The Legislative Analyst’s Office says the governor’s budget proposal attempts to dodge the state spending limit that was overwhelming passed by voters in a 1979 Special Election. In declaring that the governor’s budget does not count $22 billion dollars against any appropriation limit, the LAO report states clearly that the Governor’s proposal violates the spirit of the Gann Limit.
The state spending, or more properly, appropriation limit, named after chief proponent Paul Gann, intended to limit state appropriations to 1978-79 spending with increases allowed for population and inflation growth.
With the state economy growing, revenue is now approaching the appropriation cap, according to the LAO’s calculations. If the appropriation limit is breached, the law requires excess revenue be split between the schools and taxpayer rebates.
The governor’s plan is to make $22 billion invisible from spending limit calculations and create greater room for spending in the state budget.
Under the Gann Limit, tax revenue must be counted either on the state or local level unless specifically exempted. The proposal does not count $22 billion of school spending either against the state spending limit or the local school limits. The LAO reports that the Governor excludes these funds from the state limit by categorizing them as state subventions to local government but then does not count the $22 billion in state subventions as local proceeds of taxes. For Gann Limit purposes, the money is not counted at all.
The LAO report concludes, “In effect, the funds become nowhere money under the calculations.”
This new methodology goes against long-standing policies that guided the implementation of the Gann Limit. In fact, the LAO points out, the 1981‑82 Governor’s Budget Summary confirms that the intent of subventions to education was a “responsibility of the state and therefore a part of the state’s appropriations limit.”
Jerry Brown was governor when that 1981-82 budget summary was issued.
Prior to the vote on the spending limit in the Special Election, during his second inaugural address of 1979, Brown strongly endorsed the idea of a spending limit. “In order to ensure that we permanently slow the inflationary growth of government, I will support an appropriate constitutional amendment to limit state and local spending.”
In fact, Brown endorsed the Gann Limit when it appeared on the ballot a few months later.
The Legislative Analyst felt certain that the budget proposal is a violation of the Gann Limit, which is part of the state constitution. The LAO warned of possible legal challenges if the proposal is adopted.
That prospect took a step toward reality when Jon Coupal, president of the Howard Jarvis Taxpayers Association issued the following statement: “The Gann Spending Limit was intended to be a reasonable check on out of control state spending. We will carefully analyze the LAO report to see if we concur with the concerns expressed therein. Subsequent legal action cannot be ruled out.”