High Court Rejects L.A. County’s Challenge to State Tax Transfer

The state Supreme Court on Thursday rejected Los Angeles County’s challenge to the state government’s shift last year of $2.6 billion in property tax revenue from local governments to schools.

The county, which lost $681 million, argued that the shift violated local authority over property tax money and the financing of local government.

The revenue transfer was upheld by Los Angeles Superior Court Judge Diane Wayne and by a state appeals court. The Supreme Court denied review of the case.

The tax money was shifted to satisfy the state’s funding obligations for schools, under voter-approved Proposition 98, without widening the deficit. Counties lost $2.1 billion, and the rest came from cities and special-purpose local districts.

Local governments were partially compensated with revenue from a half-cent sales tax increase, but still lost significant amounts of money.

The 2nd District Court of Appeal said March 30 that the California Constitution gives the Legislature “the power . . . to allocate property tax revenue.”

Sally Reed, the county’s chief administrative officer, said: “The suit was well-founded. We regret losing it, but we knew it was a long shot.”

The ruling has no immediate impact on the county’s budget deliberations. The lost revenue has already been factored into its revenue projections.