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Propositions 1D and 1E

Funding Shifts to Support the State Budget

By Vernon M. Billy - May 8, 2009

This article is the last in a series of articles about the ballot measures on the May 19th statewide ballot.

As a part of the February budget deal, the Governor and Legislature agreed to place six measures – Propositions 1A-1F – before the voters that collectively would establish a new budget spending cap, repay schools almost $9.3 billion, securitize lottery revenue, shift mental health funding and limit legislative salaries in budget deficit years.

Propositions 1D and 1E both temporarily redirect hundreds of millions of dollars from voter approved initiatives to the State's General Fund.

Specifically, Proposition 1D redirects $340 million in 2009 and $268 million annually between 2009-10 through 2013-14 of First 5 Commission reserves and future funding to the State General Fund.  Similarly, Proposition 1E redirects more than $450 million in mental health funds provided under Proposition 63 over two fiscal years to fund state General Fund costs.

If approved by voters, these ballot measures would provide the state with an immediate budget year savings of almost $600 million and forestall potentially deeper cuts to education and other programs.

However, redirecting these funds comes at a cost.  For example, the redirection of Proposition 1D funds literally means thousands of preschool age children could be denied critical services that prepare them for their first years in school.  This ultimately could mean that more state resources are eventually spent in the K-12 system educating and providing support services to these same children.

Similar to Proposition 1D, if voters approve Proposition 1E, the state could ultimately incur more costs and experience an actual reduction in federal funding for mental health services. 

The reduction in available services for mental health programs due to Proposition 1E could result in increased costs to local cities and counties as recipients seek out or are captured in other social service programs.  Further compounding this potential situation is that some of Proposition 63's mental health funds are used to draw down federal matching funds through the medi-cal program.  Thus, the redirection of funds under Proposition 1E could result in a decrease in federal assistance to the State.

In the end, both measures are merely part of a temporary budget fix that doesn't address the underlying structural deficit.  The question for the public on May 19th is whether these temporary fixes are appropriate to address the immediate crisis, or does the State need to finally address the real problem – a massive structural deficit that continues to plague the State like a bad cold that won't go away.

Editor's Note: Vernon Billy is President of Governmental Solutions Group, LLC,a policy consulting and legislative advocacy firm.