California Proposition 58 (2004)
Encyclopedia
Proposition 58 was a California ballot proposition
on the March 2, 2004 ballot. It passed with 4,535,084 (71.2%) votes in favor and 1,841,138 (28.8%) against. It was officially called the California Balanced Budget Act. It requires the state legislature to pass a balanced budget
every year, which means that budgeted recurrent expenditure, including repayment of past debt
, does not exceed estimated revenue
. (The act does not require that capital works programs be funded out of current revenues. The California Constitution
has always allowed bond
issues, (state debt) for specified capital works, above a certain value. Bond measures must be approved by a statewide ballot).
The Act created a reserve fund called the Budget Stabilization Account in case of future financial trouble. It also prevented the creation of any future bonds to pay off deficits like that in Proposition 57
(the California Economic Recovery Bond Act). Proposition 58 took effect only because Proposition 57 also passed.
Propositions 57 and 58 were the centerpiece of Governor
Arnold Schwarzenegger's
plan to resolve California's budget problems. Schwarzenegger campaigned heavily for the both propositions' passage.
While Prop 58 was to provide balanced California budgets, the deficits continued in subsequent years, growing larger over time.
Summary of Legislative Analyst's Estimate of Net State and Local Government Fiscal Impact:
California ballot proposition
In California, a ballot proposition is a proposed law that is submitted to the electorate for approval in a direct vote . It may take the form of a constitutional amendment or an ordinary statute. A ballot proposition may be proposed by the State Legislature or by a petition signed by members of...
on the March 2, 2004 ballot. It passed with 4,535,084 (71.2%) votes in favor and 1,841,138 (28.8%) against. It was officially called the California Balanced Budget Act. It requires the state legislature to pass a balanced budget
Balanced budget
A balanced budget is when there is neither a budget deficit or a budget surplus – when revenues equal expenditure – particularly by a government. More generally, it refers to when there is no deficit, but possibly a surplus...
every year, which means that budgeted recurrent expenditure, including repayment of past debt
Debt
A debt is an obligation owed by one party to a second party, the creditor; usually this refers to assets granted by the creditor to the debtor, but the term can also be used metaphorically to cover moral obligations and other interactions not based on economic value.A debt is created when a...
, does not exceed estimated revenue
Revenue
In business, revenue is income that a company receives from its normal business activities, usually from the sale of goods and services to customers. In many countries, such as the United Kingdom, revenue is referred to as turnover....
. (The act does not require that capital works programs be funded out of current revenues. The California Constitution
California Constitution
The document that establishes and describes the duties, powers, structure and function of the government of the U.S. state of California. The original constitution, adopted in November 1849 in advance of California attaining U.S. statehood in 1850, was superseded by the current constitution, which...
has always allowed bond
Bond (finance)
In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity...
issues, (state debt) for specified capital works, above a certain value. Bond measures must be approved by a statewide ballot).
The Act created a reserve fund called the Budget Stabilization Account in case of future financial trouble. It also prevented the creation of any future bonds to pay off deficits like that in Proposition 57
California Proposition 57 (2004)
Proposition 57 was a California ballot proposition on the March 2, 2004 ballot. It was passed with 4,056,313 votes in favor and 2,348,910 against. The proposition authorized the state to sell $15 billion in long-term bonds to pay off accumulated deficits...
(the California Economic Recovery Bond Act). Proposition 58 took effect only because Proposition 57 also passed.
Propositions 57 and 58 were the centerpiece of Governor
Governor of California
The Governor of California is the chief executive of the California state government, whose responsibilities include making annual State of the State addresses to the California State Legislature, submitting the budget, and ensuring that state laws are enforced...
Arnold Schwarzenegger's
Arnold Schwarzenegger
Arnold Alois Schwarzenegger is an Austrian-American former professional bodybuilder, actor, businessman, investor, and politician. Schwarzenegger served as the 38th Governor of California from 2003 until 2011....
plan to resolve California's budget problems. Schwarzenegger campaigned heavily for the both propositions' passage.
While Prop 58 was to provide balanced California budgets, the deficits continued in subsequent years, growing larger over time.
Official summary
- Requires enactment of a balanced budget where General Fund expenditures do not exceed estimated General Fund revenues.
- Allows the Governor to proclaim a fiscal emergency in specified circumstances, and submit proposed legislation to address the fiscal emergency.
- Requires the Legislature to stop other action and act on legislation proposed to address the emergency.
- Establishes a budget reserve.
- Provides that the California Economic Recovery Bond Act is for a single object or work.
- Prohibits any future deficit bonds.
Summary of Legislative Analyst's Estimate of Net State and Local Government Fiscal Impact:
- Unknown net state fiscal effects, which will vary year by year and depend in part on actions of future Legislatures.
- Reserve provisions may smooth state spending, with reductions during economic expansions and increases during downturns.
- Balanced budget and debt limitation provisions can result in more immediate actions to correct budgetary shortfalls.