How to Make Self-Funding Initiative Legislation Work

Mark Paul, New America senior scholar, has studied the question of how the state might implement rules requiring initiatives that create new spending to include a source of revenues. (This is in reference to California legislation, SCA-14, prohibiting "something for nothing" initiatives that mandate spending without new revenues). Here is the relevant excerpt from a memo he prepared on the subject.

"The initiative process is established in Article 2, Section 8 of the state consti-
tution. This section should be amended to provide that no initiative measure
shall be placed before voters or have any effect if it increases General Fund
spending or reduces General Fund revenues and does not include provisions
that offset those effects on the state budget.
"To carry out this constitutional change, it will also be necessary to revise the
corresponding statutes involving the initiative process. Section 12172 of the
Government Code and Section 9005 of the Elections Code currently guide
the preparation of a fiscal analysis of initiatives submitted to the Attorney
General for title and summary. These seem the most likely places to add lan-
guage specifying how it will be determined if an initiative meets the new
constitutional language barring 'something for nothing' measures.
"Issues for consideration:
"1. Threshold. Should the prohibition on 'something for nothing' initia-
tives have a threshold? The goal of the changes proposed here is to
keep the initiative process from distorting the state's finances. But the
costs associated with "something for nothing" measures range from
very minor to huge. It seems sensible to set a threshold for application
of this provision, just as there is usually a dollar threshold set by the
appropriations committees in dealing with legislation. For example,
the constitutional provision could require an offset when the initiative is estimated to have an annual fiscal effect amounting to more than
one-twentieth of 1 percent of the General Fund (roughly $50 million in
current terms) or more than one-tenth of 1 percent of the General Fund
in one-time or capital costs (roughly $100 million).
2. Time frame. The language should spell out over what time the initiative
should be measured for fiscal effect. The time should be long enough
to discourage initiative proponents from backloading costs into future
years but short enough to allow for credible estimates by analysts.
Given that the most expensive measures have been those, like Three
Strikes, that build up slowly, ten years seems a reasonable time frame.
3. Fiscal estimates. Under current law, the Legislative Analyst, Depart-
ment of Finance, and Joint Legislative Budget Committee have roles in
determining the fiscal impact of initiatives. Does it make sense to set
up a process for estimating how much a measure will cost and
whether the proposed offsets are sufficient or credible? Would it be
useful for there to be a way for the public to participate (by way of a
hearing?) in the analysis or give the initiative proponent an opportunity
to appeal an estimate he or she considers incorrect or arbitrary?"