Pay-Up Time for the State

Students of government reform in California say that one of the major problems is the disconnection between the taxes residents pay and the services they receive. This compounds a related problem--the absence of accountability and the difficulty in figuring out whom to blame when things go wrong.

In the old days--basically before the passage of Proposition 13 in 1978--local property taxes went to support local services, including schools, police and fire protection, parks, libraries and the like. Residents could relate their property tax bills to the quality of local services. If service deteriorated, they could go to their local officials to demand improvement.

Since 1978, however, an increasing amount of local revenue, mostly from the sales tax, has been collected by the state and distributed back to counties, cities and local districts under a set formula. But not all of the money is being kicked back.

During the early 1990s, the governor and Legislature usurped, and that’s the word, more than $3 billion annually in local property tax revenues to help state government weather the recession. With the return of good times, Sacramento has returned most of the money it tapped during the recession. For instance, the income surtax on wealthier Californians was allowed to expire. And last year, the state repaid a $1.3-billion loan taken from the public employees retirement system.

Local government was compensated in part for its losses. A special statewide sales tax was levied in behalf of counties and cities, but it was limited to law enforcement uses. Then last year, Sacramento agreed to take over about $350 million in court costs, for the most part an expense of the counties.

Those actions were appropriate, and past due, but the net loss to local government still amounts to about $2 billion a year. California cities and counties have pleaded for three years now to have the state begin returning at least a portion of the lost property tax revenue. The Legislature unanimously passed a bill to do so two years ago, but the measure was vetoed by Gov. Pete Wilson. Lawmakers budgeted up to $280 million in a property tax rebate last year but the governor stepped in, using it instead to pay off the loan from the retirement system.

Now the Legislature is working on a 1998-99 state budget that may have a surplus of $1.5 billion or more. Again, local government seeks a modest return of the property tax revenues. Again, the governor has declined to provide the funds.

This situation should be a top priority when the Legislature develops the budget for the fiscal year beginning July 1. State and local governments are supposed to work as equal partners. Right now, one partner is definitely more equal than the other. It’s time Sacramento balanced the scale.