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Press Release · May 21, 2008

Californians Call Governor’s Lottery Proposal a Bad Bet

But They Back His Plan For Temporary Sales Tax Hike If Lottery Measure Loses

SAN FRANCISCO, California, May 21, 2008 — Most Californians dislike Governor Arnold Schwarzenegger’s latest budget plan and oppose his proposal to borrow from the state lottery. But they are willing to accept a temporary increase in the sales tax if the governor’s lottery proposal fails, according to a statewide survey released today by the Public Policy Institute of California (PPIC) with funding from The James Irvine Foundation.

The survey finds Californians in a gloomy mood about the state’s fiscal prospects and their own. Vast majorities say the current budget situation is a big problem, the governor can’t be trusted to make the tough choices needed, and the state is headed in the wrong direction.

But as a polarized legislature heads into a summer of difficult budget negotiations, the survey reveals the same deep partisan divisions among residents over how to deal with a multibillion-dollar budget gap.

“Californians are divided about whether they’d rather pay higher taxes and get more services or pay lower taxes and get less in the way of services,” says PPIC president and CEO Mark Baldassare. “Even independents are divided.

“But overall, Californians don’t like what they’ve heard so far from their leaders. They haven’t heard a compelling argument about why they should agree to a permanent tax increase, particularly in this economy. They’re reluctant to make an investment themselves when they feel that the legislature and governor haven’t been good money managers.”

Satisfaction With Schwarzenegger Budget Plan Hits New Low

In his revised 2008-2009 budget, announced on May 14, the governor scaled back his proposal to make deep cuts in K-12 public education and dropped plans to close many state parks and release nonviolent prisoners early. His new plan would maintain K-12 funding but exclude any cost-of-living increases. It calls for deep cuts in health and human services to seniors, the poor, the disabled, and recent immigrants. To raise revenue, the governor proposes borrowing about $15 billion against future proceeds from the state lottery. The lottery plan involves adding new games and promotions to boost sales, which would require voter approval in November. If it fails, a temporary one-cent sales tax increase would go into effect.

When they are read a brief summary of the governor’s revised plan, just 35 percent of residents and likely voters say they are satisfied with it, the lowest level of satisfaction since Schwarzenegger took office in 2003. Majorities of residents (56%) and likely voters (57%) are dissatisfied.

Solid majorities of residents (58%) and likely voters (62%) oppose the governor’s plan to borrow money from future lottery earnings, and they do so across party lines (62% Democrats, 60% independents, 53% Republicans). Majorities of residents (54%) and likely voters (57%) favor a temporary increase in the sales tax if the lottery plan fails. A majority of Democrats (62%) and independents (56%) back the plan, with about half of Republicans (51%) favoring it.

The potential temporary sales tax increase is the only tax increase included in the governor’s revised budget. Asked whether they believe tax increases should be part of his plan, residents are split (48% yes, 46% no), although the percentage favoring tax increases has risen sharply since December (30%). Residents are deeply split along party lines on the question, with 62 percent of Democrats saying tax increases should be in the governor’s budget and 62 percent of Republicans opposed.

Concern Over Health Cuts, But Desire To Spare Schools Is Stronger

Nearly eight in 10 residents are very concerned (42%) or somewhat concerned (36%) about the impact of proposed spending cuts on health and human services. Levels of concern vary widely across party lines and among demographic groups. A majority of Democrats (55%) are very concerned compared to about one in five Republicans (22%) and one in three independents (34%). Latinos (53%) are far more likely than whites (36%) to be very concerned, and women more likely (46%) than men (37%).

When asked which area of the budget they most wanted to see spared from cuts, six in 10 residents (61%) choose K-12 public education – the top choice in previous surveys, as well – with health and human services (17%) a distant second, followed by higher education (12%), and prisons and corrections (7%).

Californians United In Perceiving A Problem

Two in three Californians consider the current budget situation a big problem (67%) and believe that major changes are needed in the state’s budget process (65%).

As residents’ perception of the problem has grown, their faith in the governor to make tough budget choices has declined from 24 percent in January to 17 percent today. Californians put more trust in legislators to make these choices, with 37 percent preferring the Democrats’ approach and 20 percent preferring the Republicans’ approach. But it’s clear that Californians’ trust is in the legislators of their own parties, rather than in the legislature as a whole. A strong majority of Democrats (63%) want Democratic lawmakers to handle the budget, while nearly half of Republicans (46%) prefer GOP lawmakers’ approach, and one in four (25%) favor the governor’s.

But They’re Divided Over How To Solve It

A plurality of residents (43%) say the budget gap should be closed through a mix of spending cuts and tax increases, while a third (33%) would close it mostly through cuts. Fewer than one in 10 residents (8%) prefer tax increases alone. Opinion is divided along party lines, with half of Republicans (51%) favoring spending cuts and a majority of Democrats (54%) favoring a mix of cuts and taxes. Among independents, more favor a combined approach (44%) over spending cuts alone (36%).

Tax Hikes Backed, But Only For Corporations, The Rich

While strong majorities favor raising state taxes paid by California corporations (63%) or state income taxes paid by the wealthiest Californians (69%), there is considerably less willingness to increase taxes on all residents. Only 35 percent favor a permanent increase in the state portion of the sales tax. The results are similar on the question of whether to increase the annual vehicle license fee, which the governor reduced after he took office. Today, only 37 percent of Californians favor increasing the fee.

Budget Reforms A Hard Sell With One Exception

While Californians believe that the budget process needs fixing, they are less enthusiastic about some specific structural reforms proposed in recent years. Currently, a two-thirds vote of the legislature is required to pass a budget, and only four in 10 residents (42%) favor lowering the threshold to a 55-percent majority vote. A proposal to extend the state sales tax to services that are not currently taxed – such as accounting services, haircuts and auto repairs – fares even less well, with just 37 percent saying this is a good idea.

Californians confirm their distaste for changing the state lottery when asked if it should be leased to a private company as a way to make more money, as some state leaders have suggested. Just one in four (26%) say this is a good idea.

But two in three residents (66%) say it is a good idea to limit increases in state spending each year. A constitutional amendment proposed by the governor that would limit state spending increases, as well as establish a reserve fund and allow for midyear spending cuts, gets strong support, with 59 percent of residents and 61 percent of likely voters in favor.

Bleak View Of Economy, State’s Direction

With just one in four (24%) saying the state is heading in the right direction and 65 percent saying it’s heading in the wrong direction, Californians’ views of the state of the state have hit lows not seen since months leading up to the 2003 governor’s recall election (22% in August 2003, 24% in September 2003). Residents in Los Angeles (69%), the Central Valley (69%), and the Other Southern California region (64%) are more likely to say things are going in the wrong direction than those in the San Francisco Bay Area (58%).


As they have since the beginning of the year, Californians place jobs and the economy (36%) at the top of their list of worries, followed in this month’s survey by gasoline prices (15%), education (8%), immigration (7%), and the state budget (6%).

More Key Findings

  • Double-digit drop in approval ratings for governor, legislature — Page 17
    The governor’s overall approval rating (41%) has seen a double-digit decline, sliding 16 points since December and 12 points from a year ago. After his budget revision, his approval rating on handling the budget (32%) has dipped to its lowest level since 2004. The legislature lags even further behind, with its overall approval rating (26%) dropping 15 points since December and 11 points from a year ago.
  • Thirty years later, support strong for Proposition 13 — Pages 18, 19
    As the 30th anniversary of the passage of Proposition 13 approaches next month, a solid majority (59%) of residents feel positive about the measure that limits property tax rates to 1 percent of assessed value at the time of purchase, restricts property tax increases to 2 percent a year, and requires a two-thirds majority vote to pass local special taxes. Californians are more divided in their views of the measure’s effect on local government services (27% good effect, 28% bad effect, 29% no effect) and the fairness of the provision that requires homeowners who recently purchased a home to pay higher property taxes than longtime owners (41% favor this provision, 51% are opposed).
  • June eminent domain measures trailing — Page 20
    Propositions 98 and 99 are aimed at changing the government’s power to take private property. While seven in 10 likely voters say the government’s power of eminent domain needs major changes (39%) or minor ones (32%), support for these two propositions is falling short of approval. Proposition 98, which would bar state and local governments from seizing private property to give it to another private party, would also ban rent control. When they are read the ballot measure, 30 percent of likely voters say they would vote yes, 48 percent would vote no, and 22 percent are not sure. This is a drop in support for the measure since March (37% yes, 41% no, 22% unsure). When asked their views about rent control, 54 percent of likely voters say it is a good thing and 38 percent say it is a bad thing. Attitudes toward rent control are favorable among both homeowners (51%) and renters (63%). A majority of Democrats (66%) and half of independents (51%) favor rent control, while a majority of Republicans (53%) say it is a bad thing. Proposition 99, which would block the government from taking a single family home or condominium to transfer to another private party, would allow eminent domain for public uses and would not ban rent control. Among likely voters, 44 percent say they would vote yes, 36 percent say no, and 20 percent are unsure.
  • Presidential preview: See how they run — Page 22
    As the presidential primary season winds down, Barack Obama has the highest favorability rating of the candidates (59% among likely voters). Hillary Clinton has an unfavorable rating (51% vs. 46% favorable) in the state where she won the primary nearly four months ago. While Obama’s and Clinton’s ratings have remained about the same since March, John McCain’s ratings have declined somewhat (49% favorable in March vs. 42% favorable, 53% unfavorable today). Among independent voters, Obama has the highest favorability rating (60%). Independent voters are divided in their ratings of Clinton (46% favorable, 50% unfavorable), and give McCain an unfavorable rating (53% vs. 41% favorable). Latinos give Clinton the highest favorability ratings among the candidates (72% vs. 68% Obama, 38% McCain).
    If the general election were held today, likely voters would favor Obama over McCain by 17 points (54% to 37%), an improvement for Obama since March (49% to 40%). Likely voters favor Clinton over McCain by 12 points (51% to 39%), an improvement for her also since March (46% to 43%).
  • Californians fail budget math quiz — Page 12
    When asked which area gets the biggest share of state spending, only 20 percent of residents correctly identified K-12 education. Asked where the biggest chunk of revenue comes from, only 32 percent give the correct answer: personal income tax.

About the Survey

This survey is the 29th in the Californians and Their Government series, conducted periodically to examine the social, economic, and political trends that influence public policy preferences and ballot choices. It is supported with funding from The James Irvine Foundation. Findings are based on a telephone survey of 2,003 California adult residents interviewed from May 12 to 18, 2008. Beginning on May 14, when the governor released his revised budget, 1,503 adults also answered six questions on this topic. Interviews were conducted in English or Spanish. The sampling error for the total sample is +/- 2%. For the six questions asked of the 1,503 adults beginning May 14, it is +/-2.5%, and for the 1,086 likely voters, it is +/- 3%. For more information on methodology, see page 25.

Mark Baldassare is president and CEO of PPIC, where he holds the Arjay and Frances Fearing Miller Chair in Public Policy. He is founder of the PPIC Statewide Survey, which he has directed since 1998. This is the 86th PPIC Statewide Survey in a series that has generated a database that includes the responses of more than 182,000 Californians.

PPIC is a private, nonprofit organization dedicated to informing and improving public policy in California through independent, objective, nonpartisan research on major economic, social, and political issues. The institute was established in 1994 with an endowment from William R. Hewlett. PPIC does not take or support positions on any ballot measure or on any local, state, or federal legislation, nor does it endorse, support, or oppose any political parties or candidates for public office.