Justification for State’s Raid on the Counties Is Dead

They say you can’t squeeze blood from a turnip. But the state of California continues to perform a similar feat every year by sucking increasing amounts of property tax revenues from fiscally starved local governments.

It’s time to stop this raid on the treasuries of California’s 7,000 counties, cities and special districts. A powerful bipartisan coalition has come together in the Legislature to do just that, but it will need strong public support to get the message across to Gov. Pete Wilson.

The property tax hemorrhage started back in 1992 when the recession plunged the state budget deep into the red. Over a two-year period, the governor and Legislature took several billion dollars in local property tax income so the state could meet its obligation to school finance. The diversion was supposed to be temporary, until the recession ended and state tax receipts rebounded.

Well, the recession is over. State revenues have recovered and now are expected to in- crease by about $2.5 billion over current levels in the coming year.

So, are local governments getting their property tax money back? Not a cent. Moreover, the amount the state takes grows by about 3.5% each year because of rising property values. That’s like loaning money, against your will, to a big brother and then having to pay him interest.

Local government staged a mini-revolt last year. The Legislature gave overwhelming approval to a bill by Assemblyman Fred Aguiar (R-Chino) to cap the tax shift at the 1996-97 level. Local governments then would get to keep the modest growth in the tax, amounting to about $120 million a year.

Wilson vetoed the bill, criticizing it as a piecemeal approach to the tangled state-local fiscal situation in California. In his veto message, the governor proposed consideration of fiscal reform during this year’s budget debate. But his budget was silent on the matter.

Now, Aguiar and his allies are back, in force. Aguiar has teamed with Mike Sweeney, the Democratic chairman of the Assembly Local Government Committee, to co-sponsor new legislation that would cap the property tax diversion and begin returning the $3.5 billion base amount to local governments in 10% annual increments. The measure won approval of the Sweeney committee on Wednesday.

The effort is expected to get significant support from California business leaders as it moves through the Legislature. The goal is to make the issue an integral part of the budget debate, as it should be.

California does need--desperately--to overhaul local government finance, which has become an irrational morass over the past 20 years. With welfare reform and other urgent matters on the agenda, reform is not in prospect this year. That, however, is no excuse to avoid the property tax issue again. Passage of the Sweeney-Aguiar bill would not complicate subsequent reform efforts. But it would strike an overdue blow for fairness.