By Mark Baldassare, research director, Public Policy Institute of California
This opinion article appeared in the San Jose Mercury News on June 22, 2003

Californians have a message for Gov. Gray Davis and the Sacramento political establishment: Get our financial house in order or face the wrath of angry voters. As in the tax revolt of 25 years ago that led to the passage of Proposition 13, voters are so frustrated and disenchanted with the state's political leadership today that they are ready to make drastic changes.

In recent weeks, it has become increasingly evident that the state may be on the verge of another milestone: The first recall election of a governor in California history. But public support for the governor's recall is just a symptom of a deeper malaise that could shake up the state's entire governmental system -- giving life to proposals to shift more power over spending and taxes to local government.

The latest survey of 2,003 state residents by the non-partisan Public Policy Institute of California shows a stagnant economy has put them in a restless mood.

Most residents name jobs and the economy as their No. 1 concern. Twice as many Californians say the state is headed in the wrong direction as believe it's going in the right direction, and most residents believe that their region is in an economic recession. On top of that, six in 10 predict that the state's bad economic times will continue for at least 12 months.

Nowhere is this economic discontent more prevalent than in the Bay Area.

While most Californians' grim view of economic conditions has not changed over the past year, the institute's surveys showed, there are now signs of fundamental political discontent as well.

Only one in three voters say they trust the state government to do what is right "most of the time" -- the lowest number since the institute began tracking this question in 1998. Residents are also lashing out at specific members of the state's leadership: Six in 10 likely voters are unhappy with the Legislature overall, and three in four disapprove of the job the governor is doing. Examining past opinion polls, Davis may just be the most unpopular governor in modern California history.

The reason for this crisis of confidence is glaring: California is facing the worst budget crisis in its history. As the governor and Legislature spar over spending cuts, tax increases and borrowing in an effort to address the staggering $38 billion deficit, the political stalemate over California's $100 billion budget places many state residents in real jeopardy. Most of the state's spending is dedicated to four program areas -- public schools, higher education, health and human services, and prisons and public safety -- that are all critical to the economic well-being and quality of life of the entire population.

But political jockeying over the budget reflects no such urgency.

The Legislature recently missed a key budget deadline, and the state is expected to start the new fiscal year July 1 without a budget in place. The government is operating on short-term loans, while new debts are piling up.

From Surplus to Deficit
Not surprising, seven out of 10 likely voters are displeased with the way the governor and the Legislature are handling the budget mess. They are not willing to forgive and forget this basic fact: Their state leaders allowed a bountiful state surplus to turn into a huge budget deficit. The governor's fiscal plan -- making up the $38 billion deficit through $19 billion in cuts, $11 billion in long-term borrowing and $8 billion in new taxes -- is hardly a crowd pleaser.

Faced with such spending cuts and tax increases, residents are feeling angry, helpless and highly vulnerable to the economic shock waves that are likely to emanate from state budget problems of this magnitude.

If we flash back to the eve of Proposition 13, there are eerie similarities to the public's mood today.

Twenty-five years ago, the recipe for change included soaring housing prices, skyrocketing property taxes, and the state government's inaction in the face of financially threatening circumstances. Voters turned to the citizen-initiative process in June 1978 to make the tax reforms they thought were needed to restore fiscal order.

This time, though, they are prepared to express themselves in different ways at the ballot box. And Davis may be the first to feel the brunt of this attack on the political establishment.

A substantial share of the 900,000 signatures needed to place a recall on the ballot have already been collected, recall backers say. If passed, a recall measure would remove Davis from office and replace him with the candidate who gets the most votes. Currently, half of the voters support the removal of Davis from office. With many Republicans hinting that they will run, the state may be headed for a hotly contested race this fall or at the March primary.

New Look at Prop. 13
Californians are also contemplating making sweeping and somewhat surprising changes in the once-sacrosanct Proposition 13 tax limitations. But the intention is the same: limiting the power of state government. Indeed, the proposed Proposition 13 reforms seek to shift the balance of power from the state to the local level.

Most significant, there is a movement afoot to take aim at Proposition 13's ``supermajority'' requirement, which raised the bar from a 50 percent vote to a 67 percent or two-thirds vote so local communities could not easily raise taxes. One such proposal -- led by the Silicon Valley business community -- calls for reducing the two-thirds vote requirement to a 55 percent majority for local transportation projects.

In the past 25 years, local officials have found it difficult to win the two-thirds vote needed to raise local taxes for local services. That has meant local communities have become highly reliant on less-than-dependable state funding. Earlier this month, for instance, school districts around the state failed in their bids to make up for the expected shortfall in state funding because they failed to secure the two-thirds approval vote required.

Nearly half of state residents say changing the two-thirds vote to a 55 percent approval rate for all special local taxes is a good idea. Certainly, the public seems more willing to overlook the potential downside of a lower vote threshold -- such as raising local taxes too often or overextending local spending -- than it has in the past.

Increasing public support for local fiscal autonomy is another potential byproduct of the state's current shaky finances. Proposition 13 required that local governments collect property taxes, but put the Legislature in charge of distributing those dollars to school districts and city and county governments.

Local officials are resentful of the state's control of their local affairs, and voters may be ready to support changes in the way their local taxes are spent. Current proposals by civic leaders and local government officials focus on dedicating local tax revenues to local services, such as schools, parks, roads, public safety and libraries.

Bond Measures on Way
Another consequence of the budget deficit is that Californians may be hesitant to support the major state-run projects that are headed for the ballot next year. With the state poised to issue almost $11 billion in bonds to finance a major portion of the budget deficit, will voters support a $12.3 billion bond for school construction in March 2004 and a $10 billion bond for high-speed rail in November 2004?

Currently, voter support for bond measures is holding up in our surveys, but that may change as the reality of the ballooning state debt sinks in. If the voters lose faith in state bond measures, then California is sure to fall further behind in planning for future growth.

Unless the governor and Legislature can act soon to repair the damage to their credibility, they are likely to face a season of voter discontent the likes of which have not been seen for 25 years. Many of them may not return to their seats in Sacramento, and those who serve may find that voters changed the rules of the game.

Both the Democrats and the Republicans in office will be held accountable for their inaction. It is not too late for the state's politicians to show they can respond to the voters' wish list: a fiscally sound budget, stable funding for local services and a plan to get the economy moving again.

But if the governor and Legislature can't deliver the goods, then the voters are ready to take matters into their own hands -- again.