California Proposition 1C, Borrowing Against Future Lottery Proceeds (May 2009)

California Proposition 1C (May 2009) is one of six ballot propositions that appeared on the May 19 ballot in California. Proposition 1C, a legislatively-referred constitutional amendment, was defeated.

Proposition 1C was part of the ill-fated 2009-2010 California state budget and tax increase agreement.,

Proposition 1C would have authorized borrowing against future lottery proceeds as a way to avoid state government spending cuts. The 2009-2010 budget plan includes $5 billion from this source, and the measure would also authorize similar borrowing in future years. It does not include a cap on the amount of future lottery revenue that could be pledged to pay for current spending. Essentially, the measure would allow a form of deficit spending that is not subject to the balanced budget provisions adopted by a vote of the people in California Proposition 58 (2004).

The proposal would also have repealed the current requirement that lottery revenue be used only for education. Instead, the legislature could appropriate lottery revenue for any purpose. However, the measure would require the legislature to appropriate general fund revenues to education in an amount equivalent to the lottery revenues that went to schools in FY 2008-2009, adjusted for inflation and changes in student counts.

It would also have revised lottery management details, including repealing a competitive bidding requirement for certain lottery operations, and lowering the cap on the amount of lottery revenue that can be used for administration purposes from 16 percent to 13 percent (which is the amount currently used for administration).

Election results

California Proposition 1C (May 2009)
Result		Votes	Percentage
d No		3,085,138	64.4%
Yes		1,708,800	35.6%

Final results from the California Secretary of State

Background

Proposition 1C is one of six statewide ballot propositions placed on the May 2009 ballot as part of the 2009-2010 California state budget and tax increase agreement (Propositions 1A, 1B, 1C, 1D, 1E and 1F). They are intended to close an approximately $42 billion gap between desired spending and expected revenues. In absolute terms, however, as of March, 2009 projections, when the budget deal's $10 billion tax increase and the $5 billion in borrowed money proposed by Proposition 1C are included, total general fund spending in the 2009-2010 budget will only decline by around 2 percent, from $94.089 billion to $92.206 billion. However, the nonpartisan California Legislative Analyst's Office which is the source of those figures, also said in early March that tax revenues flowing into the state treasury are "well below" the projections it used earlier in the year, and that California's government now faces an additional $8 billion gap betweeen expected revenue and the amount appropriated.

The measure was introduced in the California State Legislature by Don Perata and supported by Noreen Evans. For details on the measure, see ballot title, summary and analysis from the California Legislative Analyst's Office.

Constitutional changes

If Proposition 1C had been approved, it would have amended Section 19 of Article IV of the California Constitution.

Text of measure

Chart developed by the California Legislative Analyst's Office to help voters understand Proposition 1C

Title

The ballot title was:

Lottery Modernization Act. Legislative Constitutional Amendment.

Summary

The official summary provided to describe Proposition 1C said:

• Allows the state lottery to be modernized to improve its performance with increased payouts, improved marketing, and effective management.
• Requires the state to maintain ownership of the lottery and authorizes additional accountability measures.
• Protects funding levels for schools currently provided by lottery revenues.
• Increased lottery revenues will be used to address current budget deficit and reduce the need for additional tax increases and cuts to state programs.

Fiscal impact

See also: Fiscal impact statement

The estimate of net state and local government fiscal implications of Proposition 1C provided by the California Legislative Analyst's Office said:

• Impact on 2009–10 State Budget: Allows $5 billion of borrowing from future lottery profits to help balance the 2009–10 state budget.
• Impact on Future State Budgets: Debt-service payments on the lottery borrowing and higher payments to education would likely make it more difficult to balance future state budgets. This impact would be lessened by potentially higher lottery profits. Additional lottery borrowing would be allowed.

Support

See also: Supporters of California Propositions 1A, 1B, 1C, 1D, 1E or 1F (May 2009)

Supporters

Supporters of Proposition 1C included:

• Budget Reform Now, a coalition of groups assembled by the governor to support the overall 2009-2010 budget agreement and tax increases.
• On April 26, the California Democratic Party, meeting in its annual convention, endorsed Proposition 1C.

The official arguments in favor of Proposition 1C in the voter guide were signed by:

• Ed Bonner, president, California State Sheriffs' Association
• Dr. Glen W. Thomas, California Secretary of Education
• Bill Hauck, vice-chairman, California Business for Education Excellence
• Sheldon D. Gilbert, president, California Fire Chiefs Association

Arguments in favor

Arguments made in favor of Proposition 1C included:

• "By modernizing our state lottery, Prop. 1C will immediately raise $5 billion in new revenues without increasing taxes. Our lottery is out of date and underperforming."
• "Without this new lottery revenue, we will either be forced to cut another $5 billion from the state budget—most likely from law enforcement, schools or health care—or California's hard-working residents will have to pay another $5 billion in taxes."
• "Every other state that has modernized its lottery has seen an increase in revenues. New York, North Carolina, Missouri and Massachusetts have all brought more revenues into their state budgets, some increasing their revenues by as much as 4,000 percent. Right now, California's lottery ranks dead last in performance among the ten largest states."

Donors

$25,809,869 was contributed to the campaign in favor of a "yes" vote on Proposition 1C, with an additional $34,485 of reported independent expenditures in support. Several of the most well-funded campaign committees advocating for a "yes" vote on Proposition 1C were simultaneously advocating for a "yes" vote on Propositions 1A, 1B, 1D, 1E and 1F. Because of this, it isn't possible to determine how much money was raised or spent just on Proposition 1C's behalf.

Opposition

Bob Huff, a leading opponent of Proposition 1C

Opponents

Opponents of Proposition 1C included:

• California Nurses Association
• American Federation of State, County and Municipal Employees.
• Peace and Freedom Party
• State Senator Bob Huff, who signed the official voter guide arguments opposing Proposition 1C.
• The California Coalition Against Gambling Expansion.

Arguments against

Arguments made against Proposition 1C in the official voter guide included:

• "This is not an immediate, responsible solution to our fiscal crisis and we don't know how this will play out in the long term. What we do know is that we are making grand assumptions about a modernized state lottery, with anticipated revenues we probably won't see."
• "Part of 'modernizing' the lottery will be to make the games available virtually wherever we go. We will also have sustained advertising aimed at separating people from their money, for a chance to win big. After all, it's for our children! If the increased revenues expected from this scheme don't materialize, what's next—full blown Las Vegas style gambling?"

Donors

A group called "Stop Taxing Us-No on 1A-F" was formed to oppose Proposition 1C, but no donations were received by the group. $1,197 was reported in independent opposition expenditures.

Polls

See also Public opinion polling for all May 2009 statewide ballot propositions

• The Field Poll conducted a public opinion research survey between February 20 and March 1 on Proposition 1C and the other five budget-related measures that will appear on the May 19 ballot. Of the six statewide propositions polled, Proposition 1C showed the weakest level of support.,

• A Public Policy Institute of California poll that concluded in late March showed declining support for Proposition 1C.,

• On April 20-21, SurveyUSA conducted a poll of 1,300 California adults for KABC-TV Los Angeles, KPIX-TV San Francisco, KGTV-TV San Diego, and KFSN-TV Fresno. 15% of the registered voters they spoke with had already cast their vote. They concluded that for Proposition 1C, opposition had grown over the last six weeks.

• Field conducted a second poll between April 16-26 that indicates that "voters strongly oppose" five of the six budget measures on the May 19 ballot, including Prop 1C. According to Field Poll Director Mark DiCamillo, "The majority of voters just doesn't believe what is being sold to them. The skepticism extends up and down the ballot. Voters feel the Legislature isn't doing its job, hasn't been able to work with the governor and is just passing these things on to them."

Date of Poll	Pollster	In favor	Opposed	Undecided
February 20-March 1	Field	47 percent	39 percent	14 percent
March 10-17	PPIC	37 percent	50 percent	11 percent
March 11-12	SurveyUSA	28 percent	29 percent	43 percent
April 20-21	SurveyUSA	23 percent	41 percent	35 percent
April 16-26	Field	32 percent	59 percent	9 percent
April 27 - May 4	PPIC	32 percent	58 percent	10 percent
May 8-10	SurveyUSA	29 percent	52 percent	19 percent
May 15-17	SurveyUSA	29 percent	56 percent	16 percent

Editorial opinion

"Yes on 1C"

Newspapers endorsing a "yes" vote on Proposition 1C included:

• The Los Angeles Times, which wrote, "...we cannot be as cheerful as the campaign ads that began running last week...but the good outweighs the bad... Without the $5 billion it brings, California would have to make up the difference by again raising taxes or by making deeper, and ultimately more expensive, cuts."

"No on 1C"

Media endorsing a "no" vote on Proposition 1C included:

• La Prensa San Diego, which said, "The problem with this proposition is that as a state we are becoming more and more dependent on the vices of gambling to solve our problems, not only the lottery but the casino businesses. The lottery is sustained by the poor of our community! They spend a disproportionate amount of their money on lotto tickets with the hope that this may put them on easy street. In essence we are asking the poor, those who can least afford it, to balance our state budget!"

Path to the ballot

The California State Legislature voted to put Proposition 1B on the ballot via Senate Constitutional Amendment 12 of the 2007–2008 Regular Session (Resolution Chapter 143, Statutes of 2008) and Assembly Bill 1654 of the 2007–2008 Regular Session (Chapter 764, Statutes of 2008) and Assembly Bill 12 of the 2009–2010 Third Extraordinary Session (Chapter 8, 2009–2010 Third Extraordinary Session).

Votes in legislature to refer to AB 12 to ballot
Chamber	Ayes	Noes
Assembly	70	8
Senate	30	8

Votes in legislature to refer to SCA 12 to ballot
Chamber	Ayes	Noes
Assembly	63	14
Senate	27	9

External links

Center for Government Studies Review of 1C

Basic background information:

• Official Voter's Guide to Proposition 1C
• PDF of the mailed May 19, 2009 voter guide for Proposition 1C
• May 19, 2009 ballot proposition election returns
• Proposition 1C in the Smart Voter Guide
• Analysis of Proposition 1C from the Institute of Governmental Studies
• Guide to Proposition 1C from the California Voter Foundation
• Summary of donors to and against Proposition 1C from Cal-Access
• Donors for and against Proposition 1C from Follow The Money
• California Secretary of State's announcement about May 19 ballot measures

Supporters:

• Budget Reform Now, official website in favor of Prop 1C
• Campaign finance reports of Budget Reform Now
• Campaign finance reports of "Californians for Modernization", a group that supports 1C

Opponents:

• California League of Women Voters
• Peace and Freedom Party