Fiscal Hope for Counties

Talk is cheap. That’s the tough lesson that officials of city and county governments have learned in Sacramento as they seek to crawl out of the fiscal hole that the state dug by grabbing a major share of their property tax receipts. Governors have made grand promises but have not delivered the cash. Then-Gov. Pete Wilson, a Republican, twice vetoed measures for local financial aid passed by the Legislature. Democratic Gov. Gray Davis’ budget does little to solve the local governments’ chronic money woes despite a $4.3-billion state budget surplus.

Sacramento has been siphoning cash from cities and counties for seven years. The results include ever tighter budgets for local governments already constrained by the huge property tax cuts imposed by Proposition 13. Residents see the result in pot-holed streets, shrunken public health services and even inadequate animal control.

But help finally might be coming. Both the Senate and Assembly have included at least $200 million in their versions of the 1999-2000 state budget to aid local governments. More significantly, the Senate would limit the amount of local property tax dollars the state takes annually from the locals. When a final budget is drafted in coming weeks, the lawmakers should approve the Senate’s bill to cap the property tax grab and pay back at least a fraction of the billions that the state has swept up.

Back in the early 1990s, the California recession ripped a $14-billion hole in state revenues. In order to meet its obligation to public schools, Sacramento simply seized more than $3 billion in property tax revenues from counties, cities and special districts. And it’s still taking the money, even though the recession is long over and Sacramento has reaped massive budget surpluses over the past three years.

Some of the damage was offset by 1993’s Proposition 172, which imposed a half-cent sales tax statewide that was earmarked for local public safety programs. But that’s not even half a loaf. In 1998-99 alone Los Angeles County lost $946 million in property tax revenues to the state and got in return only $437 million from the new sales tax. That left the county with a net loss of $509 million.

Adding insult to inequity, the state even skims off the annual increase in the local property tax that results from rising property values. The least that the Legislature and Davis can do this year is to cap the state’s share of the property tax. Local governments need every cent of the new revenue generated by growing assessments.

Some authorities say no further action should be taken until several commissions studying reform of the fiscal relationship between state and local government complete their work. But every day of delay will penalize cities and counties even more.

The first, most logical step toward reform is for the Legislature to freeze the state’s take of property taxes, now totaling about $4 billion a year. Ultimately, cities, counties and special districts should regain use of all of the property tax, their traditional financial base. Then, locally generated tax money again would be paying for those services closest to the people. That should be the goal of reform and good government.