Should California have a new Constitution?

Using public choice economics, how might we redesign the Constitution of California?  Lawmakers from both parties have proposed this idea, plus there were (failed) attempts to call a new constitutional convention through a referendum.  Did you know that the operative constitution from 1879 is the third longest in the world, after Alabama and India?

I see a few options on the table:

1. Eliminate the 2/3 legislative majority required to pass a new budget.

2. Eliminate popular referenda. 

3. Move closer to a Swiss-like "veto only" system for referenda.

4. Eliminate the power of referenda to authorize state-level expenditures.

5. Cap state-level expenditures.

6. Regulate state treatment of pensions more strictly, to encourage fiscal responsibility.

7. Amend the constitution to make it harder to…amend the constitution.

Joseph Palermo proposes doubling the number of State assembly members and Senators, ending term limits, ending state tax exemptions for extractive industries, and limiting out-of-state money to influence elections, plus finance and referenda changes similar to those stated above.

Is there a good theory of which changes are appropriate or inappropriate at the constitutional level?

Here's one downside:

With everything on the table, the same interest groups that today fight tooth and nail over a budget resolution or a ballot measure can be expected to do battle even more vociferously over an entirely new Constitution.

I welcome your suggestions in the comments.  Surely economics has a contribution here, right?


The WSJ had an interesting this article that proposed that California (or any other state facing debt crises) merge with a fiscally strong, neighboring state, most likely Oregon. In response to your question, it would involve tearing up their constitution and being subsumed into another state.

I have no research to back me up, but I am skeptical of the net benefits of a bicameral legislature. The mischief that occurs when joint committees create the final versions of legislation often occurs outside the public eye. The senate v. house set-up seems in many states to create or intensify rural-urban differences that may have little economic basis.

I'd also like to see a fiscal cycle of three to five years, still requiring that the budget be balanced annually, but allowing some carryover of surpluses or very limited deficit spending within the cycle.

From Wikipedia: "Since 1900, Stanford has enjoyed the benefit of a constitutional clause shielding Stanford-owned property from taxes".

I'm not sure that should be in there...

I second PJ's idea, although four may be enough.
I don't see a benefit in eliminating term limits and I thought they already capped spending. They just have a giant loophole they drive through.

Will any of the items on Tyler's list, severally or in combination, be sufficient to solve California's fiscal problems? A constitutional limitation on spending based on population, income, or both might but it's hard to imagine that actually making it into a new constitution. Without immigration reform it probably won't help much and immigration is a federal issue.

Countries that rewrote their constitution in the last few decades have mostly produced their worst constitutions ever. The effort was captured by interest groups and by modern and post-modern pseudo-thinkers.

It would be less bad if it would be written by a group of very cultured and judicious constitutionalists, however even this effort could be botched by the presence of a few "loonies" among them.

"One downside"?? Are you kidding? Doesn't public choice economics show us that the constitutional process would be a clusterf*ck of unbelievable proportions?

How would any of the special interests be restrained from enshrining their causes directly into the constitution? The idea that everything is on the table is wrong. As far as the unions and public employees are concerned, *nothing* is on the table except the taxpayers. Their empires need to be broken and fall first, so their interests are just as diffuse as the taxpayers'. Then everything could be on the table for a new constitution. (But by then the problems would nearly be solved already.)

Illinois has a balanced budget requirement, and yet is still gravely in debt. Clever accountants still find a way for the state to spend beyond its means within the letter of the law.

I don't know enough about what's happening in California to comment. However, "referenda to authorize state-level expenditures" are definitely a recipe for trouble anywhere in the world and should surely be eliminated. It's a very predictable weakness of direct democracy.

Application of ideas suggested by Buchanan and Congleton in Part 3 of Politics By Principle, Not Interest would perhaps solve California's problems at a stroke? They have a section on extending the "generality principle" throughout the structure of federalism, making it similarly difficult or impossible to finance or provide differentially beneficial goods and services to members or allies of dominant coalitions. In other words the principle of generality applied to fiscal authority at the federal level simply cascades down to the state level. The same mandates apply in regional or even district jurisdiction. I don't necessarily agree with Buchanan's objections to means testing, but much of the rest seems commonsense from the point of view of constitutionally enforceable fiscal discipline.

Also, breaking it up into 3 states would be the best option, but that's unlikely. Which is unfortunate. And even something the GOP should get behind, because it'd effectively give them 15 free electoral votes every election, while maintaining the balance of power in the Senate.

The comment by pj and Ted Craig--breaking up the states for better government--is the most boring and straightforward idea. It's also most likely to be correct. Can there be any doubt that California is just too big to keep government close to the people?

Ending term limits is also a good idea. I used to think that term limits also limited politicans' power and corruption. Now that seems unlikely. It just empowers special interest groups, lobbyists, and legislative staffers. Let politicians run on their records. It gives us someone to blame. (Either the politicians or the citizens!)

May basic advice for societies that are failing is to pick the most analogous succeeding society and try to copy it. Unfortunately, most polities are too proud to try to emulate success. Dunces. In California's case, I would say they should try to copy Texas but the stubborn dopes of the Golden State wouldn't think of it.

"If for every dollar California put into federal coffers it got back a dollar, California would have a multi-billion dollar surplus."

It's hard to accept that argument based on the large amount of defense work in the state. Part of California's problem may be the state's economy is overstated if you eliminate defense and service, especially in SoCal.

California is forced to subsidize failed states like Mississippi, New Mexico, and West Virginia. If for every dollar California put into federal coffers it got back a dollar, California would have a multi-billion dollar surplus. Hell, if it got 90 cents back for every dollar it put in, it would be essentially in the black.

If California elected politicians (Reps or Dems, but Reps more likely) that actually opposed these subsidies, I'd say "forced." But they're not. California continually elects politicians that support increased federal transfers, especially to the poor. California is a richer state, as you note (though some of it is twisted by laws, especially on housing, that raise the cost of living), and it's simply the case that any federal redistribution is going to go from richer states to poorer states in aggregate.

Stop electing politicians that favor redistribution, and you'll have room to whine. Until then, California is getting exactly what it's voting for. Until then, any complaints about California "unfairly" having to pay out more are just going to be laughed at.


How about "gerrymandered" assembly districts (same problem in the US House), which makes many elections noncompetitve and encourages ideological extremism. Term limits actually helps because it forces turnover, gets the corrupt and powerful old bulls out of office.

But I am curious? Are California's voters rational? If so, what is the problem? If not, how will a new constitution fix it?

You want a model? Try New Hampshire. Small state in area and population. Yet it has a very large legislature, so that every district is small enough for every legislator to meet the voters. The legislators are not paid, and the legislature does not meet full time. Yet, the state does without a sales tax or an income tax, and it is not broke, and it has few corruption scandals. Imagine that. It also does not have a large population of illegal immigrants. Something to learn from.

The progressive attitude seems all too typical. If the "progressives" are out of office, there is something wrong with the voters. If the "progresives" are in office, and they still can't get what they want, or their programs don't work, there is something wrong with the political structure. It can never be that "progressive" programs don't work.

Californians vote for initiatives repeated. They take the government into their own hands because the elected representatives are bozos, unresponsive to the desires of the voters and unconnected to reality. I lived in California for 20 years and saw it all up close.

The famous "Proposition 13," which capped property taxes, passed because property taxes were soaring and the legislature did not care. The dreadful electricity crisis of 10 years ago was not caused by the voters but by idiots in office.

Consider that if California had no initiative process, the government would be worse.

Califano used to work with Lyndon Johnson. Was the Johnson administration a success? Why should we listen to someone whose ideology is that there is no such thing as too big a government?

California should have a drastically larger Assembly. I recommend between 300 and 350 Assemblymen. It would also be nice if California would return to the 'cutting edge' of electoral democracy and adopt something other than and, of course, better than single-member plurality elections.

They Californian senate may be retained, but I think it should be drastically different from the lower house and perhaps, for aesthetic diversity, called something other than Senate. They should try something really radically distinctive, perhaps a Senate chosen by lot or one elected by non-geographical constituencies via a different electoral system than the lower house. American upper houses provide often largely redundant representation of population, but I think that there's ample chance for experiment.

Even more radically, relatively speaking, California could adopt a parliamentary system or, even if they might not realize what they were getting into, a semi-presidential system.

They probably won't, however, do anything clever or innovative. Mercifully, in California's case, a few mild corrections could yield significantly better government.

California's initiative process means we need 50% + 1 of the unaccountable general public in order to spend money. Then we need 2/3 of elected officials, dependent on the good will of the public, in order to raise money. It's miraculous that we're only as broke as we are.

It will probably take an actual default crisis to bring any meaningful change to the trajectory of the various state and local governments. This is coming.

@anonymous backstabber

So the fact that spending has increased relative to ten years ago is a sign that the state must be overtaxed, despite the fact that it is objectively not overtaxed??

This is ludicrous without even mentioning the fact that an increase doesn't say anything about relative amount, or that spending is not the same as spending, if it was there would BE NO PROBLEM (at least, not a problem as huge as the state's imminent collapse).

I think anonymous backstabber's point is that CA was doing at least as well as now 10 years ago, and it required MUCH less money to do at least as well--suggesting that a large part of the problem is increased spending, not undertaxation. It could of course be both. But overspending never seems to be considered as a legitimate diagnosis, which is frustrating.

The main problem is that it takes 50% to spend and 2/3rds to tax, which isn't a good idea. I don't mind if you put the tax/spend vote percentage above 50%, but they should be the same number.

"Surely economics has a contribution here, right?".

Only 3 of your 7 ideas centered on economics.

As to California... given the political and economic demographics of who remains there, it is beyond hope.

Outlaw public sector unions.

All government activities open to public tender/outsourcing.
Wages, benefits and pensions of public sector employees tied to economic performance of the entire state / all citizens (and especially no separate fund for managers).
All taxes / fees sunset after 3 years; keep the 2/3 majority for all budgets where expenditures are increased.


Good job for talking about solutions, raising the issue of California governance.

However, I think it is way to late to be pecking around at the edges. The only way that I see for the U.S. will finance its deficit over the next six months to a year is for the Federal Reserve to resume “quantitative easing.† Effectively that is default.

Somebody needs to say that our first cut at guaranteeing retirement, health care, financial security, housing and employment have created far more promises than can be delivered. Similarly governments, at all levels, have outspent and outpromised the ability of the tax-producing sector to create.

The result is the ultimate backstop for all of these problems, the U.S. government, is tapped out at the same time that Social Security, Federal civilian and military retirement, state and local pension funds, the Pension Benefit Guaranty Corporation, Medicare, Medicaid, state and Federal retiree health benefits, private health insurance, Federal, state and local spending, U.S. Postal Service, unemployment, underwater mortgages, Fannie, Freddie,, bank failures, the FDIC, and the Federal debt, all need bailed out.

We need answers and we need them now!

I think that the first step is to agree that the people who have to bear the burdens make the choices. Tax, spending, and debt levels should be set directly by the citizens/taxpayers (Click on link below). They should also make the decisions on major policy questions. Everyone will lose something. Everyone also needs to have the opportunity to participate in the decisions that impact their lives.

John Bailey

Yay! A chance for me to post a link to the split-CA-up picture:
The lines could be negotiated, and no one wants LA in their state, so they should just be their own.

And before moving to solutions, it's a worthwhile endeavor to look at what the PROBLEMS are the new government structure is supposed to solve!

I would put problems with California's dysfunctional government in several categories:
(1) Dealing with intertemporal choices. Examples include:
* Public employee pensions and retiree health care benefits
* Global warming
* California's boom and bust cycle of revenues (the result of a highly progressive tax structure coupled with volatility of the highest income Californians... eg. California defines stock capital gains as income)

(2) Handling Special Interests (Programs greatly benefiting the few at the expense of the many)
* Water
* Teachers unions & education
* Medicaid
* Prison guards

(3) Size and scope of government

California has had its current constitutional structure for a long time. Why the dysfunction now? As I see it, the overall context is that during the .com boom back in the late 1990s, California government thought it could have FAR more government services with the same tax rates. When revenues collapsed, this free lunch was exposed as fallacious, but a consensus was never reached on whether to raise taxes or slow spending growth.

Excluding Schwarzenegger's TOUGH budget in the first year after he was elected, the long term gap has been papered over by Sacramento with gimmicks and debt. The latest downturn has merely ripped this untreated wound open again. The problem from the late 1990s was never solved.

@ drtaxsacto

California is suffering from a negative revenue shock. The literature (Alt & Lowry (1994), Persson, & Tabellini (2004a), Persson & Tabellini (2004b) suggests that partisan divisions between houses and/or governors reduces fiscal adjustment and tends to lengthen budget deficits.

In fact, "Poterba (1994) shows that (1) unified state governments adjust more quickly to unexpected deficit shocks than do split governments, (2) unified governments make most of their adjustment with tax changes (rather than spending) and do so to a greater extent than split governments, and (3) where rules affecting budget balance are stronger, governments adjust more quickly to offset unexpected deficit shocks" (Alt & Lowry 1994).

So the 2/3rd's majority rule is another hindrance to agreement at this point.

As to the bicameral legislature it probably doesn't help adjustment either. These checks are not against bad policy, they are checks against quick change. In a crisis they don't help at all.

California's population is not greater than Spain's. Spain's population was about 46,157,822 according to the 2008 census while California's was 36,961,664 according to a 2009 census bureau estimate.

is in its mess because the state government is structured in a way that makes it impossible for it to run a balanced budget. Its like eighteenth century Poland all over again.

It is worth noting that the Polish constiution with its unanimty requirement worked for a couple centuries before unanamity became a problem, and the Californian constitution worked for decades before the assymetry between spending and taxation became a problem. These constitutions work, until a signficant minority in government doesn't want them to work anymore.

They should try something really radically distinctive, perhaps a Senate chosen by lot or one elected by non-geographical constituencies via a different electoral system than the lower house. American upper houses provide often largely redundant representation of population, but I think that there's ample chance for experiment.

The Supreme Court ruled anything other than "largely redundant representation of population" illegal. Justice Alito (or Roberts, but I think Alito) at his confirmation hearings came for some withering questioning over having written a law review article saying that those decisions (which banned "one member per county" and other style state Senates) were perhaps not the best.

Limitations on constitutional amendments will only lock in bad past decisions, such as Prop 13 which has shifted responsiblities from the state because the local government could no longer support them, eg., education.

I'm waiting for someone to offer a soak the rich constitutional amendment--everyone pays taxes with incomes exceeding the top 5%. They did crazy things for the right; crazy can happen on the other side.

So, to avoid this, they need to go with majority rule on both taxes and spending, and also do some devolvement back to the local government which would be give more taxing authority, ie, repeal of prop 13. Otherwise, just go the oregon route, which is not optimal either but which may be necessary to get people to the bargaining table and acting like adults.

Michigan's up for a constitution convention this year - any ideas for that state?

Would a move to a parliamentary system where the Governor is a symbolic rather than actual head of government and the actual power rests with a premier appointed from and responsible to the legislature as is the norm in the rest of the civilised world violate this requirement?

The case of Switzerland proves that direct democracy is not the problem.

Someone from the other side is right: Swiss citizens can propose legislation of their own (initiative) and veto a decision of the parliament (referendum). See

Public finances in Switzerland are in quite good shape, although tax increases have to be approved by the people. On December 2, 2001, a fiscal rule at the federal level was accepted by the people with a majority of 85%.

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Obviously those suggesting splitting up California haven't tried dividing California to avoid causing one or more cites becoming ghost towns for lack of water, and the nation losing a major source of fresh food. A third of the state is desert, but that part is probably the most productive.

California is a big state in economy because of a century of big government. California made education a priority and wrote it in the constitution. When the anti-tax free lunch crowd passed prop 13, prop 98 had to follow - Californians aren't going to sacrifice their educational system. Without that, California can kiss its future good bye, based so heavily on human capital.

Texas has more area and lots more resources to exploit, but its growth has more to do with Congressional Texans bringing home the bacon. Why is the NASA control center in Texas?? With out Texans like LBJ and his peers, Texas would be cattle, oil wells, and petrochemical factories producing smog.

California just needs to make setting taxes be rational instead of large groups trying to get a free lunch off someone else.

As usual the claimed solutions, ending the pensions or killing the unions just won't address the real problems - the amount of money saved just isn't enough. In fact, switching to 401Ks or defined contribution pension funds would make problems worse because the cost going forward has to be paid in good times and bad, and all the past commitments would need to be made good in what are probably bad times. If California returns to historical growth rates, the burden of pensions and similar things becomes less.

In general, the state and national fiscal problems have been harmed most by the poor economy since 2001, an economy that has been harmed by the tax cuts. At the national levels, setting taxes to pay for government has been impossible and the consequence has been poor growth, well below even the worst decades of the previous century. Likewise, California's economy has been made worse by both the national economy, but also the problems in California setting taxes.

If low taxes are the key to growth an prosperity, the big economy states would be make up of the states known today for their poverty and backwardness.

I agree with Mulp.

California got itself into this problem beginning with Prop 13. A lawyer friend of mine who purchased his house in the early 70's pays $6999 property on his $2 million house. Local government services devolved to the state, education was picked up, etc. because local government had no funding. State taxes increase. Dah.

California knows what it has to do, and until they suffer more they will not take the steps to do it because a generation was locked into a house with low property taxes; they'll have to die off first before change.

If low taxes are the key to growth an prosperity, the big economy states would be make up of the states known today for their poverty and backwardness.

Not at all. Low taxes are the key to growth and prosperity. It makes perfect sense that richer states are more interested with enjoying the fruits of their wealth, while poorer states are more interested in growth.

So poor and backwards states have low taxes because they want growth. Surely it hasn't escaped you that the poorer states have been catching up?

There's also an incentive for wealthier states to raise their own taxes in order to keep tax revenue in their own state instead of having it redistributed (thanks to the federal deduction for state taxes.)

Re term limits -

Iimagine you just got a new job. You know with 100% certainty that you will be fired in six (or eight) years, and that you won't be fired before then. The economically rational thing to do is not really to worry about the performance of your current job too much, but instead concentrate on positioning yourself for your *next* job, and in the meantime try to get as much money as you can from your current one. And that's what most state legislators do.

Boy, Mulp sure uses a lot of words to be wrong. California has had a net domestic population loss for years. California's "miraculous" educational system may be helping western states, but I question its connection to the state's well-being. What California has going for it is two things - Stanford and the weather. Both attract people like Larry Page (Michigan) and Sergey Brin (Maryland). And 13% of all defense spending means somebody's bringing how the bacon to California, as well.

It is no coincidence that public pensions have run wild in the ten years since term limits came into full effect. State legislators don't work for the people at all anymore, they work only for their campaign contributors, which for Democrats means the public employee unions. The idea that term limits "get the corrupt people out of there" is laughable.

California is in dire need of more Mexicans.

I always like it when someone says there is this unfunded.[insert pension, entitlement, etc]..liability.

Most of the liabilities are matched with revenues as times go forward. Liabilities are future obligations matched with future revenues.

Think of it this way.

Intel has an unfunded debt liability; Cisco has an unfunded debt liability...and so forth.

It is sad that people have to use this approach to speak to the ignorant in order to motivate them, rather than to discuss things rationally. We need, particularly on a site that has economist on it, for someone to stand up and point out the stupidity of these arguments. What matters is if there is a shortage of revenue to match liabilities and it is only the net mismatch which matters.

Where's those Mexicans we need in California?

has anybody tried actually drafting a constitution.
here's an idea for a state constitution that came out of a political science assignment. I'm a political philosophy/econ major, not a law student, so there are necessarily problems with the wording, and of course, it's rough. It's also way out there (Burke would say there's the problem).

Anyway the ideas were
-A unicameral legislature (Nebraska's happy with there legislature)
-A electoral method that would allow for legislative districts but get past some of the problems of first-past-the-post voting (Condorcet)
-A fusion of legislative and executive powers in the Cabinet somewhat similar to the British system (Bagehot)
-A way to get past some of the problems with decision making in democratic bodies by presenting the legislature with yes-no options whenever possible(Arrow)
-A semi-independent fiscal agency. After all the US constitution turned a huge national debt into a national asset through the National Bank and Hamilton's treasury department. Who was it who said that democracy ends when the public realizes it has the keys to the treasury?

-I don't think the props, referendums, recalls, and other shenanigans can really be incorporated into a republican constitution in any constructive way. As Hamilton said, you first have to give the state the power to govern the people, then oblige it to govern itself.
-The voting age is lowered to 16 to make the electorate less geriatric (old people for obvious reasons don't vote to protect the long-term interest of a state) The electorate is as large as possible, allowing voting rights to be removed is very very dangerous.

Apparently there's a law class over at UC Berkeley that was a thought-experiment for drafting a California constitution. It's now "secret" because of protesters.

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