Molly Munger

Prop 38's Molly Munger

California’s gas prices have stabilized, a testament to the power of government action. Governor Jerry Brown’s moving of the cutoff date to switch from summer to the less expensive winter fuel blend has led to some price easing.

And with refineries slowly coming back on line, prices should drop, cutting some of the gap between California gas prices and the average for the rest of the country, which currently stands at 85 cents.

This won’t happen overnight, however; the main Chevron refinery in Richmond plans to remain shut through the end of the year.

As I said the other day, the ancillary problem to the gas price spike was the consequences for the statewide election in November. Voters will be asked to support Prop 30, Governor Brown’s tax measure that would fill a large budget gap and avert major cuts to K-12 schools and higher education. Perhaps the flatlining of gas prices, just as ballots get mailed to voters, will mean less of a disruption to the Prop 30 race. But Brown has another problem.

There are actually three tax measures on the statewide ballot. Prop 39 concerns a corporate tax loophole, and would dedicate the revenue from closing it to energy projects. That exists separately from Brown’s measure, and so both Prop 30 and Prop 39 could pass under the law. But Prop 38, promoted by millionaire lawyer Molly Munger, is a different animal. Munger’s proposition would increase overall state income tax rates to pay for schools and early childhood education. It conflicts with Brown’s increase on just the top tax rates (along with a small 1/4 cent increase in the state sales tax). So both measures cannot pass; if they both cross the 50% threshold, whichever proposition gets the most votes will get implemented.

Munger’s Prop 38, which raises more money because it raises income taxes across the board, has consistently lagged in the polls, and this aspect of competition between it and Prop 30 has now led Munger to actually air an attack ad against the competing measure.

“Prop 38 sends billions of new education dollars straight to our local schools and guarantees that politicians can’t touch it. Thirty-eight will restore the education cuts from Sacramento,” said the first Prop 38 ad, released a couple of weeks ago.

Brown’s Proposition 30 team echoed that last week.

“Thirty will restore funding for our schools and colleges and prevent billions in new cuts. With strict accountability, money must go to the classroom and can’t be touched by Sacramento,” its ad said.

“It was grand theft,” of Prop 38′s themes, and required a direct response, Prop 38 spokesman Nathan Ballard said. Munger, the daughter of Warren Buffett’s business partner, billionaire Charles Munger Sr., added $3 million this week to her war chest, on top of the $31 million she had already committed, and she launched a direct comparison ad on Tuesday.

“Prop 30 sends money in here,” the new ad says, showing a cartoon of dollars going into a schoolhouse, “but lets the politicians take it out here,” it continues, showing money come out the back.

It should be noted that Munger’s ad is wrong. California, through Proposition 98, has extremely stringent guidelines on how much money must be delivered through the General Fund to the education budget. So any increased revenue will necessarily pass through to schools, at least in part. Furthermore, as part of this year’s budget, California passed a kind of “trigger,” deliberately earmarking revenue gained from Prop 30 to education. If the tax measure does not pass, the education budget will take a very specific hit. So you can absolutely say that Prop 30 will “restore funding for our schools and colleges and prevent billions in new cuts.”

This definitely risks torpedoing both tax measures. If neither of them pass, further cuts to schools will commence, and the idea that Californians don’t support more taxes to fund government operations will harden. And Munger is engaging in a kind of kamikaze strategy, where she seeks to stop Prop 30 even if her initiative has no chance of passing. Prop 30 has funded opposition of its own. Now it has to fend off attacks from a separate tax measure in order to succeed.