news story / By Heidi Walters

The Band-Aid Measures

(May 7, 2009)  Propositions 1C, 1D and 1E are the quick fix. Combined, they would produce an immediate cash infusion of $6 billion to balance the state’s 2009-10 budget. They would do this by diverting to the General Fund money currently allocated, per prior voters’ wishes, to specific services. Props 1D and 1E would only temporarily divert their respective funds from one pot to another. But Prop 1C would dump the formerly spoken-for funds into a new pot permanently.

All three measures ask voters to fundamentally alter measures a majority of the electorate once considered dear enough to support. And, all three measures can be broadly viewed as robbing Peter to pay Paul.

Under Prop. 1C, the Lottery Modernization Act, the state could sell $5 billion in bonds secured by future lottery profits in order to balance the budget for 2009-10. It could borrow more later. The scheme hinges on significant changes to the California Lottery, created in 1984 by Prop. 37. Under Prop. 37, 50 percent of profits from lottery ticket sales goes toward prizes, up to 16 percent of sales goes toward running the lottery and the rest is paid directly to schools and colleges. Prop. 1C would raise the percentage of ticket sales that goes toward prizes, with the hope that higher payouts would boost sales. It would limit operating expenses to 13 percent of sales — although, the Legislative Analyst notes, less than 13 percent of sales currently go toward running the whole show, anyway. The remaining profits would go to the General Fund, not schools, and be used to pay off the $5 billion-plus-interest debt, bolster a problem gambling fund, and build up a new Debt Retirement Fund to deal with other state debts.

Prop. 1C also requires the state to replace education’s nabbed funds by increasing the money schools and colleges get from the General Fund — banking on its plumping up with higher lottery ticket sales; if it doesn’t, the state would have to find other ways to keep those higher payments coming.

Some critics question a measure whose success relies on California’s dubious appeal to would-be creditors, and on imagined future sales of lottery tickets — which have declined, actually, over time because of Indian gaming and, lately, the economic downturn. The San Francisco Bay Guardian finds the measure repugnant: “The idea here: increase lottery revenue through better marketing, thus taking more money from poor people …”

As for teachers, it depends on what union they belong to. The California Teachers Association, the largest union representing teachers, supports the measure. The California Federation of Teachers opposes it — the CFT is allied with the Service Employees International Union, which fears the props’ impact on state jobs.

Garry Eagles, Humboldt County Superintendent of Schools, supports 1C. He says lottery proceeds have never been a major source of revenue for schools, anyway — Janet Frost, Eagles’ executive assistant, says county schools will get about $2.2 million in lottery funds this 2008-09 fiscal year, which amounts to less than 1 percent of total revenues coming into the schools from all sources, and comes out to about $118 per pupil.

The props promise more.

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