PPIC Survey Reveals Popular Awareness Of State Fiscal Crisis & Weak Support For Reform Efforts

High Awareness

There is nearly unanimous consensus on one issue in California today: The state government's record-setting budget deficit of $38 billion spells trouble for Californians. Nine in 10 residents consider the deficit a big problem (73%) or somewhat of a problem (21%)-similar to the levels of concern registered in our February 2003 survey. Serious concern about the budget deficit is found among large majorities in all demographic groups and regions of the state. However, there are some important differences: Whites (80%) are much more likely than Latinos (59%), San Francisco Bay Area residents (80%) are more likely than Central Valley residents (70%), and Republicans (85%) are more likely than Democrats (77%) or independents (75%) to consider the deficit a big problem for the people of California today.

In these days following the public release of the governor's May budget revisions, six in ten residents (61%) are following the news about the state budget either very closely or fairly closely (fewer than one in five are following the issue very closely). The public's attention to this issue remains as high today as it was in out February 2003 survey. Roughly six in 10 residents in all the major regions of the state are closely following the news on this issue. Attention to news on this topic increases with age, education and income and is significantly higher among whites than Latinos.

Although the state's budget deficit in 2003 has generated a high level of awareness and a great deal of concern, the public does not appear to be as alarmed about this issue as it was with the state's electricity crisis in 2001. In our July 2001 survey, 81 percent were closely following the news about electricity (39% very closely), and 94 percent said electricity was a problem (78% a big problem) for the state.

The Knowledge Gap

Although most residents are closely following the state's budget crisis, relatively few seem to have a deep understanding of how California's complex state and local finance system works. Only 15 percent of residents say they know a lot about how their local and state governments raise and spend money, while more than four in 10 residents (44%) admit that they know very little or nothing about state and local finance. Higher percentages of registered voters (63%) and likely voters (75%) than the public at large (56%) claim to know a lot or something about the fiscal system in California. Republicans express more knowledge about state and local budgets than Democrats or independent votes, and knowledge tends to increase with age, education, and income. Latinos (57%) are more likely than whites (37%) to say they know very little or nothing about state and local finance.

When asked to name the primary cause for the state's budget deficit, residents most often mention factors outside the fiscal system itself. Four issues to the list: Population growth and immigration (22%) the state economy (18%), the energy crisis (16%), and the state's elected officials (14%). Spending increases (9%) and declining revenues (8%), which are often mentioned in reports and analysis of the $38 billion state budget deficit, are mentioned by fewer than one in 10 residents as the primary cause for the state's budget crisis. Democrats are more likely to name the state's economic slump (21%), while Republicans and independents are more likely to point the finger at the state's elected officials (both 20%). The mention of growth and immigration is higher among Latinos (30%) than whites (19%) and declines with education and income. College graduates and upper-income residents are more likely than others to point to revenue declines and spending increases as the cause of the state budget deficit, but even in these groups, the issue of growth and the economy are the dominant responses when fixing the blame.

Spending and Tax Reforms

Beyond the current budget crisis, there is newfound emphasis in policymaking circles on fundamental fiscal reform. Among the proposals under consideration in the state is a constitutional limit on increases in state spending, taxes on all goods sold over the internet, and a relaxing of the Proposition 13 restrictions on property taxes for commercial property. This survey indicates that these structural reform proposals all have substantial public support.

Seven in 10 Californians think that limiting increases in the mount of money the state can spend each year is a good idea. In February 2003, a slim majority (52%) said they would favor and amendment to the state constitution that limited annual increases in state spending. Today, 80 percent of Republicans, 70 percent of independents, nd 64 percent of Democrats think that spending limits is a good idea.

Nearly six in 10 Californians (57%), including a majority of likely voters (54%), think that commercial properties should be taxed according to current market values. As in February 2003, when 52 percent of state residents felt that Proposition 13 restrictions on commercial property tax assessments should be removed, there are significant partisan divisions on this proposed measure. Sixty-three percent of Democrats and 57 percent of independents say that taxing commercial property at current market value is a good idea, while 50 percent of Republicans say it is a bad idea.

Fifty-seven percent of Californians say that it is a good idea to tax all good sold over the Internet. Similarly, in February 2003, 56 percent of residents favored requiring all companies that sell items over the Internet to collect state sales tax from their customers. Today, as in February, majorities of Democrats (60%), independents (54%), and Republicans (53%) support extending the sales tax to all Internet sales. Two-thirds (66%) of those who do not ever go on-line to purchase goods or services think that this is a good idea, compared to only 48 percent of those who do shop on the Internet.

Changing the Supermajority Requirements

One path that fiscal reform might take is to alter the rules and procedures that underlie the budgeting process and the implementation of new taxes. In California, supermajority requirements mandate that two-thirds of each house of the legislature must vote to pass a state budget and new taxes and that two-thirds of the voters in local elections must agree in order to pass local special taxes. These requirements, passed into law through citizens' initiatives, are one of the core structural features underlying California's fiscal landscape, and changing them would require a constitutional amendment passed by a majority of state voters. Some argue that these requirements make it too difficult to pass budgets or raise revenue and that a lower threshold for enactment should be implemented. Many Californians are reluctant to change the two-thirds supermajority requirements, and passing such structural reforms today would indeed be a challenge, based on the reactions of likely voters.

Less than half of all residents (46%) and only 42 percent of the state's likely voters think that it would be a good idea to replace the two-thirds vote requirement with a 55 percent requirement in order for the legislature to pass a budget. Half of all Democrats (50%) think that relaxing the requirement is a good idea, while majorities of Republicans (56%) and independents (51%) think it is a bad idea. Support for the two-thirds requirements is unrelated to how closely people are following news about the budget crisis or to how much they know about state and local finance.

Support for replacing the two-thirds vote requirement with a 55 percent requirement for voters to pass local special taxes also gets lukewarm support. Forty-six percent of residents say that changing the local vote requirement would be a good thing, and 45 percent think it would be a bad thing. Among likely voters, a majority (52%) think it is a bad idea. Again, there is a large partisan gap on this question: A majority of Democrats (51%) think changing the vote threshold is a good idea, a majority of Republicans (61%) think it is a bad idea, and independents are slightly less likely to say that it is a good idea than a bad idea (45% vs. 48%).

2004 Fiscal Ballot Measures

While California is facing a large budget deficit this year, voters will be asked to consider two major fiscal proposals on the 2004 ballot. How do they currently respond to ballot measures to borrow several billion dollars in state bonds for education and to permanently set aside funds for infrastructure spending? Seventy-three percent of adults and 65 percent of likely voters say they would vote yes on the $12.3 billion Kindergarten to University Bond Act. Fifty-nine percent of all adults and 53 percent of likely voters would also vote yes on a measure creating a dedicated California Infrastructure Fund.

The Kindergarten to University Bond Act follows up a bond (Proposition 47) passed by 59 percent of state voters in November of 2002. The new bond would provide additional monies for K-12 public school, college and university facilities. Support for the bond measure is strong across the state's major regions, with more than 70 percent of those in the Central Valley, San Francisco Bay Area, Los Angeles County, and Other Southern California saying they would vote yes. Eighty-three percent of Democrats and 72 percent of independents would vote yes on this bond, compared to a slim majority (52%) of Republicans. Most Californians ages 18 to 34 (86%) would vote yes on the measure, as would 79 percent of those who have children in the household.

The California Infrastructure Investment Fund would dedicate money each year for infrastructure projects. Half of the money would go toward state projects and half toward local projects. Majorities of residents in all of the states major regions support the measure, but support varies widely by party registration, age and household income. Solid majorities of independents (64%) and Democrats (62%) say they would vote yes on this measure, compared to only 47 percent of Republicans. Nearly 70 percent of Californians under are 35 want to create this fund, compared to 53 percent of those ages 55 and older. Among those from households with incomes of $80,000 and higher, 53 percent would vote yes, while over six in ten of those with lower incomes support the measure.

Overall Spending and Tax Preferences

Clearly, many residents are opposed to reduction in state spending on public programs, but given the current deficit, which state program are they most concerned about saving from they budget ax? For most Californians, the answer is kindergarten through 12th grade public education. Overall, 62 percent of Californians (and 63 percent of likely voters) want to spare K-12 spending when given the choice between that and preserving spending on health and human services (20%), higher education (10%), and youth and adult corrections (6%).

Public support for saving the schools from funding cuts is strong across voter groups. Still, there are significant variations in program priority across the major regions of the state and among demographic groups. Women are more likely than men (65% to 58%) to want to protect K-12 spending, as are those with children at home compared to those without (68% to 57%). There is also interesting regional variation: In Los Angeles County -where the lowest percentage of residents (56%) most wants to protect K-12 education - a regional high of 25 percent of residents support sparing health and human services. One-third of California residents ages 55 and older most want to protect health and human services from spending cuts, compared to only 19 percent of those between the ages of 35 and 54 and 14 percent of those under 35 years old. Health and human services is also mentioned more by those with household incomes under $40,000 (24%) than by those with household incomes of $80,000 or more (14%).

Asked to name their most disliked tax, 35 percent of Californians indicate income taxes, 26 percent say property taxes, 21 percent give the nod to vehicle license fees, and only 14 percent say sales taxes. Among these four taxes, sales taxes are the least likely to be mentioned across partisan groups and major regions of the state, except in the San Francisco Bay Area, where vehicle license fees receives slightly fewer mentions than sales taxes (15% to 17%).

State and Local Burden and Fairness

The public's perceptions of the equity or fairness of the taxes they are paying can tell us a great deal about their desire to make sweeping reforms of the state and local tax system. Overall, two-thirds of Californians think that the state and local tax system is either very (6%) or moderately (60%) fair. Majorities across the political spectrum think the system is at least moderately fair, although Democrats (71%) and independents (67%) are much more likely than Republicans (55%) to see the system as fair. Moreover, 20 percent of Republicans think that the state and local tax system is not at all fair, compared to only 9 percent of independents and 8 percent of Democrats. Liberals (73%) are much more likely than conservatives (59%) to think that the system is fair.

Seventy-three percent of Latinos and 63 percent of whites think that the state and local tax system is at least moderately fair. Californians under 35 years old are the most likely (75%) to see the tax system as fair; only 60 percent of those ages 55 and older think the system is fair. Among the various income categories, we find only moderate variation in opinion about the fairness of the system.

When asked to think about their personal state and local tax burdens, nearly half of all residents (47%) think that they pay about the right amount of taxes. However, almost half of all Californians think that they pay somewhat (25%) or much more (22%) than they should. Only 4 percent of the state's residents say that they pay too little in state and local taxes. Again, there is a significant partisan split on the question: Sixty percent of Republicans say they pay more than they should, compared to roughly 45 percent of independents and Democrats. Fifty-four percent of Latinos and 47 percent of whites say that they pay about the right amount in state and local taxes. While 39 percent of those with annual household incomes under $40,000 think that they pay more than they should in state and local taxes, 55 percent of those with incomes $80,000 and higher say that they pay more than they should. Thirty percent of those with household incomes higher than $100,000 say that they pay much more than they should in state and local taxes.

Distrust in State Government

The public's confidence in state officials' ability or willingness to address problems in an effective manner could ultimately influence Californians' reactions to governmental proposals for reforming the state's fiscal system. Coincident with the deepening state budget crises, trust in state government "to do what is right" is at its lowest since the PPIC Statewide Survey began in 1998. Today, only 34 percent of all adults, and 31 percent of likely voters, say that they trust the government in Sacramento to do what is right just about always or most of the time. Sixty percent of Californians now think that the state government can be trusted to do what is right only some of the time, and another 4 percent volunteered that the state government can be trusted none of the time. In 2001 and early 2002, nearly half of Californians thought that the state government could be trusted to do what is right almost all of the time or most of the time.

Once again, there is a strong partisan divide, although confidence is low across party lines. Thirty-nine percent of Democrats say that they trust the state government to do what is right just about always or most of the time, a position shared by even fewer independents (30%) and Republicans (26%). Californians under age 35 are more likely to trust the government than those 55 and older (39% to 28%); and continuing one of our surveys' consistent findings, Latinos are much more trusting than whites of the state government: Forty-five percent of Latinos today say that they trust the government in Sacramento to do what is right all or most of the time, compared to only 31 percent of whites.

A slim majority (52%) of Californians think that the state government wastes a lot of the money they pay in taxes. The percentage of Californians who think that the state wastes a lot of money is no higher than it has been in pervious surveys, but it is significant across the state's major geographic regions and partisan groups. A plurality of residents throughout the state think that people in state government waste a lot of money; the percentage is highest in the Central Valley, where 57 percent say that the state wastes a lot of the money they pay in taxes. Two-thirds of Republicans, 50 percent of Democrats, and 49 percent of independents say that the state government wastes a lot of money.