California Proposition 72, the Paul Gann Spending Limit Initiative (June 1988)

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California Proposition 72, or the Paul Gann Spending Limit Improvement and Enforcement Act of 1988, was on the June 7, 1988 statewide primary ballot in California as an initiated constitutional amendment, where it was defeated.

Proposition 172 would have made several changes in how the state's appropriations limit works

  • It would have changed the way certain state tax revenues are treated for purposes of the limit.
  • It would have required the state to use revenues from the sales tax on motor vehicle fuels only for street, highway and mass transit guideway purposes.
  • It would have required the state to begin each fiscal year with a reserve equal to 3 percent of General Fund expenditures.

Election results

Proposition 72
Defeatedd No3,264,65361.47%
Yes 2,046,358 38.53%

Constitutional changes

California Constitution
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If Proposition 72 had passed, it would have changed these parts of the California Constitution:

Text of measure


The ballot title was:

Emergency Reserve. Dedication of Certain Taxes to Transportation. Appropriation Limit Change. Initiative Constitutional Amendment.


The official summary said:

"Requires three percent of total state General Fund budget be included in reserve for emergencies and economic uncertainties. Provides net revenues derived from state sales and use taxes on motor vehicle fuels be used only for public streets, highways, and mass transit guideways. (Three-year phase-in.) Requires two-thirds vote of Legislature or majority vote of voters before taxes on motor vehicle fuels may be raised. Reserve and fuel tax revenues excluded from appropriation limit. Prohibits Legislature from lowering local sales tax rates in effect January 1, 1987."

Fiscal impact

See also: Fiscal impact statement

The fiscal estimate provided by the California Legislative Analyst's Office said:

This measure has two major fiscal effects.

First, the changes to the state's appropriations limit will allow increased state appropriations of up to $1.6 billion in 1988-89, $1.5 billion in 1989-90, and slightly larger amounts in future years. As a result, the state may be able to spend or retain tax proceeds which otherwise could be subject to return to taxpayers.

The bulk of this additional appropriations authority results from the provisions of this measure which: (a) require a new reserve and specify the treatment of appropriations to and from this reserve; and (b) declare state sales tax revenues from motor vehicle fuels to be "user fees," without making a corresponding reduction in the appropriations limit. These two increases are partially offset by net decreases in appropriations authority resulting from the change in treatment of other motor vehicle-related revenues.

Based on the estimates contained in the Governor's Budget, the state will not have sufficient revenue in 1988-89 to fund any additional appropriations allowed by this measure. In future years, the economy's performance will determine whether and to what extent state revenues will be available to fund such additional appropriations.

Second, the requirement that certain state sales tax revenues be spent only for street, highway and mass transit guideway purposes results in an increase in the amount of revenues available for those purposes. However, it also reduces the amount of revenues available for education, health, welfare and all other General Fund expenditures. This shift of funding from general state purposes to transportation purposes, to be phased in over three years, will amount to about $200 million in 1988-89, about $430 million in 1989-90, about $725 million in 1990-91, and increasing amounts annually thereafter. To the extent that revenues are not available to pay for additional appropriations, as indicated above, this shift of general purpose revenues to street, highway and mass transit guideway purposes will require a corresponding reduction in expenditures for other General Fund programs.

In summary, the approval of this measure by the voters will have the following state fiscal effects.

In the 1988-89 fiscal year:

  • The state government's appropriations limit will be increased by up to $1.6 billion If the Governor's Budget estimates prove to be correct, revenues will be insufficient to fund any of this additional appropriation authority; and
  • $200 million of existing state sales tax revenues will be shifted from General Fund programs to street, highway and mass transit guideway purposes.

In subsequent fiscal years, the economy's performance will determine whether and to what extent revenues are available to:

  • Offset the General Fund revenue loss from the shift in sales tax revenues, and
  • Fund additional appropriations authorized by this measure.
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