Easy Choices on Tax Measures

When the state ran short of cash during the last two recessions, it treated local government treasuries as piggy banks, siphoning off as much as $40 billion over a dozen years that otherwise would have gone to cities, counties and special districts throughout the state. The cities and counties, themselves suffering from declining revenues because of the recessions, had to struggle with ever-diminishing services. Needless to say, the money wasn’t repaid.

This basic unfairness needs fixing, and not one but two measures on the Nov. 2 ballot aim to do so. One is easy to endorse; the other should be tossed out.

Proposition 1A, a compromise by the localities, Gov. Arnold Schwarzenegger and the legislative leadership, restricts the state’s ability to raid local treasuries but does not shackle state government in a real fiscal emergency. It’s not perfect, but it’s a step in the right direction.

The other measure, Proposition 65, was put on the ballot by the League of California Cities before the deal with Schwarzenegger. It’s the equivalent of tearing down the house to put out a kitchen fire. Even its original sponsors have disowned it, and voters should have no qualms about rejecting it.

Proposition 65 would be far more generous to local government than Proposition 1A, requiring any shift of tax revenues to the state to be approved in a statewide election. That’s a nearly impossible barrier. Even worse, it would lock into the state Constitution a financial distribution system that forces cities and counties to compete for big-box stores and auto malls because of the sales tax revenues they generate. Competition like that just encourages unplanned growth and sprawl. The Times joins the cities that originally put Proposition 65 on the ballot in urging a “no” vote. It has served its purpose, forcing the governor to negotiate with the cities and counties.

Proposition 1A lets the state continue to take local money for the next couple of years. After that, it would be much harder to shift money away from cities to, for instance, schools, but not impossible. There would be strict deadlines for repayment. The state would also have to pay when a new state law required cities or school districts to spend money to comply.

A flaw is that the measure does not diminish the locals’ reliance on sales taxes. But it allows the Legislature to address that issue without having to change the Constitution. Other beneficial provisions would gradually increase the role of property taxes in city finances, from 7.4% of total municipal spending this year to 11% in 2006-07, slightly eclipsing the sales tax. As much as possible, property tax collections should remain within the community to provide such property-related services as police and fire protection.

Proposition 1A will end the state’s ability to grab local tax money willy-nilly when it begins to feel a financial pinch.