Prop. 13’s Legacy: Powerful Medicine and a Bitter Aftertaste

Voters supported Proposition 13 two decades ago because they needed relief and the state Legislature had refused to act responsibly. The medicine worked, but damaging side effects are still being felt in Ventura County and throughout California.

In 1978 the state had a huge budget surplus--more than $10 billion in today’s dollars. What caused this? The economy was strong, income tax receipts were high and unemployment and welfare costs were low. Also, the Legislature had refused to enact meaningful property tax reform. Instead the state had required local governments, particularly counties, to provide services but hadn’t provided the money to pay for them.

Consequently, each year property owners faced property tax increases to pay for non-property-related services that should have been paid for by the state. Voters rebelled and passed Proposition 13, a “simple tax-cutting measure” that has profoundly affected all layers of government.

In my judgment the five most significant impacts of Proposition 13 have been:

* Decision-making authority has been increasingly centralized in Sacramento, where the taxing power is greatest and accountability is least.

* Important services desired by local residents have been reduced or eliminated.

* Interagency conflicts have increased in Ventura County as local governments have sought beneficial state legislation and have competed for local sales and redevelopment property tax dollars.

* Cooperative efforts between the county and its cities have increased, at least in some key service areas.

* The lucrative business of qualifying ballot measures for statewide consideration has gained momentum, spawning a series of propositions that have further reduced the ability of local governments to pay for services.

Centralized Decisions

With the passage of Proposition 13, someone had to decide how the remaining but greatly reduced local property tax dollars were divided.

Previously, local governments had decided how much of this revenue they needed. However, Proposition 13 reduced and capped property tax revenues and required that property taxes be “allocated according to law.” So the state Legislature, which made the law, became the allocator. It decided to give top priority to public safety and to “the basics” in schools.

With this shift of authority to the state, representatives of local agencies in Ventura County increased their individual lobbying, to protect their revenue sources and fight against unfunded mandates.

Consequently, lobbying became extremely important, especially during economic downturns when the state inevitably covets local government revenue.

Shrinking Services

Given these state priorities, local agencies in Ventura County have been forced to drastically reduce so-called nonessential services, such as libraries and parks, even though they help create more livable communities.

Consequently, many park sites throughout the county remain vacant because even if the dollars were available to build them, there would be none to maintain them. Also, several communities have been advised that the county library district cannot pay for their long-awaited new libraries or operate them at an acceptable level.

Ironically, these vacant park sites and longed-for libraries are generally either in the poorest neighborhoods or in newer communities where post-Proposition 13 property taxes are highest. Funds to purchase school and public library materials have plummeted to the point that California now spends less per student for school libraries than any other state in the country.

Shamefully, this is the case despite significant increases in the general level of affluence in the state. This is reprehensible, particularly when we call ours a “high-tech” state.

Local Conflicts

During times of fiscal crises California has pitted cities against counties and schools against both.

For example, counties historically were required to pay the costs associated with the booking of people arrested and held in county jails. Counties also were required to keep property assessments current and to collect property taxes.

But because the Legislature wanted to reduce state dollars provided to counties, it authorized counties to charge cities booking fees and required cities to pay for property assessment and tax administration.

True to form, however, the Legislature refused to pay counties for the schools’ share of property tax administration, even though schools still receive the largest portion of property taxes. Why? To do so would have increased the state’s cost by $200 million.

Consequently, cities, counties and other local agencies pay to collect property taxes for schools. Surely these antics by the state don’t encourage local harmony.

To survive, cities have implemented strategies to enhance local revenue. Local leaders realized that if their cities and counties were to be economically viable and fulfill the goals set forth in their general plans, they would have to utilize all available tools, including redevelopment laws.

For years the state constitution had authorized and protected redevelopment as a state program, to be carried out by local redevelopment agencies. As cities began implementing these programs, several divisive struggles--including some lawsuits--occurred between sister agencies in Ventura County regarding the allocation of future property taxes.

Fortunately, these battles have subsided because in recent years Ventura County has taken a positive stance toward redevelopment, having recognized that the fiscal future of the county is enhanced by appropriate redevelopment projects.

The local sales tax--one penny for each dollar of taxable sales--has become an increasingly important city revenue source. As competition for retail outlets has increased, several legal battles have been between neighboring cities. (Some companies took advantage of city efforts to secure sales taxes and demanded tax break incentives, a form of “corporate welfare.”)

These battles occurred because cities, which generally provide property-related services, receive only a small share of the total property tax, which was greatly reduced by Proposition 13. In fact, the city’s portion of taxes on even the most expensive new homes was simply inadequate to pay for the services citizens required.

Better Cooperation

Despite keen competition for dollars among local agencies, the willingness of Ventura County and its cities to cooperate has been laudable.

Through thoughtful discussions and negotiations, the booking fee is no longer charged. The county and cities also worked together to implement Proposition 172, which partially replaced dollars taken by the state. However, cities receive very few of these dollars.

Cities served by the library district have hammered out a joint agreement with the county that should, over time, provide enhanced though still decidedly inadequate services.

Also, to the credit of every city and the county, the guidelines for orderly development have remained strongly in place, discouraging urban sprawl and protecting open space and greenbelts between cities.

Ballot-Item Boom

The passage of Proposition 13 spawned a lucrative business: qualifying and supporting ballot measures, several of which have further reduced the revenue-raising authority of local governments.

Unfortunately, the demand by citizens for services has not been similarly reduced. But the ballot initiative industry is providing lucrative employment opportunities to a growing segment of our population.

*

We know that history seems to repeat itself. California, thanks to a robust economy, again has billions in reserve. Yet as in 1978, the state has no desire to return money it took from cities and counties during the recent recession.

Ironically, some politicians are saying, “The state has a surplus but don’t cut state revenues; let’s cut city and county revenues instead! Let’s repeal the vehicle license fee!”

Perhaps this is why many believe that when the state is in trouble, it bails itself out by taking local revenue, but when the state has excess money, it hoards it and forces voters to take away local revenue.

Surely these are not the same politicians who want to take billions of dollars from local government while saying, with straight faces, and possibly forked tongues, “The government that governs best is that which is closest to the people.”

Is there an integrity issue here? Perhaps this illustrates that good politics and good policy don’t always mesh.

But if history does repeat itself, we can be assured that more power will be shifted to Sacramento. More services will be eliminated or eroded, and more initiatives will be placed on the ballot.

The question we need to ask ourselves is, “Do I really want to live in the kind of community that I’m willing to pay for?”