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RENEE MONTAGNE, host:

California lawmakers, having worked over the weekend, say they're closer to reaching a deal that would close the state's $26 billion deficit. For now though, California remains on the brink of running out of cash.

STEVE INSKEEP, host:

In fact, the state is still issuing IOUs to pay some of its bills. This week we'll be looking at some of the reasons why California is in crisis.

MONTAGNE: One key factor is the many voter-approved initiatives that control the way state money is spent. As NPR's Ina Jaffe reports, it's commonly called ballot-box budgeting.

INA JAFFE: Listing the things that Californians have voted for over the years sounds a little like a quarterback calling a play: Prop 98, Prop 13, 42, 10, 36, Hike. Well, there may be less hiking here if the state goes through with a plan to shut down the parks to save money, but every single one of those numbers represents a ballot initiative that in some fashion controls the public purse.

Mr. DON PERATA (Democrat, former head of the California State Senate): If representatives don't have the power of the purse, then you really can't make public policy, you can just talk about it.

JAFFE: That's Don Perata, a Democrat and the former head of the state senate who helped craft a bunch of budget deals over the years. Just look at Proposition 98, he suggests. It devotes at least 40 percent of the general fund to public education.

Mr. PERATA: Good cause, but when you start tying all that up, you have very little maneuverability and when people want you to be able to respond to their needs and you can't, they don't understand why not and it accounts for the gridlock that's up there right now.

JAFFE: In recent years, the voters have instructed lawmakers to spend money on drug rehab, stem cell research, and electronic monitoring of registered sex offenders. It can be incredibly complicated, but on a recent episode of "The Daily Show" Jon Stewart and his resident expert John Hodgman reduced the source of California's problems to something very simple.

Mr. JOHN HODGMAN (Humorist): The people of California...

Mr. JON STEWART (Host, "The Daily Show"): What?

Mr. HODGMAN: ...and their miserable ballot initiative system.

Mr. STEWART: Right, that's the direct form of democracy they've...

Mr. HODGMAN: Yeah, obviously they can't handle it at all. First in 1978, they voted to make it nearly impossible to raise taxes, and since then, year after year, they've required the state to give them all sorts of services and fancy stuff. Just last fall...

JAFFE: Californians, however, do not see themselves as a national laughing stock. They like the power they have.

Mr. JIM BRULTE (Former Head of Republican Caucuses, California State Assembly): By and large, my sense of the electorate in California is, generally speaking, they get it right.

JAFFE: That's Jim Brulte who was formerly head of the Republican caucuses in the state assembly and then in the senate. He never felt especially constrained by so-called ballot-box budgeting.

Mr. BRULTE: I think the voters tend to believe that the legislature and the governor should run the state. And voters tend to engage when they reach a point where they're no longer willing to wait. So they tend to act with a vengeance.

JAFFE: The most famous example of that is Proposition 13. In the 1970s, voters were angry that property taxes were skyrocketing and elected officials had done nothing about it. So, in the legendary taxpayer revolt, they rolled back their property taxes and limited future increases.

Mr. DAN SCHNUR (Head of the Jesse Unruh Institute of Politics, University of Southern California): Legislation is a scalpel. The ballot initiative is a sledgehammer.

JAFFE: Dan Schnur is the head of the Jesse Unruh Institute of Politics at the University of Southern California.

Mr. SCHNUR: Voters tend to be interested in immediate gratification. And if they are asked to vote for something that sounds appealing to them, they're going to vote for it. There's nothing that's part of the package that says, well you might like this now, but are you going to like it again in 5 or 10 or 20 years?

JAFFE: So, says Schnur, they may not have been focused on the part of Prop 13 that said that no tax of any kind can be raised without a two-thirds vote.

Mr. SCHNUR: The initiative process isn't designed to offer a cost-benefit analysis. A ballot initiative is drafted saying: Would you like this or not?

JAFFE: So in 2002, voters decided they would like to have more after-school programs and voted yes on Prop 49, a pet cause of Arnold Schwarzenegger before he became governor. The program costs more than half a billion dollars a year. Senator Denise Moreno Ducheny, head of the senate budget committee, says the state just can't afford it these days.

State Senator DENISE MORENO DUCHENY (Democrat, California State Senate): In last year, when we tried to suggest that it ought to be available for flexibility in these very difficult years, the governor vetoed the legislation. So the irony of this year is we are cutting schools, but his initiative for after-school programs is fully funded.

JAFFE: Ducheny is one of several lawmakers who want to change the initiative process. One of her proposals would require an initiative that costs money to also include a new tax or some other way to pay for it. But this would only affect future initiatives, not the ones Ducheny struggles with now.

State Sen. DUCHENY: (Laughs) You know, you do what you can do when you can do it.

JAFFE: And in the end, even if her efforts to change the initiative process succeed in the legislature, they'll still have to be approved by a vote of the people.

Ina Jaffe, NPR News.

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