Prop 1A will make our deficits worse

• Prop 1A requires 3% of revenue each year to be deposited into a Budget Stabilization Fund until the fund reaches 12.5% of all revenues. If voters approve Prop 1B, half of that (1.5%) will go into a Supplemental Education Payment Account (SEPA), established by Prop 1B. The SEPA contribution cannot be waived until the state pays $9.3 billion owed to schools.

• Prop 1A requires unanticipated revenues to be determined by the lesser of two formulas creating a restrictive limit on spending:

1. The Department of Finance’s estimate of revenues derived from the last ten years of revenue growth amounts.

2. The difference between estimated revenues and prior year’s spending adjusted for population growth and inflation.

• Prop. 1A will make it harder to balance the budget in future years. It requires contributions to the fund even in years with budget shortfalls. Had Prop 1A been implemented in 1990, it would have required contributions in years when the state had deficits in 1996-97 and again in 2005-06 putting funding below baseline levels.

• Education, debt payment, and infrastructure have first priority on spending from the Budget Stabilization Fund, any excess is restricted to one-time uses rather than to ongoing programs. That means less money will be available for the ongoing services SEIU members provide.

Prop 1A will result in funding below baseline levels

• Because it will start in the midst of the worst economic downturn since the Great Depression, Prop 1A will set the baseline after more than $31 billion in cuts to services over the last three years. As a result, it will severely limit the ability to restore the cuts even when the economy improves.

• According to the California Budget Project, starting in the 2010-2011 budget year, Prop 1A will force the state to put billions into the reserve fund and not be able to meet baseline spending obligations.

• According to preliminary estimates for 2010-11, it would force $16 billion less than what’s needed to support baseline spending and the gap would widen in 2011-12 and 2012-13 to $17 billion and $21 billion, respectively.

Prop 1A greatly enhances the Governor’s power to make deep cuts

• Prop 1A allows the Governor’s appointed Department of Finance Director to determine how deep the cuts will be each year because cuts will be based on his/her own revenue forecast and nobody can challenge it.

• Prop 1A gives the Governor sweeping new powers to make unilateral budget cuts with no checks and balances. For SEIU programs that are perennially targeted by the Governor and have been protected by the legislature, this eliminates that protection.

Prop. 1A hits SEIU services hardest

• The inflation measure used by Prop 1A measures changes in the cost of goods purchased by households, not governments. The CPI doesn’t take into account that government spends a larger share of its budget on items such as healthcare for which costs have risen faster than the rate of inflation. Between 1990 and 2007, national per capita health expenditures more than doubled, rising by 164% while the CPI for California rose by just 61%.

• The populations served and the costs of many of our (SEIU) programs grow faster than these formulas allow which will gradually squeeze the programs and services our members provide. For example, between 2000 and 2020, the population of older people is expected to grow by 75.4% while the general population is estimated to increase by 29.4%. That is in part why home care cases have and will continue to increase. Likewise, the population of autistic children is growing faster than the general population and therefore, developmental disability cases will continue to increase. Prop 1A’s formulas will hurt the fastest growing SEIU programs the most: Homecare, Developmental Disabilities, Mental Health, and Medi-Cal.

• Prop 1A is incompatible with constitutional guarantees such as Props 98 (education), and 42 (transportation). It allows unanticipated revenues to be used for school funding but doesn’t adjust the cap to reflect their ongoing costs in future years. This will cause services without constitutional protection, those provided by SEIU members, to be crowded out in future years.

• Prop 1A will be a barrier to our union’s growth. In good economic times, we have been successful in growing programs like homecare because we were able to get the Governor and the legislature to allocate funding. Under 1A, it will be impossible to do for childcare and developmental disabilities what we’ve done for homecare.