My beef with the political process in California was put into a few perfect paragraphs in a newspaper that was thrown by accident onto my stoop this morning. I do not get the Financial Times but found myself reading, and agreeing, with their story about the budget woes of California. I have long argued these points, and am glad to see I am not alone in my thinking.
One cause of the problem is the state’s dysfunctional political system. California is one of only three in the US that requires a two-thirds majority in its legislature to approve a budget. With the state’s upper and lower houses evenly split between Republicans and Democrats, securing a two-thirds majority on all but mundane matters is practically impossible. A two-thirds majority is also required to raise taxes, which limits the ability of the governor to balance the books.
California’s system of direct democracy, while laudable in aim, is another headache. “Ballot initiatives” were introduced in 1911 by Hiram Johnson, then governor, who wanted to curtail the influence of the mighty Southern Pacific Railroad and return power to the people. Since then, any issue can be put to a state-wide vote, provided half a million or so signatures are gathered to support a change in the law.
Ballot initiatives were intended to give a voice to voters. “It was supposed to be about mom and pop talking about something around the dinner table and then getting all their friends to sign a petition,” says Dan Mitchell, professor emeritus at the UCLA Anderson School of Management and the School of Public Affairs. “But most initiatives on the ballot don’t start that way.” Instead wealthy individuals and special interest groups “pay a couple of million dollars to employ people to collect signatures outside of supermarkets”.
Ballot initiatives have resulted in controversial laws being passed, such as the amendment to California’s constitution that outlawed gay marriage in California last November. The state’s constitution is bursting with such amendments, which can often impose huge constraints on financial planning, such as the 1998 proposition that committed the state to spending 40 per cent of its annual budget on education.
Mr Schwarzenegger admits the two-thirds majority rules and the ballot proposition process have been a hindrance. “It’s governing with your hands tied behind your back,” he says. The final link in California’s fiscal chain is its tax system. “It’s flawed,” he adds. “It has failed us over and over again when we have a downturn. We in California rely very heavily on rich people paying taxes – income taxes and capital gains.” This imbalance is partly because of legislation passed in 1978 – via a ballot initiative, naturally – that set strict limits on property taxes.