of a spending plan this year. The Legislature has met its budget deadline five times in 30 years.

“It is a game changer,” said Senate President Pro Tem Darrel Steinberg, a Democrat from Sacramento. “There is no reason why the budget should be late now.”

Supporters of the measure, mostly public-employee unions such as the California Federation of Teachers, poured about $10 million into their effort, according to state campaign finance data. They said a simple-majority vote would end the legislative gridlock that leads to late budgets. In their campaign commercials, they highlighted the provision that takes away lawmakers’ pay when budgets are overdue.

Chevron Opposition

Opponents, led by Chevron Corp., as well as beer and wine distributors and the California Chamber of Commerce, plowed $15.8 million into defeating it. They said lowering the threshold to pass budgets could make it easier for lawmakers to raise taxes because of ambiguous language in that part of the measure. They also said budgets could raise fees, such as for vehicle registration, when passed by a simple majority.

Passage of the budget-vote measure may reduce “uncertainty” about the state’s fiscal health and boost its credit outlook, Standard & Poor’s said Oct. 25 in a report. S&P rates California general-obligation debt A-, its fourth-lowest investment grade and the lowest among states. Moody’s Investors Service gives it an A1 and Fitch Ratings ranks it A-.

Fee ‘No’ Vote

California’s Governor-elect Jerry Brown, who defeated Meg Whitman, the former EBay Inc. chief executive officer, said today that voters don’t appear open to higher taxes to fix the budget, noting the rejection of an $18 increase in vehicle registration fees that would have been used for state parks.

“We have to make tough choices and we have to live within our means,” Brown, 72, told reporters in Oakland.

The extra yield investors demand to own 10-year California bonds fell 2 basis points today to 124 basis points more than that provided by AAA rated municipal securities, according to data compiled by Bloomberg. That’s down from 150 basis points in March. A basis point is 0.01 percentage point.

The fee measure, Proposition 26, won 53 percent to 47 percent, according an Associated Press tally. It would require a two-thirds vote by lawmakers to raise most fees that now can be increased by a simple majority. It also would require a two- thirds popular vote to pass increases in some types of fees now set by local governments.

“A lot of what needs to be done still requires a two- thirds vote,” Steinberg said.

To contact the reporters on this story: Michael Marois in Sacramento at mmarois@bloomberg.net;

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net

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